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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001144204-07-010016.txt : 20070226
<SEC-HEADER>0001144204-07-010016.hdr.sgml : 20070226
<ACCEPTANCE-DATETIME>20070226162418
ACCESSION NUMBER:		0001144204-07-010016
CONFORMED SUBMISSION TYPE:	S-4
PUBLIC DOCUMENT COUNT:		18
FILED AS OF DATE:		20070226
DATE AS OF CHANGE:		20070226

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:		S-4
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-140890
		FILM NUMBER:		07649527

	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>S-4
<SEQUENCE>1
<FILENAME>v065446s4.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body style="FONT-SIZE: 10pt; COLOR: #000000; LINE-HEIGHT: 12pt; FONT-FAMILY: Times New Roman">
    <div style="MARGIN: 0pt" align="center"><font style="FONT-FAMILY: Times New Roman" color="#000000"><strong>As
      filed with the Securities and Exchange Commission on
      February 26, 2007</strong></font></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt; PADDING-BOTTOM: 3pt; BORDER-BOTTOM: #000000 12pt double" align="right"><strong>Registration
      No.
      333-[&#9679;]&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
    <div style="MARGIN: 0pt" align="center"><strong>UNITED STATES<br>SECURITIES AND
      EXCHANGE COMMISSION<br>WASHINGTON, D.C. 20549</strong></div>
    <div style="MARGIN-TOP: 5.5pt; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 13pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN: 0pt" align="center"><strong>FORM S-4<br>REGISTRATION
      STATEMENT<br>UNDER<br>THE SECURITIES ACT OF 1933</strong></div>
    <div style="MARGIN-TOP: 2.75pt; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 13pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 6pt; FONT-SIZE: 18pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 20pt; FONT-FAMILY: Times New Roman Bold" align="center"><font style="FONT-FAMILY: Times New Roman Bold"><strong>DGSE
      COMPANIES, INC.</strong></font></div>
    <div style="MARGIN-TOP: 0pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 2.65pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman">(Exact
      Name of
      Registrant as Specified in Its Charter)</font></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="162">
            </td>
            <td width="27">
            </td>
            <td width="162">
            </td>
            <td width="27">
            </td>
            <td width="162">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="216">
              <div style="MARGIN: 0pt" align="center"><strong>Nevada</strong></div>
            </td>
            <td valign="top" width="36">
              <div style="MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="216">
              <div style="MARGIN: 0pt" align="center"><strong>3911</strong></div>
            </td>
            <td valign="top" width="36">
              <div style="MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="216">
              <div style="MARGIN: 0pt" align="center"><strong>88-0097334</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="216">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(State
                or Other Jurisdiction of <br>Incorporation or
                Organization)</div>
            </td>
            <td valign="top" width="36">&#160;</td>
            <td valign="bottom" width="216">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(Standard
                Industrial<br>Classification Code Number)</div>
            </td>
            <td valign="top" width="36">&#160;</td>
            <td valign="top" width="216">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(I.R.S.
                Employer<br>Identification
                Number)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 12pt; MARGIN: 0pt; LINE-HEIGHT: 14pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN: 0pt; LINE-HEIGHT: normal" align="center"><strong>2817 Forest
      Lane<br>Dallas, Texas 75234<br>(972) 484-3662<br></strong>(Address, Including
      Zip Code, and Telephone Number, Including Area Code,<br>of Registrant&#8217;s
      Principal Executive Offices)</div>
    <div style="MARGIN-TOP: 5.5pt; FONT-SIZE: 12pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 14pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN: 0pt" align="center"><strong>Dr. L.S. Smith<br>Chairman of the
      Board and Chief Executive Officer<br>DGSE Companies, Inc.<br>2817 Forest
      Lane<br>Dallas, Texas 75234<br>(972) 484-3662</strong></div>
    <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(Name,
      Address, Including Zip Code, and Telephone Number, Including Area Code,<br>of
      Agent for Service)</div>
    <div style="MARGIN-TOP: 5.5pt; FONT-SIZE: 12pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 14pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="169">
            </td>
            <td width="16">
            </td>
            <td width="169">
            </td>
            <td width="16">
            </td>
            <td width="169">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="225">&#160;</td>
            <td valign="top" width="21">
              <div style="MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="225">
              <div style="MARGIN: 0pt" align="center"><i>Copies to:</i></div>
            </td>
            <td valign="top" width="21">
              <div style="MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="225">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="225">&#160;</td>
            <td valign="top" width="21">&#160;</td>
            <td valign="top" width="225">&#160;</td>
            <td valign="top" width="21">&#160;</td>
            <td valign="top" width="225">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="225">
              <div style="MARGIN: 0pt" align="center"><strong>John J. Hentrich,
                Esq.<br>Andreas F. Pour, Esq.<br>Sheppard, Mullin, Richter
                &amp;<br>Hampton LLP<br>12275 El Camino Real, Suite 200<br>San Diego,
                California 92130-2006<br>(858) 720-8900</strong></div>
            </td>
            <td valign="top" width="21">&#160;</td>
            <td valign="top" width="225">
              <div style="MARGIN: 0pt" align="center"><strong>William H. Oyster<br>Chief
                Executive Officer<br>Superior Galleries, Inc.<br>9478 West Olympic
                Blvd.<br>Beverly Hills, California 90212<br>(310)
                203-9855</strong></div>
            </td>
            <td valign="top" width="21">&#160;</td>
            <td valign="top" width="225">
              <div style="MARGIN: 0pt" align="center"><strong>Thomas G. Brockington,
                Esq.<br>Richard Marr, Esq.<br>Rutan &amp; Tucker, LLP<br>611 Anton
                Boulevard,<br>14th Floor<br>Costa Mesa, California 92626<br>(714)
                641-5100</strong></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 5.5pt; FONT-SIZE: 12pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 14pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Approximate
      date of commencement of proposed sale to the public: </strong>As soon as
      practicable after this Registration Statement becomes effective and all other
      conditions set forth in the Amended and Restated Agreement and Plan of Merger
      and Reorganization, made as of January 6, 2007, described in the enclosed joint
      proxy statement/prospectus have been satisfied or waived.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If the
      securities being registered on this Form are being offered in connection with
      the formation of a holding company and there is compliance with General
      Instruction G, check the following box. <font style="FONT-FAMILY: Wingdings">&#168;</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If this
      form is filed to register additional securities for an offering pursuant to
      Rule
      462(b) under the Securities Act, check the following box and list the Securities
      Act registration statement number of the earlier effective registration
      statement for the same offering. <font style="FONT-FAMILY: Wingdings">&#168;</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If this
      form is a post-effective amendment filed pursuant to Rule 462(d) under the
      Securities Act, check the following box and list the Securities Act registration
      statement number of the earlier effective registration statement for the same
      offering. <font style="FONT-FAMILY: Wingdings">&#168;</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 3pt; BORDER-BOTTOM: #000000 12pt double"><br></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt; PAGE-BREAK-BEFORE: always" align="center"><strong>CALCULATION
      OF REGISTRATION FEE</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="177">
            </td>
            <td width="10">
            </td>
            <td width="49">
            </td>
            <td width="25">
            </td>
            <td width="37">
            </td>
            <td width="25">
            </td>
            <td width="5">
            </td>
            <td width="51">
            </td>
            <td width="25">
            </td>
            <td width="5">
            </td>
            <td width="44">
            </td>
            <td width="12">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="236">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Title
                of Each Class of Securities to Be Registered</strong></div>
            </td>
            <td width="13">&#160;</td>
            <td valign="bottom" width="66">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amount
                to Be<br>Registered(1)</strong></div>
            </td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="49">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Proposed<br>Maximum<br>Offering<br>Price
                Per<br>Unit</strong></div>
            </td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="68">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Proposed<br>Maximum<br>Aggregate<br>Offering
                Price</strong></div>
            </td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amount
                of<br>Registration<br>Fee</strong></div>
            </td>
            <td valign="top" width="16">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="236" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td width="13">&#160;</td>
            <td valign="bottom" width="66" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="49" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="7" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="68" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="7" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="16">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="236">
              <div style="PADDING-LEFT: 1.8pt; MARGIN: 0pt">Common Stock, par value
                $0.01 per share</div>
            </td>
            <td width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">5,411,348</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt">(2)&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(2)&#160;&#160;</div>
            </td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="68">
              <div style="MARGIN: 0pt" align="right">10,285,023</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt">(2)&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">315</div>
            </td>
            <td valign="top" width="16">
              <div style="MARGIN: 0pt" align="right">(2)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="236">
              <div style="PADDING-LEFT: 1.8pt; MARGIN: 0pt">Warrants to Purchase
                Shares
                of Common<br>Stock, par value $0.01 per share</div>
            </td>
            <td width="13">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">1,708,634</div>
            </td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">N.A.</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="68">
              <div style="MARGIN: 0pt" align="right">5,232,871</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt">(3)</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">161</div>
            </td>
            <td valign="top" width="16">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">In
      accordance with Rule 416 under the Securities Act of 1933, as amended, this
      registration statement shall be deemed to cover any additional securities that
      may from time to time be offered or issued to prevent dilution resulting from
      stock splits, stock dividends or similar transactions.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(2)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 6.65pt">The
      number of shares of common stock, par value $0.01 per share, of DGSE to be
      registered pursuant to this registration statement is based on the maximum
      number of shares of DGSE common stock issuable to stockholders of Superior
      Galleries, Inc. in the merger described herein and upon exercise of warrants
      being issued in the merger, as follows:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="64">
            </td>
            <td width="47">
            </td>
            <td width="26">
            </td>
            <td width="10">
            </td>
            <td width="38">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="45">
            </td>
            <td width="23">
            </td>
            <td width="10">
            </td>
            <td width="31">
            </td>
            <td width="50">
            </td>
          </tr>
          <tr>
            <td valign="top" width="85">&#160;</td>
            <td valign="bottom" width="63">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amount
                to Be<br>Registered(a)</strong></div>
            </td>
            <td width="35">&#160;</td>
            <td colspan="2" valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Proposed<br>Maximum<br>Offering<br>Price
                Per
                Unit</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="66">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Proposed<br>Maximum<br>Aggregate<br>Offering
                Price</strong></div>
            </td>
            <td valign="bottom" width="31">&#160;</td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amount
                of<br>Registration<br>Fee</strong></div>
            </td>
            <td valign="top" width="66">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="85">&#160;</td>
            <td valign="bottom" width="63" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td width="35">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="31">&#160;</td>
            <td valign="bottom" width="14" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="42" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="66">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="85">
              <div style="PADDING-LEFT: 1.8pt; MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="63">
              <div style="PADDING-LEFT: 1.8pt; MARGIN: 0pt" align="right">3,605,763</div>
            </td>
            <td width="35">
              <div style="MARGIN: 0pt">(b)&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">N.A.</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">8,677,175</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt">(c)&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">266</div>
            </td>
            <td valign="top" width="66">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="85">&#160;</td>
            <td valign="bottom" width="63">
              <div style="PADDING-LEFT: 1.8pt; MARGIN: 0pt" align="right">845,634</div>
            </td>
            <td width="35">
              <div style="MARGIN: 0pt">(d)</div>
            </td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">1.89</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">1,598,248</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt">(e)</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">49</div>
            </td>
            <td valign="top" width="66">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="85">&#160;</td>
            <td valign="bottom" width="63" style="border-bottom: #000000 0.5pt solid;">
              <div style="PADDING-LEFT: 1.8pt; MARGIN: 0pt" align="right">959,951</div>
            </td>
            <td width="35">
              <div style="MARGIN: 0pt">(f)</div>
            </td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">0.01</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,600</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt">(e)</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="top" width="66">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="85">&#160;</td>
            <td valign="bottom" width="63" style="border-bottom: #000000 3pt double;">
              <div style="PADDING-LEFT: 1.8pt; MARGIN: 0pt" align="right">5,411,348</div>
            </td>
            <td width="35">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="60" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">10,285,023</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="14" style="border-top: #000000 0.5pt solid; border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42" style="border-top: #000000 0.5pt solid; border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">315</div>
            </td>
            <td valign="top" width="66">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="PADDING-LEFT: 36pt; FONT-SIZE: 11pt; MARGIN: 0pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(a)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 2.5pt">See note
      (1) above.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(b)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 2.5pt">The
      estimated number of shares of DGSE common stock issuable to stockholders of
      Superior in the merger.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(c)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 2.5pt">Estimated
      solely for purposes of calculating the registration fee pursuant to Rule 457(c)
      and (f)(1) under the Securities Act, based upon the number of shares of common
      stock, par value $0.001, of Superior Galleries, Inc. (&#8220;Superior&#8221;) to be
      exchanged in the merger described herein (13,558,087 shares), multiplied by
      $0.64, the arithmetic mean of the high and low prices of Superior common stock
      as reported on the OTCBB on February 21, 2007.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(d)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 2.5pt">Warrants
      to purchase 845,634 shares of DGSE common stock have an exercise price per
      share
      equal to $1.89.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(e)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 2.5pt">Estimated
      solely for purposes of calculating the registration fee pursuant to Rule 457(i)
      under the Securities Act, based upon the aggregate exercise price for the
      maximum number of shares of DGSE common stock subject to warrants to be issued
      in connection with the merger described herein.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(f)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 2.5pt">Warrants
      to purchase up to 959,951 shares of DGSE common stock have an exercise price
      per
      share equal to $0.01.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(3)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 2.5pt">Estimated
      solely for purposes of calculating the registration fee pursuant to Rule 457(c)
      and (f)(1) under the Securities Act, based upon the excess of the amount of
      Superior debt being exchanged for shares of Superior common stock in connection
      with the merger described herein over the product of the number of shares of
      Superior common stock being exchanged for that debt multiplied by $0.64, the
      arithmetic mean of the high and low prices of Superior common stock as reported
      on the OTCBB on February 21, 2007.</div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>The
      Registrant hereby amends this Registration Statement on such date or dates
      as
      may be necessary to delay its effective date until the Registrant shall file
      a
      further amendment which specifically states that this Registration Statement
      shall thereafter become effective in accordance with Section 8(a) of the
      Securities Act of 1933 or until this Registration Statement shall become
      effective on such date as the Commission, acting pursuant to said Section 8(a),
      may determine.</strong></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="FONT-SIZE: 8.5pt; PAGE-BREAK-BEFORE: always; MARGIN: 0pt; COLOR: #ff0000; LINE-HEIGHT: 10.5pt; FONT-FAMILY: Arial"><font style="FONT-FAMILY: Arial" color="#ff0000">The
      information in this joint proxy
      statement/prospectus is not complete and may be changed. DGSE Companies, Inc.
      may not sell these securities until the registration statement filed with the
      Securities and Exchange Commission is effective. This joint proxy
      statement/prospectus is not an offer to sell these securities and it is not
      soliciting an offer to buy these securities in any state where the offer or
      sale
      is not permitted.</font></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 5pt; COLOR: #ff0000; FONT-FAMILY: Times New Roman Bold" align="center"><font style="FONT-FAMILY: Times New Roman Bold"><strong>SUBJECT
      TO
      COMPLETION, DATED FEBRUARY 26, 2007</strong></font></div>
    <div>

  <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">
    <tr>
      <td width="228"> </td>
      <td width="239"></td>
      <td width="239"> </td>
    </tr>
    <tr>
      <td width="304"> <div style="MARGIN: 0pt" align="center"><img src="v065446s4part1001.jpg" alt="[v065446s4part1001.jpg]" width="225"></div></td>
      <td width="200">&nbsp;</td>
      <td width="319"> <div style="MARGIN: 0pt" align="center"><img src="v065446s4part1002.jpg" alt="[v065446s4part1002.jpg]" width="300"></div></td>
    </tr>
  </table>
    </div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><font style="FONT-FAMILY: Times New Roman" color="#000000">Dear
      DGSE Companies, Inc. and
      Superior Galleries, Inc. Stockholders:</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We are
      pleased to report that the boards of directors of DGSE Companies, Inc., which
      we
      refer to as DGSE, and Superior Galleries, Inc., which we refer to as Superior,
      have each unanimously approved the Amended and Restated Agreement and Plan
      of
      Merger and Reorganization, which we refer to as the merger agreement, providing
      for a merger and reorganization involving our two companies, which we refer
      to
      in this joint proxy statement/prospectus as the combination. Before we can
      complete the combination, we must obtain the approval of the stockholders of
      each of our companies. We are sending you this joint proxy statement/prospectus
      to ask you to vote in favor of the merger agreement and various related
      matters.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to the combination, Superior will merge with a wholly-owned subsidiary of DGSE,
      which we refer to as the merger, and DGSE will acquire all of the outstanding
      shares of Superior. Superior stockholders will be entitled to receive 0.2731
      shares of DGSE common stock for every share of Superior common stock they own
      at
      the effective time of the merger, which we refer to in this joint proxy
      statement/prospectus as the exchange ratio. <strong>The value of the merger
      consideration will fluctuate with changes in the price of DGSE&#8217;s common stock.
      If the price of DGSE&#8217;s common stock increases, the value of the merger
      consideration increases, however, if the price of DGSE&#8217;s common stock decreases,
      the value of the merger consideration decreases. There can be no assurance
      as to
      the market price of DGSE common stock at any time prior to the completion of
      the
      proposed merger or at any time thereafter.</strong> Fractional shares will be
      rounded up to the nearest whole number of DGSE shares. Fifteen percent of the
      number of shares of DGSE common stock to be issued at the closing of the merger,
      less 33,648 shares to which DGSE is entitled as an indemnity under the merger
      agreement, will be deposited in an escrow account as security for the payment
      of
      indemnification claims under the merger agreement in the event Superior&#8217;s
      representations and warranties concerning its capitalization are inaccurate.
      As
      a result of the exchange, Superior stockholders will become DGSE stockholders
      and Superior will become a wholly-owned subsidiary of DGSE. Each outstanding
      share of DGSE common stock will remain unchanged in the combination.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Both
      DGSE
      and Superior have scheduled a special meeting of their respective stockholders
      to vote on the combination and related proposals. The dates, times and details
      of these meetings are described in this joint proxy statement/prospectus.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>YOUR
      VOTE IS VERY IMPORTANT.</strong> Whether or not you plan to attend your meeting,
      please take the time to vote by completing, signing, dating and returning the
      enclosed proxy card to DGSE or Superior, as applicable. <strong>We encourage you
      to read this entire joint proxy statement/prospectus carefully and we especially
      encourage you to read the section entitled &#8220;Risk Factors&#8221; beginning on page
      22.</strong> This document provides you with detailed information about the
      merger and reorganization and the other related proposals of DGSE and Superior
      and the meetings of DGSE and Superior. As described in the next few pages,
      you
      can also find more information about DGSE and Superior from publicly available
      documents on file with the Securities and Exchange Commission. DGSE&#8217;s common
      stock trades on the Nasdaq Capital Market under the symbol &#8220;DGSE.&#8221; Following the
      combination, DGSE may change its listing to the American Stock Exchange. On
      [&#9679;],
      2007, the closing price of DGSE common stock, as reported by the Nasdaq Capital
      Market, was $[&#9679;] per share. The warrants will not be listed on any securities
      exchange.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">We
      enthusiastically support the merger and reorganization, and we join with the
      members of our boards of directors in recommending that you vote FOR the merger
      agreement, the combination and the other proposals.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="219">
            </td>
            <td width="29">
            </td>
            <td width="219">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="292">
              <div style="MARGIN: 0pt" align="center"><strong>Dr. L.S.
                Smith</strong></div>
            </td>
            <td valign="top" width="38">
              <div style="MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="292">
              <div style="MARGIN: 0pt" align="center"><strong>William H.
                Oyster</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="292">
              <div style="MARGIN: 0pt" align="center"><i>Chairman of the Board
                and Chief
                Executive Officer<br></i>DGSE Companies, Inc.</div>
            </td>
            <td valign="top" width="38">&#160;</td>
            <td valign="top" width="292">
              <div style="MARGIN: 0pt" align="center"><i>Chief Executive
                Officer<br></i>Superior Galleries, Inc.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Neither
      the Securities and Exchange Commission nor any state securities commission
      has
      approved or disapproved the DGSE Companies, Inc. common stock to be issued
      pursuant to the terms set forth in this joint proxy statement/prospectus or
      passed upon the adequacy or accuracy of this joint proxy statement/prospectus.
      Any representation to the contrary is a criminal offense.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">This
      joint proxy statement/prospectus is dated [&#9679;], 2007 and is first being mailed to
      DGSE and Superior stockholders on or about [&#9679;], 2007.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>ADDITIONAL
      INFORMATION</strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">As
      used in this joint proxy statement/prospectus, &#8220;DGSE&#8221; refers to DGSE Companies,
      Inc., formerly known as Dallas Gold &amp; Silver Exchange, Inc., and its
      consolidated subsidiaries, and &#8220;Superior&#8221; refers to Superior Galleries, Inc.,
      formerly known as Tangible Asset Galleries, Inc., and its consolidated
      subsidiaries, in each case, except where the context otherwise requires or
      as
      otherwise indicated.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">This
      joint proxy statement/prospectus:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Incorporates
      important business and
      financial information about DGSE and Superior from documents filed with the
      Securities and Exchange Commission that is not included in or delivered with
      this document but is available online at http://www.sec.gov/, as well as from
      other sources; and</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Does
      not include some information included
      in the registration statement on Form S-4 filed with the Securities and Exchange
      Commission by DGSE, of which this joint proxy statement/prospectus forms a
      part,
      or information included in the exhibits to the registration
      statement.</font></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">The
      information described above is available to you without charge upon your written
      or oral request. You can obtain any of the information described above regarding
      DGSE by requesting it in writing or by telephone from DGSE at the following
      address and telephone number:</div>
    <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 18.7pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -0.7pt"><strong>DGSE
      Companies, Inc.<br>2817 Forest Lane<br>Dallas, Texas 75234<br>Attention:
      Investor Relations<br>(972) 484-3662</strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">You
      can obtain any of the information described above regarding Superior by
      requesting it in writing or by telephone from Superior at the following address
      and telephone number:</div>
    <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 18.7pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -0.7pt"><strong>Superior
      Galleries, Inc.<br>9478 West Olympic Blvd.<br>Beverly Hills, California
      90212<br>Attention: Investor Relations<br>(800) 421-0754</strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt"><strong>In
      order for you to receive timely delivery of the documents in advance of the
      meetings, DGSE or Superior should receive your request no later than [&#9679;],
      2007</strong>, which is five business days before the date of each company&#8217;s
      special meeting.</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Please
      also see the section entitled &#8220;Where You Can Find More Information&#8221; beginning on
      page 155.</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">If
      you have any questions about the combination or the meetings of DGSE and
      Superior, including the procedures for voting your shares, or if you need
      additional copies of this joint proxy statement/prospectus or the enclosed
      proxy, please contact:</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>For
      DGSE stockholders:</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt" align="center">DGSE Companies,
      Inc.<br>2817 Forest Lane<br>Dallas, Texas 75234<br>Attention: Investor
      Relations<br>(972) 484-3662</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt" align="center"><strong>For
      Superior stockholders:</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt" align="center">Superior
      Galleries, Inc.<br>9478 West Olympic Blvd.<br>Beverly Hills, California
      90212<br>Attention: Investor Relations<br>(800) 421-0754</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">The
      &#8220;US Bullion Exchange&#8221;, &#8220;Dallas Gold and Silver Exchange&#8221;, &#8220;First Coin Auctions&#8221;,
&#8220;Virtual Auctioneer&#8221; and &#8220;DGSE&#8221; family of related marks, images and symbols are
      the properties, trademarks and service marks of DGSE. The &#8220;Superior Galleries&#8221;
family of related marks, images and symbols are the properties, trademarks
      and
      service marks of Superior. Additional company and product names may be
      trademarks of their respective owners.</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 11pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>DGSE
      COMPANIES, INC.<br>2817 Forest Lane<br>Dallas, Texas 75234</strong></div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 2.5pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTICE
      OF SPECIAL MEETING OF STOCKHOLDERS<br>To Be Held [&#9679;], 2007</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt">To the Stockholders of DGSE
      Companies, Inc.:</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Notice
      is
      hereby given that a special meeting of stockholders of DGSE Companies, Inc.,
      a
      Nevada corporation, will be held at DGSE&#8217;s executive offices at 2817 Forest
      Lane, Dallas, Texas 75234, on [&#9679;],[&#9679;], 2007, at [&#9679;] AM Central Time, for the
      purpose of considering and voting upon the following matters:</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt"><strong>1.</strong></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Reorganization</strong>. To
      adopt and approve the Amended and Restated Agreement and Plan of Merger and
      Reorganization, which we refer to as the merger agreement, entered into as
      of
      January 6, 2007, by and among DGSE, DGSE Merger Corp., a Delaware corporation
      and wholly-owned subsidiary of DGSE, Superior Galleries, Inc., a Delaware
      corporation, and Stanford International Bank Ltd., as stockholder agent, and
      to
      approve the merger and reorganization contemplated thereby, including the
      issuance of shares, and options and warrants to acquire shares, of DGSE common
      stock pursuant to the merger agreement.</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt"><strong>2.</strong></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Amendment to the Articles
      of Incorporation</strong>. To approve an amendment to DGSE&#8217;s articles of
      incorporation to increase the number of authorized shares of common stock by
      20,000,000 shares, to a total of 30,000,000 shares.</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt"><strong>3.</strong></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Adjournment</strong>. To
      adjourn the special meeting, if necessary, to solicit additional proxies if
      there are not sufficient votes in favor of the proposals.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">While
      proposals 1 and 2 are being voted upon separately, both may have to be approved
      for either to be implemented. These proposals are more fully described in the
      accompanying joint proxy statement/prospectus, which we urge you to read very
      carefully. A copy of the merger agreement, along with various related agreements
      and the amendment to DGSE&#8217;s articles of incorporation, are attached as Annexes A
&#8211; J to the joint proxy statement/prospectus.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Only
      DGSE
      stockholders of record at the close of business on [&#9679;], 2007, the record date,
      are entitled to notice of and to vote at the special meeting or any adjournment
      or postponement of the special meeting. A list of stockholders eligible to
      vote
      at the special meeting will be available for your review during DGSE&#8217;s regular
      business hours at its principal place of business in Dallas, Texas for at least
      ten days prior to the special meeting for any purpose germane to the special
      meeting.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>The
      board of directors of DGSE unanimously recommends you vote FOR Proposal No.
      1
      for the merger agreement and the issuance of shares of DGSE common stock
      pursuant to the merger agreement, FOR Proposal No. 2 for the amendment to the
      DGSE articles of incorporation to increase the number of authorized shares
      of
      common stock to 30,000,000 shares, and FOR Proposal No. 3 to adjourn the special
      meeting, if necessary to establish a quorum or to solicit additional proxies
      if
      there are not sufficient votes in favor of the proposals.</strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt"><strong>Whether
      or not you plan to attend the special meeting in person, to ensure that your
      shares are represented at the special meeting, we encourage you to submit your
      proxy by mail in the enclosed postage-paid envelope. Returning your proxy does
      not deprive you of your right to attend the special meeting and to vote your
      shares in person. You may revoke your proxy in the manner described in the
      joint
      proxy statement/prospectus at any time before it has been voted at the special
      meeting.</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="199">
            </td>
            <td width="268">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358">
              <div style="MARGIN: 0pt">By Order of the Board of Directors,</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="266">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Dated:
                [&#9679;], 2007</div>
            </td>
            <td valign="bottom" width="358">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358">
              <div style="MARGIN: 0pt">Dr. L.S. Smith, Ph.D.</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358">
              <div style="MARGIN: 0pt"><i>Chairman of the Board and
                Secretary</i></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SUPERIOR
      GALLERIES, INC.<br>9478 West Olympic
      Blvd.<br>Beverly Hills, California 90212</strong></div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt" align="center">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTICE
      OF SPECIAL MEETING OF STOCKHOLDERS<br>To Be Held [&#9679;], 2007</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt">To the Stockholders of
      Superior Galleries, Inc.:</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Notice
      is hereby given that a special meeting of stockholders of Superior Galleries,
      Inc., a Delaware corporation, will be held at Superior&#8217;s principal offices at
      9478 West Olympic Blvd., Beverly Hills, California 90212, on [&#9679;],[&#9679;], 2007, at
      [&#9679;] AM Pacific Time, for the purpose of considering and voting upon the
      following matters:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt"><strong>1.</strong></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Merger</strong>. To adopt
      and approve the Amended and Restated Agreement and Plan of Merger and
      Reorganization, which we refer to as the merger agreement, entered into as
      of
      January 6, 2007, by and among DGSE Companies, Inc., which we refer to as DGSE,
      DGSE Merger Corp., a wholly owned subsidiary of DGSE, Superior, and Stanford
      International Bank Ltd., which we refer to as SIBL, as stockholder agent, whom
      together with any successors in that capacity we refer to as the stockholder
      agent, and to approve the merger and reorganization contemplated thereby.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt"><strong>2.</strong></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Approval of the Stockholder
      Agent</strong>. To irrevocably appoint SIBL, the largest Superior stockholder
      and Superior&#8217;s primary lender, including its successors as stockholder agent, as
      the exclusive agent, attorney-in-fact and representative of Superior
      stockholders under the merger agreement and related escrow agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt"><strong>3.</strong></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Adjournment</strong>. To
      adjourn the special meeting, if necessary, to solicit additional proxies if
      there are not sufficient votes in favor of the proposals.</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">While
      proposals 1 and 2 are being voted upon separately, both must be approved for
      either to be implemented. These proposals are more fully described in the
      accompanying joint proxy statement/prospectus, which we urge you to read very
      carefully. A copy of the merger agreement and various related agreements are
      attached as Annexes A&#160;&#8211;&#160;G to the joint proxy
      statement/prospectus.</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Only
      Superior stockholders of record at the close of business on [&#9679;], 2007, the
      record date, are entitled to notice of and to vote at the special meeting or
      any
      adjournment or postponement of the special meeting. A list of stockholders
      eligible to vote at the special meeting will be available for your review during
      Superior&#8217;s regular business hours at its principal place of business in Beverly
      Hills, California for at least ten days prior to the special meeting for any
      purpose germane to the special meeting.</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt"><strong>The
      board of directors of Superior unanimously recommends that you vote FOR Proposal
      No. 1 for the merger agreement and the merger, FOR Proposal No. 2 to irrevocably
      appoint SIBL and its successors as the stockholder agent under the merger
      agreement and related escrow agreement, and FOR Proposal No. 3 to adjourn the
      special meeting, if necessary to establish a quorum or to solicit additional
      proxies if there are not sufficient votes in favor of the
      proposals.</strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt"><strong>Whether
      or not you plan to attend the special meeting in person, to ensure that your
      shares are represented at the special meeting, we encourage you to submit your
      proxy by mail in the enclosed postage-paid envelope. Returning your proxy does
      not deprive you of your right to attend the special meeting and to vote your
      shares in person. You may revoke your proxy in the manner described in the
      joint
      proxy statement/prospectus at any time before it has been voted at the special
      meeting.</strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt"><strong>You
      should not submit any stock certificates with your proxy. A transmittal form
      with instructions for the surrender of stock certificates for Superior stock
      will be mailed to you as soon as practicable after completion of the
      combination.</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="199">
            </td>
            <td width="268">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358">
              <div style="MARGIN: 0pt">By Order of the Board of Directors,</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="266">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Dated:
                [&#9679;], 2007</div>
            </td>
            <td valign="bottom" width="358">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358">
              <div style="MARGIN: 0pt">William H. Oyster</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="266">&#160;</td>
            <td valign="bottom" width="358">
              <div style="MARGIN: 0pt"><i>Chief Executive
                Officer</i></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt">&#160;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt; PAGE-BREAK-BEFORE: always" align="center"><strong>TABLE
      OF CONTENTS</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="443">
            </td>
            <td width="8">
            </td>
            <td width="16">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">&#160;</td>
            <td valign="bottom" width="10">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="right"><strong>Page</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 12.25pt; MARGIN: 0pt; TEXT-INDENT: -12.25pt">SUMMARY</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">QUESTIONS
                AND ANSWERS ABOUT THIS PROXY SOLICITATION, THE DGSE SPECIAL MEETING,
                THE
                SUPERIOR SPECIAL MEETING, THE COMPANIES AND THE COMBINATION</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">1</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Stockholder
                Meetings</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">DGSE
                Special Meeting</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">9</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Superior
                Special Meeting</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">The
                Companies</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">11</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SUMMARY
                SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF DGSE</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">13</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SUMMARY
                SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SUPERIOR</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">16</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SUMMARY
                SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
                INFORMATION</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">19</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SUMMARY
                COMPARATIVE PER SHARE MARKET PRICE DATA</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">21</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">RISK
                FACTORS</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">22</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Risks
                Related to the Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">22</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Risks
                Related to the Combined Company After the Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">24</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SPECIAL
                NOTE REGARDING FORWARD-LOOKING STATEMENTS</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">29</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SPECIAL
                MEETING OF DGSE STOCKHOLDERS</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">31</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SPECIAL
                MEETING OF SUPERIOR STOCKHOLDERS</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">35</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">DGSE
                PROPOSAL NO. 1 AND SUPERIOR PROPOSAL NO. 1 &#8212; THE COMBINATION</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">39</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Background
                of the Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">39</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">DGSE
                Reasons for the Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">42</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Superior
                Reasons for the Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">43</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Other
                Factors Considered by the DGSE Board</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">44</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Other
                Factors Considered by the Superior Board</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">45</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Opinion
                of Financial Advisor to the Board of Directors of Superior</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">47</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Interests
                of Certain DGSE Persons in the Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">52</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Interests
                of Certain Superior Persons in the Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">53</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Material
                United States Federal Income Tax Considerations</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">55</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Anticipated
                Accounting Treatment</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">57</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Appraisal
                and Dissenters&#8217; Rights</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">57</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Delisting
                and Deregistration of Superior Common Stock</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">60</div>
            </td>
          </tr>
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            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Governmental
                and Regulatory Matters</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">60</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Voting
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            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">61</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 12.25pt; MARGIN: 0pt; TEXT-INDENT: -12.25pt">THE
                MERGER AGREEMENT</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">62</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">The
                Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">62</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Exchange
                of Superior Common Stock</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">62</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Superior
                Options and Warrants</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">62</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Completion
                and Effectiveness of the Combination</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">63</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Share
                Adjustments</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">63</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Escrow</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">63</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Exchange
                of Stock Certificates</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">64</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Representations
                and Warranties</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">65</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Notice
                of
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            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">66</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Change
                of
                Recommendation</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">66</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Obligations
                of the DGSE Board of Directors and Superior Board of Directors with
                Respect to their Recommendations and Holding a Meeting of their
                Stockholders</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">66</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Employee
                Benefits Matters</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">67</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Refinancings</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">67</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Conversion
                and Exchange Agreements, Warrants and Registration Rights</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">67</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Required
                Approvals and Cooperation of the Parties</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">68</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Support
                Agreements</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">69</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Management
                Agreement</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">69</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="591">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">DGSE
                Corporate Governance</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">70</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="FONT-SIZE: 8pt; PAGE-BREAK-BEFORE: always; MARGIN: 0pt">&#160;</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="436">
            </td>
            <td width="11">
            </td>
            <td width="20">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Page</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">&#160;</td>
            <td valign="bottom" width="15">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Indemnification</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">70</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Stockholder
                Agent</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">71</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Conditions
                to Completion of the Combination</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">72</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Termination
                of the Merger Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">73</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Fees
                and Expenses</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">74</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Amendment,
                Extension and Waiver of the Merger Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">74</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">POST-COMBINATION
                STANFORD CREDIT FACILITY</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">75</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">POST-COMBINATION
                EMPLOYMENT AGREEMENTS</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">75</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">NOTE
                EXCHANGE AGREEMENT, WARRANTS AND REGISTRATION RIGHTS AGREEMENT</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">78</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">DGSE
                PROPOSAL NO. 2 &#8212; AMENDMENT TO ARTICLES OF INCORPORATION</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">81</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">DGSE
                PROPOSAL NO. 3 &#8212; POSSIBLE ADJOURNMENT OF THE SPECIAL MEETING</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">83</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SUPERIOR
                PROPOSAL NO. 2 &#8212; APPOINTMENT AND CONSTITUTION OF STANFORD INTERNATIONAL
                BANK LTD. AS STOCKHOLDER AGENT UNDER THE MERGER AGREEMENT AND ESCROW
                AGREEMENT</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">84</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">SUPERIOR
                PROPOSAL NO. 3 &#8212; POSSIBLE ADJOURNMENT OF THE SPECIAL MEETING</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">86</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">UNAUDITED
                PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">87</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">COMPARISON
                OF RIGHTS OF DGSE STOCKHOLDERS AND SUPERIOR STOCKHOLDERS</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">93</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">INFORMATION
                REGARDING DGSE COMPANIES, INC.</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">102</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Description
                of DGSE Capital Stock</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">102</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Information
                Regarding DGSE&#8217;s Business</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">102</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Market
                Price of and Dividends on Common Equity and Related Stockholder Matters
&#8212;
                DGSE</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">105</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure of DGSE</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">106</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Management&#8217;s
                Discussion and Analysis of Financial Condition and Results of Operations
                of DGSE</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">106</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Quantitative
                and Qualitative Disclosures About Market Risk of DGSE</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">113</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Ownership
                of DGSE Capital Stock</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">114</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Management
                of DGSE After the Combination</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">115</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Certain
                Relationships and Related Transactions of DGSE</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">125</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">INFORMATION
                REGARDING SUPERIOR GALLERIES, INC.</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">126</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Information
                Regarding Superior&#8217;s Business</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">126</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Management&#8217;s
                Discussion and Analysis of Financial Condition and Results of Operations
                of Superior</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">133</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Quantitative
                and Qualitative Disclosures About Market Risk of Superior</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">151</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Market
                Price of and Dividends on Common Equity and Related Stockholder Matters
&#8212;
                Superior</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">151</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure of Superior</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">152</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Ownership
                of Superior Capital Stock</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">153</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Certain
                Relationships and Related Transactions of Superior</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">154</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">LEGAL
                MATTERS</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">155</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">EXPERTS</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">155</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">WHERE
                YOU CAN FIND MORE INFORMATION</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">155</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">FINANCIAL
                STATEMENTS</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">INDEX
                TO FINANCIAL STATEMENTS</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">F-1</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">CONSOLIDATED
                FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER&#160;30,
                2006 &#8212; DGSE</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">F-2</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Consolidated
                Balance Sheets (Unaudited)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-3</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Consolidated
                Statements of Operations (Unaudited)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-5</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Consolidated
                Statements of Operations (Unaudited)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-6</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Consolidated
                Statements of Cash Flows (Unaudited)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-7</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Notes
                to
                Consolidated Financial Statements (Unaudited)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-8</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">CONSOLIDATED
                FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER&#160;31, 2005 &#8212;
                DGSE</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">F-13</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Report
                of
                Independent Registered Public Accounting Firm</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-14</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Consolidated
                Balance Sheets</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-15</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 8pt; MARGIN: 0pt">&#160;</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="FONT-SIZE: 8pt; PAGE-BREAK-BEFORE: always; MARGIN: 0pt">&#160;</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="436">
            </td>
            <td width="11">
            </td>
            <td width="20">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Page</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Consolidated
                Statements of Operations</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-16</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Consolidated
                Statements of Shareholders&#8217; Equity</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-17</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Consolidated
                Statements of Cash Flows</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-18</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Notes
                to
                Consolidated Financial Statements</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-20</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Report
                of
                Independent Registered Public Accountants</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-32</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">CONSOLIDATED
                FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED DECEMBER 31,
                2006 &#8212;
                SUPERIOR</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">F-33</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Balance
                Sheets (Unaudited)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-34</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Statement
                of Operations (Unaudited)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-35</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Statement
                of Cash Flows (Unaudited)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-36</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">CONSOLIDATED
                FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 &#8212;
                SUPERIOR</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">F-49</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Reports
                of Independent Registered Public Accounting Firms</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-50</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Balance
                Sheets</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-51</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Statements
                of Operations</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-53</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Statements
                of Stockholders&#8217; Equity (Deficit)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-55</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Statements
                of Cash Flows</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-56</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Notes
                to
                Financial Statements</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-58</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Supplemental
                Report of Independent Registered Public Accounting Firm</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-78</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 23.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Schedule
                II</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">F-79</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">ANNEXES</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">Annex
                A</div>
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: 35.85pt">Amended
                and Restated Agreement and Plan of Merger and Reorganization</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                B</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Form
                of Escrow Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                C</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Form
                of Amended and Restated Commercial Loan and Security Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                D</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Form
                of Note Exchange Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                E</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Form
                of Termination and Release Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                F</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Form
                of Registration Rights Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                G</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Form
                of Corporate Governance Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                H</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Form
                of Warrant</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                I</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Management
                Agreement</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                J</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Amendment
                to DGSE Articles of Incorporation</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                K</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Opinion
                of
                Stenton Leigh Valuation Group, Inc.</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="581">
              <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -5.75pt">Annex
                L</div>
              <div style="PADDING-LEFT: 5.75pt; MARGIN: 0pt; TEXT-INDENT: 48.1pt">Selected
                Provisions of the Delaware General Corporation Law Regarding Appraisal
                Rights</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">This
      joint proxy statement/prospectus is based on information provided by DGSE,
      Superior and other sources that DGSE and Superior believe to be reliable. This
      joint proxy statement/prospectus summarizes certain documents filed as exhibits
      hereto. For more information on how you can obtain copies of these documents,
      see &#8220;Where You Can Find More Information&#8221; on page 155.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SUMMARY</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>QUESTIONS
      AND ANSWERS ABOUT THIS PROXY SOLICITATION,<br>THE
      DGSE SPECIAL MEETING, THE SUPERIOR SPECIAL MEETING,<br>THE COMPANIES AND THE
      COMBINATION</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>The
      following questions and answers provide brief responses to some frequently
      asked
      questions regarding this proxy solicitation, the DGSE and Superior special
      meetings, the companies and the reorganization. These questions and answers
      may
      not address all of the information that may be important to you. Please refer
      to
      the more detailed information contained elsewhere in this joint proxy
      statement/prospectus and in the documents referred to or incorporated by
      reference in this joint proxy statement/prospectus.</i></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is the
      combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">DGSE, DGSE Merger Corp., a Delaware
      corporation and wholly-owned subsidiary of DGSE, which we refer to as merger
      sub, and Superior entered into an Amended and Restated Agreement and Plan of
      Merger and Reorganization as of January 6, 2007, which, as the same may be
      amended from time to time, we refer to in this joint proxy statement/prospectus
      as the merger agreement. The merger agreement contains the terms and conditions
      of the proposed business combination of DGSE and Superior, which we refer to
      in
      this joint proxy statement/prospectus as the combination. Under the merger
      agreement, Superior will merge with and into merger sub, which we refer to
      in
      this joint proxy statement/prospectus as the merger, and Superior will survive
      the merger as a wholly-owned subsidiary of DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information, see &#8220;The Merger Agreement &#8212; Conversion of Superior Common Stock&#8221;
beginning on page 67.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What will Superior
      stockholders receive in the combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Superior stockholders will be
      entitled to receive 0.2731 shares of DGSE common stock for every share of
      Superior common stock they own at the effective time of the merger, which we
      refer to in this joint proxy statement/prospectus as the exchange ratio.
      Fractional shares will be rounded up to the nearest whole number of DGSE shares.
      Fifteen percent of the number of shares of DGSE common stock to be issued at
      the
      closing of the merger, less 33,648 shares to which DGSE is entitled as an
      indemnity under the merger agreement due to the fact that Superior&#8217;s estimated
      stockholders&#8217; equity as of December 31, 2006 was inaccurate, will be deposited
      in an escrow account as security for the payment of indemnification claims
      made
      under the merger agreement in the event Superior&#8217;s representations and
      warranties concerning its capitalization are inaccurate. As a result of the
      exchange, Superior stockholders will become DGSE stockholders and Superior
      will
      become a wholly-owned subsidiary of DGSE. Each outstanding share of DGSE common
      stock will remain unchanged in the combination.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If the
      combination (including the exchange by SIBL of Superior debt for common stock)
      had been completed as of February 23, 2007, DGSE would have issued approximately
      3,702,713 shares of its common stock to the Superior stockholders (including
      the
      96,971 shares to be issued to Mr. DiGenova pursuant to his warrant), with 33,648
      of those shares paid back to DGSE as an indemnity and 521,759 of those shares
      placed in the escrow account, and options to acquire approximately 95,380 shares
      of its common stock to the Superior option holders. Accordingly, Superior
      stockholders would have beneficially owned approximately 43.6% of the
      outstanding shares of common stock of the combined company (31.2% on a fully
      diluted basis). Based upon that assumption, the DGSE stock issued to Superior
      stockholders would have represented a 5% discount to the closing price of
      Superior stock on the trading day preceding the announcement of the revised
      terms of the proposed combination. For a more complete description of the
      combination, see the section entitled &#8220;The Combination&#8221; beginning on page
      39.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>How will the merger affect
      my stock options to acquire Superior common stock?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">At the effective time of the merger,
      each outstanding option to purchase shares of Superior common stock will be
      assumed by DGSE and converted into options to purchase shares of DGSE common
      stock. Each assumed option will be exercisable for a number of shares of DGSE
      common stock equal to the number of Superior shares covered by the Superior
      option multiplied by the exchange ratio, rounded to the nearest whole number
      of
      shares (with no cash being payable for any fractional share eliminated by such
      rounding), and with an exercise price equal to the exercise price of the
      Superior option divided by the exchange ratio. After adjusting the assumed
      options to </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">1</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">reflect
      the application of the exchange ratio and the substitution of DGSE and DGSE
      common stock for Superior and Superior common stock, all other terms of the
      assumed options will remain the same. Superior option holders will need to
      surrender their option agreement to DGSE to receive the substitute option.
      </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information, see &#8220;The Merger Agreement &#8212; Superior Options and Warrants&#8221;
beginning on page 62.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Why are DGSE and Superior
      combining?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Both DGSE and Superior believe that
      combining the two companies will expand and better serve the rare coin and
      precious metals markets and result in greater long-term growth opportunities
      than either company has operating alone. DGSE and Superior expect completion
      of
      the combination will enable the combined company to:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">expand
      the product offerings in Superior&#8217;s
      Beverly Hills, California retail outlet;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">strengthen
      each company&#8217;s Internet and
      auction businesses;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">have
      a broader sales and channel coverage
      than either company independently;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">take
      advantage of financial and regulatory
      synergies;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">have
      the scale to better compete in the
      marketplace;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">be
      led by an experienced management team;
      and</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">expand
      the rare coin auction
      business.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information, see the subsections entitled &#8220;&#8212; DGSE Reasons for the Combination&#8221;,
&#8220;&#8212; Superior Reasons for the Combination&#8221;, &#8220;&#8212; Other Factors Considered by the
      DGSE Board&#8221; and &#8220;&#8212; Other Factors Considered by the Superior Board&#8221; beginning on
      pages 42, 43, 44 and 45, respectively.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What were the factors
      considered by the DGSE board of directors in deciding to recommend the
      combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The DGSE board considered many
      benefits of the combination, including: a greater penetration of the rare coin
      and precious metals businesses due to an expanded customer base, auction outlets
      and an improved supply network; a stronger financial position, including credit
      facilities, and reduced costs; enhanced trading liquidity and better market
      focus; operational synergies from combined expertise; substantially enhanced
      growth opportunities; the acquisition of a new retail location to expand DGSE&#8217;s
      jewelry, fine watch, diamond and precious metals businesses; more efficient
      utilization of DGSE&#8217;s staff and expertise in jewelry and watch repair; and the
      capped dilution of DGSE stockholders due to the fixed range of exchange ratio
      limits used to calculate the merger consideration. For more information, see
      the
      section entitled &#8220;The Combination &#8212; DGSE&#8217;s Reasons for the Combination&#8221;
beginning on page 42.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The DGSE
      board also considered numerous other factors and risks in evaluating the
      proposed combination. For more information, see the section entitled &#8220;The
      Combination &#8212; Other Factors Considered by the DGSE Board&#8221; beginning on page
      44.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What were the factors
      considered by the Superior board of directors in deciding to recommend the
      combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The Superior board considered many
      benefits of and other reasons for the combination, including: SIBL&#8217;s
      unwillingness to continue to finance Superior&#8217;s operations with its current
      operational and management structure and limited market for its securities;
      inadequate capitalization; small margins and high regulatory compliance costs;
      high levels of debt; lack of diversification in its businesses; reliance on
      a
      few key employees; continued substantial losses; and difficulties in retaining
      employees. For more information see the sections entitled &#8220;The Combination &#8212;
Superior&#8217;s Reasons for the Combination&#8221; and &#8220;The Combination &#8212; Other Factors
      Considered by the Superior Board&#8221;, beginning on pages 43 and 45,
      respectively.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Are there risks involved
      in
      undertaking the combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Yes. The combination (including
      the
      possibility that the combination may not be consummated) poses a number of
      risks. For example, each Superior stockholder will receive 0.2731 shares of
      DGSE
      common stock for </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">2</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">each
      share of Superior common stock owned by the stockholder, regardless of the
      market price of either DGSE common stock or Superior common stock at the
      effective time of the merger. The market value of DGSE common stock is likely
      to
      fluctuate, and no one can accurately predict what the market value will be
      either at the effective time of the merger or after the merger. In addition,
      both DGSE and Superior are subject to various risks associated with their
      respective businesses and industries, certain of which may be heightened by
      the
      proposed combination. These risks are discussed in greater detail under the
      caption &#8220;Risk Factors&#8221; beginning on page 22. We encourage you to read and
      consider all of these risks carefully.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What are the interests
      of
      DGSE officers and directors in the combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Certain of the directors and
      officers of DGSE have interests in the approval of the combination that are
      different from, or in addition to, the general interests of the other
      stockholders of DGSE. The DGSE board of directors was aware of these interests
      to the extent they existed at the time and considered them, among other matters,
      in approving and recommending the reorganization, the merger agreement and
      the
      transactions contemplated by the merger agreement. These other interests include
      the following, among others:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Each
      of Dr. Smith, William H. Oyster, the
      president and chief operating officer of DGSE, and John Benson, the chief
      financial officer of DGSE, is expected to enter into a new employment agreement
      with DGSE contingent upon the effectiveness of the combination.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Each
      of Dr. Smith and Mr. Oyster is
      entitled to be nominated as a director of DGSE pursuant to a corporate
      governance agreement expected to be executed in connection with the combination.
      The corporate governance agreement is attached to this joint proxy
      statement/prospectus as Annex G.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information, see the sections entitled &#8220;DGSE Proposal No. 1 and Superior
      Proposal No. 1 &#8212; Interests of Certain DGSE Persons in the Combination&#8221; beginning
      on page 52, and &#8220;Post-Combination Employment Agreements&#8221; beginning on page
      75.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What are the interests
      of
      Superior officers, directors and controlling stockholders in the
      combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Certain of the directors and
      officers of Superior have interests in the combination that are different from,
      or in addition to, the general interests of the other stockholders of Superior.
      The Superior board of directors was aware of these interests to the extent
      they
      existed at the time and considered them, among other matters, in approving
      and
      recommending the merger, the merger agreement and the transactions contemplated
      by the merger agreement. These other interests include the following, among
      others:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Silvano
      DiGenova, the former chairman,
      president and chief executive officer of Superior and the then beneficial owner
      of approximately 38.4% of outstanding Superior common stock, had an outstanding
      subordinated loan made to Superior with an outstanding principal amount of
      approximately $400,000 repaid in connection with the signing of the merger
      agreement.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">In
      connection with entering into the merger
      agreement, Superior entered into an independent contractor arrangement with
      Mr.
      DiGenova.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">In
      connection with entering into the merger
      agreement, Superior entered into a consulting agreement with Paul Biberkraut.
      The agreement has an initial term of three months and is renewable by Superior.
      Pursuant to the agreement, Superior will pay Mr. Biberkraut $4,000 per month
      for
      consulting services leading up to the merger.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Stanford
      Financial Group Company, which we
      refer to in this joint proxy statement/prospectus as SFG, an affiliate of
      Superior&#8217;s largest stockholder and principal lender, Stanford International Bank
      Ltd., which we refer to in this joint proxy statement/prospectus as SIBL, will
      enter into an amended and restated loan and security agreement with Superior
      in
      connection with the combination. For more information about this credit
      facility, see the section entitled &#8220;Post-Combination Stanford Credit Facility&#8221;
beginning on page 75.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">SIBL
      is expected to exchange approximately
      $8.4 million of secured notes issued by Superior into approximately 5 million
      shares of Superior common stock immediately preceding the combination, at the
      rate of $1.70 per share.</font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">3</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">In
      connection with the above-referenced
      exchange and the above-referenced amended and restated loan and security
      agreement, DGSE will issue warrants to SIBL and its assignees, each of which
      can
      be exercised for a period of seven years after the merger date. The first set
      of
      warrants grant the right to purchase 845,634 shares of DGSE common at an
      exercise price of $1.89 per share, and the second set of warrants grant the
      right to purchase 863,000 shares of DGSE common stock at an exercise price
      equal
      to $0.01 per share.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Subject
      to the approval by the Superior
      stockholders as provided in this joint proxy statement/prospectus, SIBL, which
      currently beneficially owns approximately 50.5% of Superior common stock and,
      after the exchange of its debt as described above, is expected to beneficially
      own approximately 70.4% of Superior common stock, is expected to act as the
      stockholder agent under the merger agreement and related escrow
      agreement.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">SIBL,
      DGSE and Dr. L.S. Smith, the chairman
      and chief executive officer of DGSE, are expected to enter into a corporate
      governance agreement in connection with the combination, pursuant to which
      SIBL
      and Dr. Smith will each have the right to nominate two &#8220;independent&#8221; directors
      to DGSE&#8217;s seven-member board of directors, and each of Dr. Smith and William H.
      Oyster, the president and chief operating officer of DGSE and the interim chief
      executive officer of Superior, will have the right to be nominated to the DGSE
      board as long as he is an executive officer of DGSE. The corporate governance
      agreement is attached to this joint proxy statement/prospectus as Annex
      G.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Directors
      and officers of Superior will
      have rights to indemnification against specified liabilities that must be
      maintained by DGSE and DGSE may be required to maintain directors&#8217; and officers&#8217;
liability insurance for Superior directors and officers for four years following
      the combination.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information, see the sections entitled &#8220;DGSE Proposal No. 1 and Superior
      Proposal No. 1 &#8212; Interests of Certain Superior Persons in the Combination&#8221;
beginning on page 53, and &#8220;The Combination &#8212; Stockholder Agent&#8221; beginning on
      page 71.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Did any financial advisor
      provide an opinion to the DGSE board?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">DGSE did not engage a financial
      advisor in connection with the proposed combination.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Did any financial advisor
      provide an opinion to the Superior board?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Stenton Leigh Valuation Group, Inc.,
      which we refer to as Stenton Leigh, has rendered its written opinion on December
      21, 2006 to the Superior board of directors that, as of such date, and based
      upon and subject to certain matters stated in its opinion, the merger
      consideration to be paid by DGSE in the merger was fair, from a financial point
      of view, to the minority stockholders. The full text of Stenton Leigh&#8217;s written
      opinion, dated December 21, 2006, is attached as Annex K to this joint proxy
      statement/prospectus. Stenton Leigh provided its opinion for the use and benefit
      of the Superior board of directors in connection with its consideration of
      the
      merger. The opinion was not intended to be and did not constitute a
      recommendation to any stockholder of DGSE or Superior as to how such stockholder
      should vote with respect to the combination-related proposals.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What are the material
      federal income tax consequences of the combination to me?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The merger has been structured to
      qualify as a tax-free reorganization within the meaning of Section 368(a) of
      the
      Internal Revenue Code of 1986, as amended. Assuming the merger qualifies as
      a
      reorganization, Superior stockholders will not recognize gain or loss for United
      States federal income tax purposes upon the exchange of shares of Superior
      common stock for shares of DGSE common stock. Tax matters are very complicated,
      and the tax consequences of the merger to a particular stockholder will depend
      in part on such stockholder&#8217;s circumstances. Accordingly, we urge you to consult
      your own tax advisor for a full understanding of the tax consequences of the
      merger to you, including the applicability and effect of federal, state, local
      and foreign income and other tax laws. For more information, see the section
      entitled &#8220;The Combination &#8212; Material United States Federal Income Tax
      Considerations&#8221; beginning on page 55.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is the anticipated
      accounting treatment for the combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The combination will be accounted
      for as a purchase transaction by DGSE for financial reporting and accounting
      purposes under United States generally accepted accounting principles. After
      the
      combination, the results </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">4</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">of
      operations of Superior will be included in the consolidated financial statements
      of DGSE. The purchase price, which is equal to the aggregate merger
      consideration, will be allocated based on the fair values of the Superior assets
      acquired and the Superior liabilities assumed. These allocations will be made
      based upon valuations and other studies that have not yet been finalized.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>How may the merger agreement
      be terminated?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The DGSE and Superior boards of
      directors may jointly agree to terminate the merger agreement without completing
      the combination. In addition, either DGSE or Superior (acting through its
      independent committee) may terminate the merger agreement if any of the
      following events occurs, provided in most cases that the terminating company
      is
      not in material breach of the merger agreement and is not responsible for the
      occurrence of the event which permits the termination:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">SIBL
      declares an event of default under the
      credit facility with Superior, demands payment of the note, or seizes any
      collateral, or the forbearance period expires and is not renewed upon
      request;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">a
      governmental entity has issued a final,
      nonappealable order, decree or ruling or taken any other action permanently
      restraining, enjoining or otherwise prohibiting the combination or other related
      transaction;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">the
      Superior stockholders do not adopt the
      merger agreement or appoint the stockholder agent; or</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">the
      company cannot satisfy one of its
      closing conditions. </font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE,
      Superior or SIBL may also terminate the merger agreement if the combination
      has
      not occurred on or before March 31, 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information regarding termination of the merger agreement, see the section
      entitled &#8220;The Merger Agreement &#8212; Termination of the Merger Agreement&#8221; on page
      73.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Who is paying the fees
      and
      expenses of the combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">All fees and expenses incurred in
      connection with the merger agreement and the combination will be paid by the
      company incurring the fee or expense. However, all of the following third party
      charges and expenses related to the combination are being shared equally between
      Superior and DGSE:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">legal
      and accounting fees and
      expenses;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">all
      filing fees and related expenses, such
      as SEC registration statement filing fees, &#8220;blue sky&#8221; filing fees, Nasdaq
      listing and other stock exchange filing fees;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">due
      diligence expenses payable to third
      parties;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">legal
      expenses related to separate
      representation of DGSE or Superior officers who are selected to continue as
      executive officers of DGSE after completion of the combination in connection
      with new employment agreements to be entered into or review of other agreements
      related to the combination; and</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">travel
      expenses incurred by their
      respective staff.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      will also pay Stenton Leigh Valuation Group, Inc. a fee of $139,500 as
      consideration for the financial advisory services provided to Superior in
      connection with the merger.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information regarding termination of the merger agreement, see the section
      entitled &#8220;The Merger Agreement &#8212; Fees and Expenses&#8221; on page 74.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Are the companies allowed
      to
      consider other potential business combination transactions?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Yes. However, DGSE and Superior
      have
      agreed to notify each other of inquiries, proposals or offers that constitute
      alternative transaction proposals. If either party receives an unsolicited
      alternative transaction proposal that is superior to the combination, that
      party
      may engage in negotiations with respect to the superior alternative transaction
      proposal.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">5</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Should I send in my Superior
      stock certificates now?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">No. After the merger is completed,
      you will receive written instructions from DGSE or the exchange agent explaining
      how to exchange your shares of Superior common stock for the merger
      consideration. You will need to return a completed letter of transmittal, in
      which you will need to provide, among other items of information, your taxpayer
      identification number (in the case of individuals, your social security number),
      together with a completed attached substitute Form W-9. You will also need
      to
      send your certificate(s) for your Superior common stock along with the
      letter.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>When do you expect the
      combination to be completed?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">DGSE and Superior are working to
      consummate the combination during the first quarter of 2007, promptly following
      the approval of the merger and reorganization by the stockholders of Superior
      and DGSE. However, the combination is subject to various closing conditions
      that
      could affect the timing of the combination.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Am I entitled to appraisal
      or dissenters&#8217; rights?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Under Delaware law, Superior
      stockholders will have the right to dissent from the merger and, in lieu of
      receiving the merger consideration, obtain payment in cash of the fair value
      of
      their shares of Superior common stock as determined by the Delaware Chancery
      Court. To exercise appraisal rights, you must strictly follow the procedures
      prescribed by Section 262 of the Delaware General Corporation Law. See the
      section entitled &#8220;The Combination &#8212; Appraisal and Dissenters&#8217; Rights&#8221; beginning
      on page 57. In addition, the full text of the applicable provisions of Delaware
      law is included as Annex L to this proxy statement/prospectus.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under
      Nevada law, DGSE stockholders will not be entitled to appraisal or dissenters&#8217;
rights under the applicable provisions of the Nevada Private Corporation
      Act.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Will the rights of a
      Superior stockholder change as a result of the merger?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Yes. Through the date of the
      combination, the rights of DGSE stockholders will continue to be governed by
      DGSE&#8217;s articles of incorporation and bylaws, and the rights of Superior
      stockholders will continue to be governed by Superior&#8217;s certificate of
      incorporation and bylaws. Upon completion of the merger, Superior stockholders
      will become DGSE stockholders and their rights will then be governed by DGSE&#8217;s
      articles of incorporation and bylaws. Please read carefully the summary of
      the
      material differences between the rights of Superior and DGSE stockholders in
      the
      section entitled &#8220;Comparison of Stockholders&#8217; Rights&#8221; beginning on page
      93.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Are there any regulatory
      consents or approvals that are required to complete the
      combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Neither DGSE or Superior is aware
      of
      the need to obtain any regulatory approvals in order to complete the combination
      other than the declaration by the SEC of the effectiveness of the registration
      statement on Form S-4, of which this joint proxy statement/prospectus is a
      part,
      and the registration by coordination or the qualification of the Form S-4 under
      state securities laws, each of which is expected to be completed
      successfully.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Will Superior stockholders
      be able to trade the DGSE common stock that they receive in the
      combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The shares of DGSE common stock
      issued in connection with the combination will be freely tradable, unless you
      are an affiliate of Superior or become an affiliate of DGSE, and are expected
      to
      be quoted on the Nasdaq Capital Market under the symbol &#8220;DGSE&#8221;. Generally,
      persons who are deemed to be affiliates (generally directors, officers and
      10%
      or greater stockholders) of Superior must comply with Rule 145 under the
      Securities Act if they wish to sell or otherwise transfer any of the shares
      of
      DGSE common stock they receive in the combination. You will be notified if
      you
      are known to be an affiliate of Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      common stock may be delisted from the Nasdaq Capital Market upon the completion
      of the combination. In that event, DGSE will apply to list its common stock
      on
      the American Stock Exchange, although no assurances can be provided that the
      application will be approved. For more information, see the section &#8220;Risk
      Factors&#8221; beginning on page 22.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">6</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>Stockholder
      Meetings</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is required to complete
      the combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Both the DGSE and Superior
      stockholders must approve the combination-related proposals at their respective
      special meetings. In addition to these stockholder approvals, DGSE and Superior
      must satisfy or waive numerous other closing conditions set forth in the merger
      agreement, including the exchange by SIBL of approximately $8.4 million in
      Superior debt for Superior common stock. Each of the conditions to the
      combination may be waived by the company entitled to assert the condition except
      to the extent the condition must be satisfied in order to comply with applicable
      law or regulatory requirements. For more information on these closing
      conditions, see the section entitled &#8220;The Merger Agreement &#8212; Conditions to
      Completion of the Combination&#8221; beginning on page 72.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is the impact of the
      support agreements on the voting?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Concurrently with the execution
      of
      the merger agreement, DGSE, Superior and Dr. L.S. Smith, who holds the power
      to
      vote approximately 51.7% of the outstanding shares of DGSE common stock, entered
      into a support agreement, and DGSE, Superior, and SIBL and other Superior
      stockholders who together hold approximately 75.6% of the outstanding shares
      of
      Superior common stock, entered into a support agreement. Pursuant to these
      support agreements, the stockholders (solely in their capacity as stockholders)
      agreed to vote all of their shares of DGSE or Superior common stock in favor
      of
      the merger and related transactions, and against any proposal or action that
      could reasonably be expected to delay, impede or interfere with the approval
      of
      the merger or any related transaction. For more information, see the section
      entitled &#8220;The Merger Agreement &#8212; Support Agreements&#8221; beginning on page 69.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Are there any DGSE or
      Superior officers, directors or stockholders already contractually committed
      to
      voting in favor of the merger and reorganization?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Yes. Please see the preceding
      answer.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Why am I receiving this
      joint proxy statement/prospectus?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">You are receiving this joint proxy
      statement/prospectus because you have been identified as a stockholder of either
      DGSE or Superior, and thus you may be entitled to vote at the upcoming special
      meeting of stockholders of either DGSE or Superior, as applicable. This document
      serves as both a joint proxy statement of DGSE and Superior, used to solicit
      proxies for the meetings, and as a prospectus of DGSE, used to offer shares
      of
      DGSE common stock to the Superior stockholders pursuant to the terms of the
      merger agreement. This document contains important information about the
      combination, the stockholder proposals of DGSE and Superior and the meetings
      of
      DGSE and Superior, and you should read it carefully.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What do I need to do
      now?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">We urge you to read this joint proxy
      statement/prospectus carefully and then vote your proxy for the relevant
      proposals. You may vote in person at the DGSE or Superior special meeting or
      vote by proxy using the applicable enclosed proxy card.</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">To
      vote in person, attend the special
      meeting of your company, and you will be provided a ballot when you
      arrive.</font></div>
    <div style="MARGIN-TOP: 6.65pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><font style="FONT-FAMILY: Times New Roman">To
      vote by proxy, simply complete, sign and
      date the enclosed proxy card and return it promptly in the envelope provided.
      If
      you return your signed proxy card before the meeting, your shares will be voted
      as you direct.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Please
      also see the instructions included with the enclosed proxy card. Regardless
      of
      whether you return your proxy card, you may attend the applicable meeting and
      vote your shares in person. Please note, however, that if your shares are held
      of record by a broker, bank or other nominee and you wish to vote at the
      applicable special meeting, you must obtain from the record holder a proxy
      issued in your name or you must bring an account statement or other acceptable
      evidence of ownership of DGSE common stock or Superior common stock, as
      applicable, as of the close of business on [&#9679;], 2007, the record date for
      voting.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">7</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>May I change my vote after
      I
      have submitted my proxy?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Yes. You may revoke your proxy at
      any time before your proxy is voted at the applicable meeting (unless you have
      signed a support agreement with DGSE and Superior to support the merger). You
      can do this in any of three ways:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">First,
      you can deliver a written, dated
      notice to the Secretary of DGSE or Superior, as applicable, prior to the date
      of
      the applicable special meeting, stating that you would like to revoke your
      proxy.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Second,
      you can complete, date and prior to
      the date of the applicable special meeting submit to the Secretary of DGSE
      or
      Superior, as applicable, a new, later-dated proxy.</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Third,
      you can attend the applicable
      special meeting and vote in person. Your attendance alone will not revoke your
      proxy.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If your
      shares are held in &#8220;street&#8221; name, please see the next question and answer.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>If my shares of common
      stock
      are held in &#8220;street name&#8221; by my broker, will my broker vote my shares for
      me?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">If your shares of DGSE or Superior
      common stock are held in &#8220;street name&#8221; (that is, through a bank, broker or other
      nominee), your broker will vote your shares for you only if you provide
      instructions to your broker on how to vote your shares. You should follow the
      directions provided by your broker regarding how to instruct your broker to
      vote
      your shares. Your broker cannot vote your shares on these proposals without
      specific instructions from you. If you hold shares in street name and would
      like
      to attend the special meeting and vote in person, you will need to bring an
      account statement or other acceptable evidence of ownership of DGSE or Superior
      common stock, as applicable, as of the close of business on [&#9679;], 2007, the
      record date for voting. Alternatively, in order to vote, you may contact the
      person in whose name your shares are registered, obtain a proxy from that person
      and bring it to the special meeting.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Who is paying for this
      proxy
      solicitation?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">DGSE and Superior are jointly
      conducting this proxy solicitation and will share the cost of soliciting
      proxies, including the assembly, printing and mailing of this joint proxy
      statement/prospectus, the proxy cards and any additional information furnished
      to their respective stockholders.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Who can help answer my
      questions?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 36pt">If you
      have any questions about the combination, the proposals of DGSE or Superior
      or
      the special meetings of DGSE or Superior, including the procedures for voting
      your shares, or if you need additional copies of the joint proxy
      statement/prospectus or an enclosed proxy, please contact:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="216">
            </td>
            <td width="21">
            </td>
            <td width="230">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="288">
              <div style="MARGIN: 0pt">If you are a DGSE stockholder:</div>
            </td>
            <td valign="top" width="28">
              <div style="MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="307">
              <div style="MARGIN: 0pt">If you are a Superior stockholder:</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="288">&#160;</td>
            <td valign="top" width="28">&#160;</td>
            <td valign="top" width="307">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="288">
              <div style="PADDING-LEFT: 27pt; MARGIN: 0pt">DGSE Companies, Inc.<br>2817
                Forest Lane<br>Dallas, Texas 75234<br>(972) 484-3662<br>Attn: Investor
                Relations</div>
            </td>
            <td valign="top" width="28">&#160;</td>
            <td valign="top" width="307">
              <div style="PADDING-LEFT: 32.45pt; MARGIN: 0pt">Superior Galleries,
                Inc.<br>9478 West Olympic Blvd.<br>Beverly Hills, California
                90212<br>(800) 421-0754<br>Attn: Investor
                Relations</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt">&#160;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">You may
      also obtain additional information about DGSE and Superior from the documents
      each company files with the Securities and Exchange Commission or by following
      the instructions in the section entitled &#8220;Where You Can Find More Information&#8221;
on page 155.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">8</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>DGSE
      Special Meeting</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is required of DGSE
      stockholders to complete the combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A.</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">To complete the combination, DGSE
      stockholders may need to adopt and approve the merger agreement and approve
      the
      reorganization, including the issuance of shares of DGSE common stock in
      connection with the combination, and will need to approve an amendment to DGSE&#8217;s
      articles of incorporation to increase the number of authorized shares of common
      stock by 20,000,000 shares to 30,000,000 total shares.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>How many votes do DGSE
      stockholders have?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Each holder of record of DGSE common
      stock on [&#9679;], 2007, the record date for the DGSE special meeting, will be
      entitled to one vote for each share of DGSE common stock held of record on
      that
      date.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>How does DGSE&#8217;s board of
      directors recommend that DGSE stockholders vote?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">After careful consideration, DGSE&#8217;s
      board of directors unanimously recommends that DGSE stockholders vote FOR
      Proposal No. 1, to adopt and approve the merger agreement, and to approve the
      reorganization contemplated thereby, including the issuance of shares of DGSE
      common stock to Superior stockholders, and the issuance of options and warrants
      to acquire DGSE common stock, pursuant to the merger agreement; FOR Proposal
      No.
      2, to approve an amendment to DGSE&#8217;s articles of incorporation to increase the
      number of authorized shares of common stock by 20,000,000 shares, to a total
      of
      30,000,000; and FOR Proposal No. 3, to adjourn the special meeting, if
      necessary, to establish a quorum or to solicit additional proxies if there
      are
      not sufficient votes in favor of the proposals. For a description of the reasons
      underlying the unanimous recommendations of DGSE&#8217;s board, see the sections
      entitled &#8220;The Combination &#8212; DGSE&#8217;s Reasons for the Combination&#8221; and &#8220;The
      Combination &#8212; Other Factors Considered by the DGSE Board&#8221;, beginning on pages 42
      and 44, respectively, the section entitled &#8220;DGSE Proposal No. 1&#8221; on beginning
      page 39 and the section entitled &#8220;DGSE Proposal No. 2&#8221; beginning on page
      81.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What DGSE stockholder
      approvals are required to approve the DGSE proposals?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Proposal No. 1.</strong> If
      the shares of DGSE common stock continue to be listed on the Nasdaq Capital
      Market at the time of the closing of the combination, pursuant to the Nasdaq
      Marketplace Rules, the affirmative vote of a majority of the shares of DGSE
      common stock voting on the proposal will be required to adopt and approve the
      merger agreement and approve the reorganization, including the issuance of
      the
      shares of DGSE common stock to be issued to Superior stockholders, and the
      issuance of options and warrants to acquire DGSE common stock, pursuant to
      the
      merger agreement. If the shares of DGSE common stock are not listed on the
      Nasdaq Capital Market or another applicable national securities exchange at
      the
      time of the closing of the combination, no applicable law or regulation will
      require DGSE stockholder approval for the adoption and approval of the merger
      agreement or approval of the reorganization or the issuance of the shares of
      DGSE common stock to be issued to Superior stockholders in connection with
      the
      combination. Nevertheless, in that case, the board of directors of DGSE would
      still seek stockholder approval of Proposal No. 1 as a matter of good corporate
      governance, and if the number of votes present in person or represented by
      proxy
      cast in favor of Proposal No. 1 does not exceed the number of votes present
      in
      person or represented by proxy cast in opposition to Proposal No. 1, the DGSE
      board of directors would reconsider its decision to approve the merger agreement
      and the reorganization, including the issuance and reservation for issuance
      of
      shares of DGSE common stock in connection with the combination. In either case,
      abstentions and broker non-votes will be counted towards a quorum, but are
      not
      counted for any purpose in determining whether Proposal No. 1 has been
      approved.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 2.</strong> The affirmative vote of a majority of the outstanding shares of
      DGSE common stock is required to approve the amendment to DGSE&#8217;s articles of
      incorporation to increase the number of authorized shares of common stock by
      20,000,000 shares, to a total of 30,000,000 shares. Abstentions and broker
      non-votes will have the same effect as voting AGAINST Proposal No. 2.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 3.</strong> The affirmative vote of holders of a majority of the shares of
      DGSE common stock present in person or represented by proxy at the special
      meeting and entitled to vote is required to adjourn the special meeting, if
      necessary, to establish a quorum or to solicit additional proxies if there
      are
      not sufficient votes in favor of Proposal Nos. 1 and 2. Abstentions and broker
      non-votes will have the same effect as voting AGAINST Proposal No. 3.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">9</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">In
      addition, for action to be taken on Proposal No. 1 or Proposal No. 2, a quorum
      of no less than a majority of outstanding shares of DGSE common stock must
      be
      present in person or represented by proxy at the special meeting.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      the
      record date for the special meeting, approximately 54.9 percent of the
      outstanding shares of DGSE common stock were owned by directors and executive
      officers of DGSE and their affiliates.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What happens if I do not
      vote?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The failure of a DGSE stockholder
      to
      vote in person or by proxy will have the effect of voting AGAINST Proposal
      No. 2
      and, if present at the meeting, will have the same effect of voting AGAINST
      Proposal No. 3. The failure of a DGSE stockholder to vote in person or by proxy
      will not affect the outcome of DGSE Proposal No. 1 (provided sufficient shares
      are present in person or represented by proxy to establish quorum) but will
      reduce the number of votes required to approve that proposal. While Proposals
      No. 1 and No. 2 are being voted upon separately, each of Proposals No. 1 and
      2
      may have to be approved in order for either of them to be implemented.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Superior Special
      Meeting</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is required of Superior
      stockholders to complete the combination?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A.</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">To complete the combination,
      Superior stockholders must adopt and approve the merger agreement, approve
      the
      merger and irrevocably appoint and constitute Stanford International Bank Ltd.
      and its successors as the stockholder agent to act as the Superior stockholders&#8217;
exclusive agent, attorney-in-fact and representative under the merger agreement
      and related escrow agreement.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>How many votes do Superior
      stockholders have?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Each holder of record of Superior
      common stock on [&#9679;], 2007, the record date for the Superior special meeting,
      will be entitled to one vote for each share of Superior common stock held of
      record on that date.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>How does Superior&#8217;s board of
      directors recommend that Superior stockholders vote?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A.</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">After careful consideration,
      Superior&#8217;s board of directors unanimously recommends that Superior stockholders
      vote FOR Proposal No. 1, to adopt and approve the merger agreement and to
      approve the merger contemplated thereby; FOR Proposal No. 2, to approve the
      irrevocable appointment and constitution of Stanford International Bank Ltd.,
      the largest Superior stockholder and Superior&#8217;s primary lender, as the
      stockholder agent under the merger agreement and the related escrow agreement;
      and FOR Proposal No. 3, to adjourn the special meeting, if necessary, to
      establish a quorum or to solicit additional proxies if there are not sufficient
      votes in favor of the proposals. For a description of the reasons underlying
      the
      unanimous recommendations of Superior&#8217;s board, see the sections entitled &#8220;The
      Combination &#8212; Superior&#8217;s Reasons for the Combination&#8221; and &#8220;The Combination &#8212;
Other Factors Considered by the Superior Board&#8221;, beginning on pages 43 and 45,
      respectively, the section entitled &#8220;Superior Proposal No. 1&#8221; beginning on page
      39 and the section entitled &#8220;Superior Proposal No. 2&#8221; beginning on page
      84.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What Superior stockholder
      approvals are required to approve the Superior proposals?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>Proposal No. 1.</strong> The
      affirmative vote of a majority of the outstanding shares of Superior voting
      stock is required to adopt and approve the merger agreement and approve the
      merger. Abstentions and broker non-votes will have the same effect as voting
      AGAINST Proposal No. 1. </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 2.</strong> The number of votes present in person or represented by proxy
      cast in favor of the proposal must exceed the number of votes present in person
      or represented by proxy cast in opposition to the proposal at the special
      meeting to approve the irrevocable appointment and constitution of Stanford
      International Bank Ltd. and its successors as the stockholder agent under the
      merger agreement and the related escrow agreement. Abstentions and broker
      non-votes will be counted towards a quorum, but are not counted for any purpose
      in determining whether Proposal No. 2 has been approved.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 3.</strong> The affirmative vote of holders of a majority of the shares of
      Superior voting stock present in person or represented by proxy at the special
      meeting and entitled to vote is required to adjourn the special meeting, </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">10</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">if
      necessary, to establish a quorum or to solicit additional proxies if there
      are
      not sufficient votes in favor of Proposal Nos. 1 and 2. Abstentions and broker
      non-votes will have the same effect as voting AGAINST Proposal No. 3.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, for action to be taken on Proposal No. 1 or Proposal No. 2, a quorum
      of no less than a majority of outstanding shares of Superior common stock must
      be present in person or represented by proxy at the special meeting.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      the
      record date for the special meeting, approximately 5.2 percent of the
      outstanding Superior voting power was owned by directors and executive officers
      of Superior and their affiliates (including DGSE) and approximately an
      additional 50.5 percent of the outstanding Superior voting power was
      beneficially owned by SIBL.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What happens if I do not
      vote?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The failure of a Superior
      stockholder to vote in person or by proxy will have the effect of voting AGAINST
      Proposal No. 1 and, if present at the meeting, will have the same effect as
      voting AGAINST Proposal No. 3. The failure of a Superior stockholder to vote
      in
      person or by proxy will not affect the outcome of Superior Proposal No. 2
      (provided sufficient shares are present in person or represented by proxy to
      establish quorum) but will reduce the number of votes required to approve that
      proposal. While Proposals No. 1 and No. 2 are being voted upon separately,
      each
      of Proposals No. 1 and 2 must be approved in order for either of them to be
      implemented.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>The
      Companies</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is the general business
      of DGSE?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">DGSE (formerly Dallas Gold and
      Silver Exchange, Inc.) sells jewelry and bullion products to both retail and
      wholesale customers throughout the United States and makes uncollateralized
      and
      collateralized loans to individuals. DGSE&#8217;s products are marketed through its
      facilities in Dallas and Carrollton, Texas, Albuquerque, New Mexico, and Mt.
      Pleasant, South Carolina and through its four internet websites. Through
      www.DGSE.com, DGSE operates a virtual store and a real-time auction of its
      jewelry products. Customers and DGSE buy and sell items of jewelry and are
      free
      to set their own prices in an interactive market. DGSE also offers customers
      the
      ability to buy and sell precious metal assets. Customers have access to DGSE&#8217;s
      two-way markets in all of the most popularly traded precious metal products
      as
      well as current quotations for precious metals prices on DGSE&#8217;s other internet
      website www.USBullionExchange.com. www.FairchildWatches.com (Fairchild
      International) provides wholesale customers a virtual catalog of DGSE&#8217;s fine
      watch inventory. www.CGDEInc.com (Charleston Gold &amp; Diamond Exchange)
      provides information about the DGSE subsidiary and inventory available to
      purchase, including find watches, diamonds, rare coins and bullion, and jewelry.
      Over 7,500 items are available for sale on DGSE&#8217;s internet sites, including
      $10,000,000 in diamonds, consisting of both inventory and consignments.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      wholly-owned subsidiary, National Jewelry Exchange, Inc., operates a pawn shop
      in Carrollton, Texas. DGSE has focused the subsidiary&#8217;s operations on sales and
      pawn loans of jewelry products.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      January 2005, DGSE began offering unsecured payday loans through its
      wholly-owned subsidiary American Pay Day Centers, Inc.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In July
      2004, DGSE sold the goodwill and trade name of Silverman Consultants, Inc.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      principal website can be accessed at http://www.DGSE.com<font style="FONT-FAMILY: Times New (W1)">/.</font>&#160;None of the information on
      any of DGSE&#8217;s websites forms a part of this joint proxy statement/prospectus.
      DGSE&#8217;s principal executive office is located at 2817 Forest Lane, Dallas, Texas
      75234, and its telephone number is (972) 484-3662.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is the market for
      DGSE&#8217;s common stock?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The common stock of DGSE is traded
      on the Nasdaq Capital Market under the ticker symbol &#8220;DGSE&#8221;. On January 8, 2007,
      the last full trading day prior to the public announcement of the terms of
      the
      proposed combination, the last reported sale price of DGSE&#8217;s common stock on the
      Nasdaq Capital Market was $2.68 per share. On [&#9679;], 2007, the last reported sale
      price of DGSE&#8217;s common stock on the Nasdaq Capital Market was $[&#9679;] per
      share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">11</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is the general business
      of Superior?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">Superior (formerly Tangible Asset
      Galleries, Inc.) sells rare coins on a retail, wholesale and auction basis.
      Superior&#8217;s retail and wholesale operations are conducted in virtually every
      state in the United States. Superior also provides auction services for
      customers seeking to sell their own coins. Superior markets its services
      nationwide through broadcasting and print media and independent sales agents,
      as
      well as on the internet through third party websites such as eBay and through
      its own website at www.SBGH.com. Superior&#8217;s headquarters is in Beverly Hills,
      California.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      website can be accessed at http://www.SBGH.com<font style="FONT-FAMILY: Times New (W1)">/.</font> None of the information
      on the
      website forms a part of this joint proxy statement/prospectus. Superior&#8217;s
      principal executive office is located at 9478 West Olympic Boulevard, Beverly
      Hills, California 90212, and its telephone number is (310) 203-9855.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: -12pt"><strong>Q:</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt"><strong>What is the market for
      Superior&#8217;s common stock?</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: -12pt">A:</div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 36pt">The common stock of Superior is
      traded on the OTC Bulletin Board, which we refer to as the OTCBB, under the
      ticker symbol &#8220;SPGR.OB&#8221;. On January 8, 2007, the last full trading day prior to
      the public announcement of the terms of the proposed merger, the last reported
      sale price of Superior&#8217;s common stock on the OTCBB was $0.75 per share. On [&#9679;],
      2007, the last reported sale price of Superior&#8217;s common stock on the OTCBB was
      $[&#9679;] per share.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">12</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SUMMARY
      SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF DGSE</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following selected financial information should be read in conjunction with,
      and
      is qualified in its entirety by reference to the financial statements of DGSE
      and accompanying notes included elsewhere in this joint proxy
      statement/prospectus.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">The selected
      operating data for the fiscal years ended December 31, 2003, 2004 and 2005,
      and
      the selected balance sheet data at December 31, 2004 and 2005, that are set
      forth below are derived from DGSE&#8217;s audited consolidated financial statements
      included in this joint proxy statement/prospectus beginning on page F-13. The
      selected operating data for the fiscal years ended December 31, 2001 and 2002,
      and the selected balance sheet data at December 31, 2001, 2002 and 2003, are
      derived from DGSE&#8217;s audited consolidated financial statements that are on file
      with the SEC but have not been included in this joint proxy
      statement/prospectus. The following data should be read in conjunction with
      DGSE&#8217;s financial statements and related notes thereto and the section entitled
&#8220;Management&#8217;s Discussion and Analysis of Financial Condition and Results of
      Operations of DGSE&#8221; beginning on page 106.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="250">
            </td>
            <td width="13">
            </td>
            <td width="29">
            </td>
            <td width="13">
            </td>
            <td width="29">
            </td>
            <td width="13">
            </td>
            <td width="29">
            </td>
            <td width="13">
            </td>
            <td width="29">
            </td>
            <td width="13">
            </td>
            <td width="29">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="333">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="9" valign="bottom" width="267" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Years
                Ended December 31,</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2001</strong></div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2002</strong></div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2003</strong></div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2004</strong></div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="9" valign="bottom" width="267">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands, except per share figures)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt"><strong>Operating
                Data:</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Sales</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">19,134</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">21,083</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">25,244</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">28,386</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">35,319</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Pawn
                and
                pay day service fees</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">120</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">156</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">182</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">256</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">320</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Total
                revenues</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">19,254</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">21,239</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">25,426</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">28,642</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">35,639</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Cost
                of
                goods sold</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">14,743</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">16,239</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">20,050</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">22,743</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">29,118</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">4,511</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">5,000</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">5,376</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">5,899</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">6,521</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Selling,
                general &amp; administrative expenses</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">3,601</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">3,948</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,054</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,724</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">5,349</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Depreciation
                &amp; amortization</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">235</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">158</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">160</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">123</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">145</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">3,836</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">4,106</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">4,214</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">4,847</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">5,494</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">Operating
                Income</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">675</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">894</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">1,162</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">1,052</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">1,027</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Other
                income (expense):</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Unrealized
                loss on investments</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(1,635</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Other
                income</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">3</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">402</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">24</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">18</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Interest
                expense</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(298</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(263</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(268</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(248</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(291</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">Total
                other income (expense)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(295</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">139</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(1,903</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(244</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(273</div>
            </td>
            <td valign="bottom" width="4">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                (loss) before income taxes</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">380</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">1,033</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(741</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">828</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">754</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                tax
                expense (benefit)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">119</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">327</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(334</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">228</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">269</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                (loss from continuing Operations)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">260</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">706</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(407</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">600</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">485</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Loss
                from
                discontinued operations,</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                of
                income taxes</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(586</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(277</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(117</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(249</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">Net
                income (loss)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(325</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">429</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(524</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">351</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">485</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Earnings
                (loss) per common share</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Basic</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 30pt; MARGIN: 0pt; TEXT-INDENT: -6pt">From
                continuing operating</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">.05</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">.14</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(.09</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">.12</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">.10</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 30pt; MARGIN: 0pt; TEXT-INDENT: -6pt">From
                discontinued operations</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(.12</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(.05</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(.02</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(.05</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(.07</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">.09</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(.11</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">.07</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">.10</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Diluted</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 30pt; MARGIN: 0pt; TEXT-INDENT: -6pt">From
                continuing operating</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">.05</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">.14</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(.09</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">.12</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">.10</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 30pt; MARGIN: 0pt; TEXT-INDENT: -6pt">From
                discontinued operations</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(.12</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(.05</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(.02</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(.05</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(.07</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">.09</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">(.11</div>
            </td>
            <td valign="bottom" width="17">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">.07</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt" align="right">.10</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -18pt">Weighted
                average number of common
                shares:&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Basic</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,925</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,914</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="333">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Diluted</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,925</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,917</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">5,135</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">5,037</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(a)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Beginning
      in fiscal year 2002, DGSE adopted Statement of Financial Accounting Standards
      No. 142, which ceased amortization of certain indefinite lived intangible
      assets. Amortization expense for fiscal years 2000 and 2001 are stated on the
      historical accounting method, and are not directly comparable to fiscal years
      2002, 2003, 2004 and 2005 amounts.</div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 2.5pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">13</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#160;</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="267">
            </td>
            <td width="14">
            </td>
            <td width="25">
            </td>
            <td width="14">
            </td>
            <td width="25">
            </td>
            <td width="14">
            </td>
            <td width="25">
            </td>
            <td width="14">
            </td>
            <td width="25">
            </td>
            <td width="14">
            </td>
            <td width="25">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="356">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="9" valign="bottom" width="248" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Years
                Ended December 31,</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="356">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2001</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2002</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2003</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2004</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="356">
              <div style="MARGIN: 0pt"><strong>Balance Sheet Data:</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="9" valign="top" width="248">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands, except per share figures)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="356">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Inventory</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">6,297</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">6,336</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">6,674</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">6,791</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">7,570</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="356">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Working
                Capital</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">1,968</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">5,055</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">5,570</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">6,234</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">7,073</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="356">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Long-term
                debt</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">764</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">3,067</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2,719</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2,749</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">3,315</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="356">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Shareholders&#8217;
                equity&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">4,469</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">4,752</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">5,362</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">5,591</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">6,071</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following data present unaudited quarterly financial information for each of
      the
      eleven quarters beginning with the quarter ended March 31, 2004 and ending
      on
      the quarter ended September 30, 2006. The information has been derived from
      DGSE&#8217;s unaudited quarterly financial statements, which have been prepared by
      DGSE on a basis consistent with its audited financial statements appearing
      elsewhere in this joint proxy statement/prospectus. The financial information
      set forth below includes all necessary adjustments, consisting only of normal
      recurring adjustments, that management considers necessary for a fair
      presentation of the unaudited quarterly results. The following data should
      be
      read in conjunction with DGSE&#8217;s financial statements and related notes thereto
      and the section entitled &#8220;Management&#8217;s Discussion and Analysis of Financial
      Condition and Results of Operations of DGSE&#8221; beginning on page 106.</div>
    <div style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt"><strong>STATEMENTS OF
      OPERATIONS DATA</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="295">
            </td>
            <td width="15">
            </td>
            <td width="6">
            </td>
            <td width="30">
            </td>
            <td width="19">
            </td>
            <td width="6">
            </td>
            <td width="35">
            </td>
            <td width="19">
            </td>
            <td width="6">
            </td>
            <td width="28">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="393">&#160;</td>
            <td rowspan="2" valign="bottom" width="20">&#160;</td>
            <td colspan="8" valign="bottom" width="204" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Fiscal
                Quarter Ended</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Mar.
                31,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td colspan="2" valign="bottom" width="55" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June
                30,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td colspan="2" valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Sep.
                30,<br>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="393">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="8" valign="bottom" width="204">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">9,721</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">12,546</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">9,609</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Cost
                of
                revenue</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,168</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">10,760</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="38" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,086</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">1,553</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">1,786</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">1,523</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Selling,
                general and administrative
                expenses&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">1,212</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">1,262</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">1,251</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Depreciation
                and
                amortization</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">39</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">40</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="38" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">30</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Operating
                income (loss)</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">302</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">484</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">242</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(77</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(74</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="38" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(79</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                (loss) from continuing operations before income tax provision</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">225</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">410</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">164</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                tax
                provision (benefit)</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">77</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">139</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="38" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">56</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss)</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">148</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">271</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="38" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">108</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss) per common share:</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="38">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">from
                net income (loss), basic</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.05</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="38" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">from
                net income (loss), fully diluted</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.05</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="38" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Weighted
                average shares outstanding:</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="38">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Basic</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="393">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Fully
                diluted</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">5,045</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">5,056</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt">&#160;</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">14</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><strong>STATEMENTS OF
      OPERATIONS DATA</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="184">
            </td>
            <td width="18">
            </td>
            <td width="6">
            </td>
            <td width="27">
            </td>
            <td width="17">
            </td>
            <td width="6">
            </td>
            <td width="27">
            </td>
            <td width="17">
            </td>
            <td width="6">
            </td>
            <td width="27">
            </td>
            <td width="17">
            </td>
            <td width="6">
            </td>
            <td width="33">
            </td>
            <td width="12">
            </td>
            <td width="8">
            </td>
            <td width="40">
            </td>
            <td width="11">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="246">&#160;</td>
            <td rowspan="2" valign="bottom" width="24">&#160;</td>
            <td colspan="11" valign="bottom" width="256" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Fiscal
                Quarter Ended</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="16">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2005</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Mar.&#160;31,
                2005</strong></div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,
                2005</strong></div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Sep.&#160;30,
                2005</strong></div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="2" valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Dec.&#160;31,
                2005</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="246">&#160;</td>
            <td valign="bottom" width="24">&#160;</td>
            <td colspan="14" valign="bottom" width="337">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">&#160;</td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="65">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 6pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="24">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,717</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,800</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">7,215</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt" align="right">14,906</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">35,639</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Cost
                of
                revenue</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,317</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,454</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,838</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">12,509</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">29,118</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,400</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,347</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,377</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt" align="right">2,397</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">6,521</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,059</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,105</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,124</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt" align="right">2,060</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">5,349</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Depreciation
                and
                amortization</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">43</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">49</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">46</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">145</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Operating
                income (loss)</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">299</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">192</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">206</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt" align="right">330</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">1,027</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(71</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(72</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(68</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">62</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(273</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                (loss) from continuing operations before income tax provision</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">228</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">120</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">139</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt" align="right">268</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">754</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                tax
                provision (benefit)</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">78</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">41</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">47</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">104</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">269</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss)</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">151</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">79</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">92</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="44" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">164</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">485</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">&#160;</td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss) per common share:</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">from
                net income (loss), basic</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="44" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.10</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">from
                net income (loss), fully diluted</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="44" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.10</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">&#160;</td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Weighted
                average shares outstanding:</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Basic</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Fully
                diluted</div>
            </td>
            <td valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">5,089</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">5,069</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">5,040</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt" align="right">5,037</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">5,037</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>STATEMENTS OF
      OPERATIONS DATA</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="184">
            </td>
            <td width="17">
            </td>
            <td width="6">
            </td>
            <td width="27">
            </td>
            <td width="17">
            </td>
            <td width="6">
            </td>
            <td width="27">
            </td>
            <td width="17">
            </td>
            <td width="6">
            </td>
            <td width="27">
            </td>
            <td width="17">
            </td>
            <td width="6">
            </td>
            <td width="27">
            </td>
            <td width="17">
            </td>
            <td width="8">
            </td>
            <td width="40">
            </td>
            <td width="11">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="246">&#160;</td>
            <td rowspan="2" valign="bottom" width="23">&#160;</td>
            <td colspan="11" valign="bottom" width="248" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Fiscal
                Quarter Ended</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="23">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2004</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Mar.&#160;31,
                2004</strong></div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,
                2004</strong></div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Sep.&#160;30,
                2004</strong></div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Dec.&#160;31,
                2004</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="246">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="14" valign="bottom" width="338">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="2" valign="bottom" width="65">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 6pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,799</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,217</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,308</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">9,318</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">28,642</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Cost
                of
                revenue</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,453</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,988</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,973</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7,328</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">22,743</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,346</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,229</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,335</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,990</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">5,899</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">909</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">897</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">987</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,907</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">4,699</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Depreciation
                and
                amortization</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">35</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">37</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">35</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">41</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">148</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Operating
                income (loss)</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">402</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">296</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">312</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">42</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">1,052</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(72</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(73</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(34</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(45</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(224</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                (loss) from continuing operations before income tax provision</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">330</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">223</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">278</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(3</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">828</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                tax
                provision (benefit)</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">112</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">75</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">95</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(55</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">228</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Loss
                from
                discontinued operations</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(32</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(46</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(74</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(97</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(249</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss)</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">186</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">101</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">110</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(45</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">351</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss) per common share:</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">from
                net income (loss), basic</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.04</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.01</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.07</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">from
                net income (loss), fully diluted</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.04</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.01</div>
            </td>
            <td valign="bottom" width="23" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.07</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Weighted
                average shares outstanding:</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
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          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Basic</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,913</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,913</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,913</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,913</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">4,913</div>
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            <td valign="bottom" width="15">&#160;</td>
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          <tr>
            <td valign="bottom" width="246">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -5.75pt">Fully
                diluted</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">5,137</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">5,162</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">5,155</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">5,135</div>
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            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">5,135</div>
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            <td valign="bottom" width="15">&#160;</td>
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      </table>
    </div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt">&#160;</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">15</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SUMMARY
      SELECTED HISTORICAL FINANCIAL DATA OF SUPERIOR</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following selected financial information should be read in conjunction with,
      and
      is qualified in its entirety by reference to the financial statements of
      Superior and accompanying notes included elsewhere in this joint proxy
      statement/prospectus.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      selected operating data for the fiscal years ended June 30, 2004, 2005 and
      2006,
      and the selected balance sheet data at June 30, 2005 and 2006, that are set
      forth below are derived from Superior&#8217;s audited financial statements included in
      this joint proxy statement/prospectus beginning on page F-49. The selected
      operating data for the fiscal years ended June 30, 2002 and 2003, and the
      selected balance sheet data at June 30, 2002, 2003 and 2004, are derived from
      Superior&#8217;s audited consolidated financial statements that are on file with the
      SEC but have not been included in this joint proxy statement/prospectus. The
      following data should be read in conjunction with Superior&#8217;s financial
      statements and related notes thereto and the section entitled &#8220;Management&#8217;s
      Discussion and Analysis of Financial Condition and Results of Operations of
      Superior&#8221; beginning on page 133.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>STATEMENTS OF
      OPERATIONS DATA</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="232">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="3">
            </td>
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          <tr>
            <td valign="bottom" width="309">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="14" valign="bottom" width="296" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Years
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            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2002</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2003</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2004</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="14" valign="bottom" width="296">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">18,797</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">20,355</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">29,997</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">39,535</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">46,317</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Cost
                of
                sales</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">16,092</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">15,952</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">23,382</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">32,027</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">38,393</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">2,705</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,403</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,615</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">7,508</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">7,924</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,406</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,676</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">5,959</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">7,708</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">9,792</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Impairment
                of goodwill</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">591</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Operating
                income (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(3,701</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(2,864</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">656</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(200</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(1,868</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(1,174</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(614</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(92</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(415</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(669</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Extraordinary
                gain from extinguished debt</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">50</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                (loss from continuing operations before income tax provision</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(4,875</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(3,478</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">564</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(615</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(2,487</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                tax
                provision (benefit)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(8</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">13</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">12</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                (loss) from continuing operations</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(4,867</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(3,491</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">552</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(616</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(2,489</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Income
                (loss) from discontinued operations</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(3,038</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(7,905</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(3,491</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">552</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(616</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(2,489</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Calculation
                of net income (loss) per share</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(7,905</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(3,491</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">552</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(616</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(2,489</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Preferred
                stock accretion</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(44</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(67</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(50</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Preferred
                stock dividends</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(62</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(429</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(37</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss) applicable to common shares</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(8,011</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(3,987</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">465</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(616</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(2,489</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Net
                income
                (loss) per common share:(1)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                continuing operations</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(2.50</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(1.75</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">0.11</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(0.13</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(0.52</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                discontinued operations</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(1.53</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                net income (loss), basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(4.03</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(1.75</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.11</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(0.13</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(0.52</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                net income (loss), fully diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(4.03</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(1.75</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.06</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(0.13</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(0.52</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt">Weighted
                average shares outstanding: &#160;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,988</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">2,278</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,370</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,627</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,817</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Fully
                diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,988</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">2,278</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">8,098</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,627</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,817</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Per share
      data and weighted average shares outstanding have been retroactively adjusted
      for a twenty-for-one reverse stock split, which was effectuated on June 30,
      2003</div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 2.5pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">16</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>BALANCE
      SHEET DATA</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="216">
            </td>
            <td width="11">
            </td>
            <td width="5">
            </td>
            <td width="24">
            </td>
            <td width="16">
            </td>
            <td width="5">
            </td>
            <td width="28">
            </td>
            <td width="16">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="16">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="16">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="288">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
            <td colspan="14" valign="bottom" width="316" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June
                30,</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
            <td colspan="2" valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2002</strong></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2003</strong></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2004</strong></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
            <td colspan="14" valign="bottom" width="316">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cash
                and cash equivalents</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">33</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">689</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">447</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">417</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">4,770</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                assets</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">5,918</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">9,597</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">16,719</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">19,395</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">19,410</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                assets</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">7,221</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">9,827</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">16,865</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">19,615</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">19,794</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                liabilities</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">5,528</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">9,955</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">17,004</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">17,879</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">20,319</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Long-term
                liabilities</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">1,007</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">807</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">944</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">400</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">300</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="288">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Shareholders&#8217;
                equity (deficit)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">(585</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">(1,572</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(1,083</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">1,336</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(825</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="288">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                liabilities and shareholders&#8217; equity (deficit)</div>
            </td>
            <td valign="bottom" width="15">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">7,221</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">9,827</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">16,865</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">19,615</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">19,794</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following data present unaudited quarterly financial information for each of
      the
      ten quarters beginning with September 30, 2004 and ending on December 31, 2006.
      The information has been derived from Superior&#8217;s unaudited quarterly financial
      statements, which have been prepared by Superior on a basis consistent with
      its
      audited financial statements appearing elsewhere in this joint proxy
      statement/prospectus. The financial information set forth below includes all
      necessary adjustments, consisting only of normal recurring adjustments, that
      management considers necessary for a fair presentation of the unaudited
      quarterly results. The following data should be read in conjunction with
      Superior&#8217;s financial statements and related notes thereto and &#8220;Management&#8217;s
      Discussion and Analysis of Financial Condition and Results of Operations of
      Superior&#8221; beginning on page 133.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>STATEMENTS OF
      OPERATIONS DATA</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="344">
            </td>
            <td width="10">
            </td>
            <td width="7">
            </td>
            <td width="40">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="46">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="459">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="5" valign="bottom" width="146" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Fiscal
                Quarter Ended</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="64" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Sept.&#160;30,
                2006</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Dec.&#160;31,
                2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 6pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 6pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="61">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">11,653</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">5,805</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of revenue</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,342</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,609</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">2,311</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">1,196</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,301</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,505</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">(1,309</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">(114</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from continuing operations before income tax
                provision&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">(104</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">(182</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax provision (benefit)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Extraordinary
                Gain</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(105</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="61" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,492</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="459">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income (loss) per common share:</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                net income (loss), basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="61" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.31</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                net income (loss), fully diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="61" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.31</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="459">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Weighted
                average shares outstanding:</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">4,820</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">4,808</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Fully
                diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">4,820</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">4,808</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><br></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">17</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><strong>STATEMENTS OF
      OPERATIONS DATA</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="210">
            </td>
            <td width="10">
            </td>
            <td width="6">
            </td>
            <td width="36">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="25">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="32">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="26">
            </td>
            <td width="15">
            </td>
            <td width="6">
            </td>
            <td width="35">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="281">&#160;</td>
            <td rowspan="2" valign="bottom" width="13">&#160;</td>
            <td colspan="11" valign="bottom" width="249" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Fiscal
                Quarter Ended</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="20">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,
                2006</strong></div>
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            <td rowspan="2" valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Sept.&#160;30,
                2005</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="41" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Dec.&#160;31,</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="41" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="14" valign="bottom" width="325">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">11,653</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">9,626</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">15,067</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">9,972</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">46,317</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of revenue</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,342</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,440</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">12,085</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="35" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,527</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">38,393</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">2,311</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">1,186</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">2,982</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">1,445</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">7,924</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,301</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,166</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,404</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="35" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,921</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,792</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">(980</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">578</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">(1,476</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">(1,868</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(114</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(137</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(177</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="35" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(240</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(669</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from continuing operations before income tax provision</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">(104</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">(1,117</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">401</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">(1,716</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">(2,537</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax provision (benefit)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Extraordinary
                Gain</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="34" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">50</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="35" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(105</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="34" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,117</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">451</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="35" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,717</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(2,489</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income (loss) per common share:</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                net income (loss), basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="34" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.23</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.09</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="35" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.36</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.52</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                net income (loss), fully diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="34" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.23</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.05</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="35" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.36</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.52</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Weighted
                average shares outstanding:</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">4,820</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">4,820</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">4,820</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">4,808</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">4,817</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Fully
                diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">4,820</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">4,820</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">8,977</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">4,808</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">4,817</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>STATEMENTS OF
      OPERATIONS DATA</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="210">
            </td>
            <td width="10">
            </td>
            <td width="7">
            </td>
            <td width="33">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="25">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="32">
            </td>
            <td width="15">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="15">
            </td>
            <td width="6">
            </td>
            <td width="35">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="281">&#160;</td>
            <td rowspan="2" valign="bottom" width="13">&#160;</td>
            <td colspan="11" valign="bottom" width="248" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Fiscal
                Quarter Ended</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="20">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,
                2006</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="bottom" width="55" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Sept.&#160;30,
                2004</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Dec.&#160;31,</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2004</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="14" valign="bottom" width="325">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">9,269</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">8,403</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">11,658</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">10,205</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">39,535</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of sales</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7,215</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="33" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,787</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,661</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,364</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">32,027</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">2,054</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">1,616</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">1,997</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">1,841</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">7,508</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,854</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="33" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,642</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,098</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,114</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7,708</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">200</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">(26</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">(101</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(273</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">(200</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(74</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="33" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(104</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(102</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(135</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(415</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from continuing operations before income tax provision</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">126</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">(130</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">(203</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(408</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">(615</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax provision (benefit)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="33" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">125</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="33" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(130</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(203</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(408</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(616</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income (loss) per common share:</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                net income (loss), basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="33" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.03</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.04</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.09</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.13</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">from
                net income (loss), fully diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="33" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.03</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.04</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.09</div>
            </td>
            <td valign="bottom" width="20" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(0.13</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Weighted
                average shares outstanding:</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">4,497</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">4,510</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">4,685</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,743</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">4,627</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Fully
                diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">8,170</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">4,510</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">4,685</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">4,743</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">4,627</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="281">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="33">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">18</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SUMMARY
      SELECTED UNAUDITED <i>PRO FORMA</i> CONDENSED COMBINED<br>FINANCIAL
      INFORMATION</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following table shows information about DGSE&#8217;s financial condition and results
      of operations, including per share data and financial ratios, on a <i>pro
      forma</i> basis after giving effect to a January 1, 2005 business combination of
      DGSE and Superior and related transactions. This information is called the
      <i>pro forma</i> financial information in this document. The table sets forth
      the information as if the combination and related transactions had become
      effective on September 30, 2006 (using currently available fair value
      information), with respect to balance sheet data, and January 1, 2005, with
      respect to statement of operations data. This unaudited <i>pro forma</i>
      financial information assumes that the combination will be accounted for using
      the purchase method of accounting and represents a current estimate based on
      available information of the combined company&#8217;s results of operations. The
      unaudited <i>pro forma</i> financial information includes adjustments to record
      the assets and liabilities of Superior at their estimated fair values and is
      subject to further adjustment as additional information becomes available and
      as
      additional analyses are performed.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      merger agreement was announced on January 9, 2007. Pursuant to the combination,
      Superior will merge with a wholly-owned subsidiary of DGSE and DGSE will acquire
      all of the outstanding shares of Superior. Superior stockholders will be
      entitled to receive 0.2731 shares of DGSE common stock for every share of
      Superior common stock they own at the effective time of the combination, subject
      to an escrow arrangement described herein.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">This
      table should be read together with, and is qualified in its entirety by, the
      historical financial statements, including the notes thereto, of DGSE and
      Superior included in this joint proxy statement/prospectus beginning on page
      F-1, and the more detailed unaudited <i>pro forma</i> condensed combined
      financial information, including the notes thereto, appearing in the section
      entitled &#8220;Unaudited <i>Pro forma</i> Condensed Combined Financial Information&#8221;
beginning on page 87.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      unaudited <i>pro forma</i> financial information, while helpful in illustrating
      the financial characteristics of the combined company under one set of
      assumptions, does not reflect the impact of possible revenue enhancements,
      expense efficiencies, asset dispositions and share repurchases, among other
      factors that may result as a consequence of the combination and, accordingly,
      does not attempt to predict or suggest future results. It also does not
      necessarily reflect what the historical results of the combined company would
      have been had the companies been combined during these periods.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Pro Forma <i>Balance
      Sheet Data</i></strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="401">
            </td>
            <td width="12">
            </td>
            <td width="7">
            </td>
            <td width="43">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="535">&#160;</td>
            <td rowspan="2" valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="68" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>As
                of<br>September&#160;30,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="535">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="68">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(in
                thousands)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="535">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Assets</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">31,154</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="535">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Liabilities</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">12,995</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="535">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Shareholders&#8217;
                Equity&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">18,159</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Pro Forma Statement
      of
      Operations Data</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="327">
            </td>
            <td width="10">
            </td>
            <td width="9">
            </td>
            <td width="49">
            </td>
            <td width="16">
            </td>
            <td width="8">
            </td>
            <td width="44">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="436">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="78" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Quarter
                Ended<br>September&#160;30,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td colspan="2" valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended<br>December&#160;31,<br>2005</strong></div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="436">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="5" valign="bottom" width="170">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(in
                thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="436">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="66">&#160;</td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="436">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="12">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">18,169</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">78,781</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="436">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                (loss) income</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="12">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">(269</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">252</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="436">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                (loss) income Per
                Share:&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="66">&#160;</td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="436">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Basic</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="12">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">(0.03</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="436">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Diluted</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="12">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">(0.03</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Comparative Per Share
      Data</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">The
      following table sets forth certain historical per share data of DGSE and
      Superior and per share data on an unaudited <i>pro forma</i> combined basis
      after giving effect to the combination. This table should be read together
      with,
      and is qualified in its entirety by, the historical financial statements,
      including the notes thereto, of DGSE and Superior included in this joint proxy
      statement/prospectus beginning on page F-1, and the more detailed unaudited
      </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 5pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">19</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 5pt; PAGE-BREAK-BEFORE: always"><i>pro
      forma</i> condensed combined financial information, including the notes thereto,
      appearing in the section entitled &#8220;Unaudited <i>Pro forma</i> Condensed Combined
      Financial Information&#8221; beginning on page 87:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="338">
            </td>
            <td width="10">
            </td>
            <td width="10">
            </td>
            <td width="43">
            </td>
            <td width="15">
            </td>
            <td width="7">
            </td>
            <td width="39">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="450">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="71" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Quarter&#160;Ended<br>September&#160;30,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="63" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year&#160;Ended<br>December&#160;31,<br>2005</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>DGSE
                Historical Per Share Data:</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Income (in thousands)</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">108</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">485</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Basic(a)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">0.10</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Diluted(b)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">0.10</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Book
                value(c)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">1.31</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">1.21</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Superior
                Historical Per Share Data:</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Income (in thousands)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">(939</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">(1,834</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Basic(a)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">(0.20</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">(0.38</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Diluted(b)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">(0.20</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">(0.38</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Book
                value(c)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">(0.35</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">0.05</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong><i>Pro
                Forma</i> Combined Company Per Share
                Data:&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                (Loss) Income (in thousands)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">(269</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">253</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Basic(d)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">(0.03</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Diluted(d)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">(0.03</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="450">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Book
                value(e)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">1.85</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">1.99</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(a)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Based
      on
      weighted average number of shares of common stock outstanding for DGSE and
      Superior for such period, respectively.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(b)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Based
      on
      the weighted average number of shares of common stock outstanding plus the
      potential dilution that would occur if interests in securities (options and
      other convertible securities) were exercised and converted into common stock
      of
      DGSE or Superior for such period.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(c)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Computed
      by dividing shareholders&#8217; equity by the weighted average number of shares of
      common stock at the end of such period plus the weighted average dilutive effect
      of interests in securities (options and other convertible securities).</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(d)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Based
      on
      the <i>pro forma</i> combined net income presented in the section entitled
&#8220;Unaudited <i>Pro forma</i> Condensed Combined Financial Information&#8221; beginning
      on page 87 of this joint proxy statement/prospectus which gives effect to the
      combination under the purchase method of accounting.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(e)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Computed
      by dividing shareholders&#8217; equity by the weighted average number of outstanding
      shares of DGSE common stock at the end of such period, adjusted to include
      the
      estimated number of shares of DGSE common stock to be issued in the combination
      plus the weighted average dilutive effect of interests in securities (options
      and other convertible securities) at the end of such period.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">20</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SUMMARY
      COMPARATIVE PER SHARE MARKET PRICE DATA</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      common stock is traded on the Nasdaq Capital Market under the ticker symbol
      &#8220;DGSE&#8221;. Superior common stock is traded is traded on the OTC Bulletin Board
      under the ticker symbol &#8220;SPGR.OB&#8221;.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The table
      below sets forth the high and low sales prices per share of DGSE common stock
      as
      reported on the Nasdaq Capital Market on January 8, 2006, the last completed
      trading day prior to the announcement of the combination, and on [&#9679;], 2007, the
      last full trading day for which high and low sales prices were available as
      of
      the date of this joint proxy statement/prospectus. These equivalent high and
      low
      sales prices per share of Superior reflect the fluctuating value of DGSE common
      stock that Superior stockholders would receive in the combination in exchange
      for each share of Superior common stock if the combination had been completed
      on
      either of those dates, applying the exchange ratio.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="270">
            </td>
            <td width="16">
            </td>
            <td width="6">
            </td>
            <td width="26">
            </td>
            <td width="19">
            </td>
            <td width="6">
            </td>
            <td width="26">
            </td>
            <td width="16">
            </td>
            <td width="5">
            </td>
            <td width="23">
            </td>
            <td width="17">
            </td>
            <td width="5">
            </td>
            <td width="23">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="360">&#160;</td>
            <td rowspan="2" valign="bottom" width="22">&#160;</td>
            <td colspan="5" valign="bottom" width="113" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>DGSE
                Common Stock</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="22">&#160;</td>
            <td colspan="5" valign="bottom" width="102" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior
                Equivalent<br>Price Per
                Share</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>High</strong></div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Low</strong></div>
            </td>
            <td colspan="2" valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>High</strong></div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td colspan="2" valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Low</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="360">&#160;</td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="34">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="34">&#160;</td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="31">&#160;</td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="31">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="360">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">January&#160;8,&#160;2007&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.65</div>
            </td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.71</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt" align="right">0.72</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt" align="right">0.74</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="360">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">[&#9679;],
                2007</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">[&#9679;]</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">[&#9679;]</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt" align="right">[&#9679;]</div>
            </td>
            <td valign="bottom" width="23">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt" align="right">[&#9679;]</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The above
      table shows only historical comparisons. These comparisons may not provide
      meaningful information to DGSE and Superior stockholders in determining whether
      to approve the combination-related proposals described within this joint proxy
      statement/prospectus. DGSE and Superior stockholders are urged to obtain current
      market quotations for DGSE common stock and to review carefully the other
      information contained in this joint proxy statement/prospectus or incorporated
      by reference into this joint proxy statement/prospectus. See the section
      entitled &#8220;Where You Can Find More Information&#8221; beginning on page 155.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Dividend
      Information (DGSE and Superior)</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Neither
      DGSE nor Superior has ever declared or paid any cash dividends on its capital
      stock. Both DGSE and Superior currently intend to retain any earnings for use
      in
      their respective businesses and neither anticipates paying any cash dividends
      in
      the foreseeable future.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">21</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>RISK
      FACTORS</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>The
      combination involves a high degree of risk. By voting in favor of the merger,
      Superior stockholders will be choosing to invest in DGSE common stock. In
      addition to the risks described in DGSE&#8217;s reports on Forms 10-K and 10-Q filed
      with the SEC, you should carefully consider the risks described below relating
      to the combination and the risks to the combined company&#8217;s business after the
      combination. You should also consider the other information contained in, or
      incorporated by reference into, this joint proxy statement/prospectus. Please
      refer to the section of the joint proxy statement/prospectus entitled &#8220;Where You
      Can Find More Information&#8221; beginning on page 155. If any of these risks
      materializes, the business, financial condition or results of operations of
      DGSE
      may be seriously harmed. In such case, the market price of DGSE common stock
      may
      decline, and you may lose all or part of your investment.</i></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>Risks
      Related to the Combination</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>If DGSE and
      Superior fail to effectively integrate their operations, the combined company
      may not realize the potential benefits of the combination.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      integration of DGSE and Superior will be a time-consuming and expensive process
      and may disrupt the combined company&#8217;s operations if it is not completed in a
      timely and efficient manner. If this integration effort is not successful,
      the
      combined company&#8217;s results of operations could be harmed, employee morale could
      decline, key employees could leave, customers could choose not to place new
      orders and the combined company could have difficulty complying with regulatory
      requirements. In addition, the combined company may not achieve anticipated
      synergies or other benefits of the combination. Following the combination,
      DGSE
      and Superior must operate as a combined organization utilizing common
      information and communication systems, operating procedures, financial controls
      and human resources practices. The combined company may encounter the following
      difficulties, costs and delays involved in integrating their operations:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">failure to manage relationships
      with customers and other important constituents successfully;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">failure of customers to accept
      new
      services or to continue using the products and services of the combined
      company;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">difficulties in successfully
      integrating the management teams and employees of DGSE and Superior;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">challenges encountered in managing
      larger, more geographically dispersed operations;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the loss of key employees;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">diversion of the attention of
      management from other ongoing business concerns;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">potential incompatibilities of
      technologies and systems;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">potential difficulties integrating
      and harmonizing financial reporting systems; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">potential incompatibility of
      business cultures.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If the
      combined company&#8217;s operations after the combination do not meet the expectations
      of existing customers of DGSE or Superior, then these customers may cease doing
      business with the combined company altogether, which would harm the results
      of
      operations and financial condition of the combined company.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If the
      anticipated benefits of the combination are not realized or do not meet the
      expectations of financial or industry analysts, the market price of DGSE common
      stock may decline after the combination. The market price of DGSE common stock
      may decline as a result of the combination if:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the integration of DGSE and
      Superior is unsuccessful;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the combined company does not
      achieve the expected benefits of the combination as quickly as anticipated
      or
      the costs of or operational difficulties arising from the combination are
      greater than anticipated;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the combined company&#8217;s financial
      results after the combination are not consistent with the expectations of
      financial or industry analysts;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">22</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the anticipated operating and
      product synergies of the combination are not realized; or</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the combined company experiences
      the loss of significant customers or employees as a result of the
      combination.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Failure to complete
      the combination could adversely affect the future business and operations of
      DGSE and Superior as well as the market price of DGSE and Superior common
      stock.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      combination is subject to the satisfaction or waiver of numerous closing
      conditions, including the approval of the merger and reorganization by both
      Superior and DGSE stockholders, and may not be successfully completed.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      event that the combination is not completed, Superior may be subject to a number
      of risks, including:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">SIBL may foreclose on its loans
      to
      Superior, which could force Superior into bankruptcy and could result in SIBL
      owning all of the assets of Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Superior could have difficulty
      attracting new customers or maintaining current customers because of its
      difficult financial situation.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Superior could lose its current
      management team, which is being provided by DGSE pursuant to the management
      agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      event that the combination is not completed, both DGSE and Superior may be
      subject to a number of risks, including:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The price of DGSE&#8217;s and Superior&#8217;s
      common stock may decline to the extent that the current market price of the
      respective companies&#8217; common stock reflects a market assumption that the
      combination will be completed.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">DGSE and Superior could suffer
      the
      loss of customers, revenues and employees due to uncertainties resulting from
      the uncompleted combination.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">DGSE&#8217;s and Superior&#8217;s costs related
      to the proposed combination, such as legal, accounting and advisory fees, must
      be paid even if the combination is not completed, and these costs would reduce
      each company&#8217;s reported earnings or increase reported loss, for the period when
      it was determined that the combination would not be consummated. </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Completion of
      the
      combination may result in DGSE being delisted from the Nasdaq Capital
      Market.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      completion of the combination may result in DGSE being delisted from the Nasdaq
      Capital Market. Under Nasdaq Marketplace Rule 4340(a), an issuer must apply
      for
      initial inclusion following a transaction in which the issuer combines with
      a
      non-Nasdaq entity if the combination results in a change of control of the
      issuer and potentially allows the non-Nasdaq entity to obtain a Nasdaq listing.
      Superior is a non-Nasdaq entity and DGSE does not currently, and may not at
      the
      time of the combination, satisfy the initial listing requirements of the Nasdaq
      Capital Market. Accordingly, if Nasdaq determines that the combination will
      result in a &#8220;change of control&#8221; of DGSE for purposes of its Rule 4340(a), Nasdaq
      may initiate proceedings to delist DGSE from the Nasdaq Capital Market. In
      this
      case, DGSE may seek to be listed on the American Stock Exchange, though it
      does
      not currently, and there can be no assurances that it will at the time of the
      combination, satisfy the initial listing requirements of the American Stock
      Exchange. </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Completion of
      the
      combination may result in dilution of future earnings per share to the
      stockholders of DGSE.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      completion of the combination may not result in improved earnings per share
      of
      DGSE or a financial condition superior to that which would have been achieved
      by
      either DGSE or Superior on a stand-alone basis. The combination could fail
      to
      produce the benefits that the companies anticipate, or could have other adverse
      effects that the companies currently do not foresee. In addition, some of the
      assumptions that either company has made, such as the achievement of operating
      synergies, may not be realized. In this event, the combination could result
      in a
      reduction of earnings per share of DGSE as compared to the earnings per share
      that would have been achieved by DGSE or Superior if the combination had not
      occurred.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">23</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong><i>The
      costs associated with the combination are difficult to estimate, may be higher
      than expected and may harm the financial results of the combined
      company.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      and
      Superior estimate that they will incur aggregate direct transaction costs of
      approximately $400,000 each associated with the combination, and additional
      costs associated with consolidation and integration of operations, which cannot
      be estimated accurately at this time. If the total costs of the combination
      exceed estimates or the benefits of the combination do not exceed the total
      costs of the combination, the financial results of the combined company could
      be
      adversely affected.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>The businesses
      of
      DGSE and Superior could suffer due to the announcement and closing of the
      combination.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      announcement and closing of the combination may have a negative impact on DGSE&#8217;s
      or Superior&#8217;s ability to sell their respective products and services, attract
      and retain key management, technical, sales or other personnel, maintain and
      attract new customers and maintain strategic relationships with third parties.
      For example, DGSE and Superior may experience deferral, cancellations or a
      decline in the size or rate of orders for their respective products or services
      or a deterioration in their respective customer or business partner
      relationships. Any such events could harm the operating results and financial
      condition of the combined company following the combination.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>DGSE executive
      officers and directors have interests that are different from, or in addition
      to, those of DGSE stockholders generally.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      executive officers and directors of DGSE in some cases have interests in the
      combination that are different from, or are in addition to, those of DGSE
      stockholders generally. The receipt of compensation or other benefits in
      connection with the combination, including employment agreements, may influence
      these officers and directors in making their recommendation that you vote in
      favor of the adoption of the merger agreement. You should be aware of these
      interests when you consider the DGSE board&#8217;s recommendation that you vote in
      favor of adoption of the merger agreement. See the sections entitled &#8220;Proposal
      No. 1 &#8212; Interests of Certain DGSE Persons in the Combination&#8221; beginning on page
      52 and &#8220;Post-Combination Employment Agreements&#8221; beginning on page 75.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Superior executive
      officers and directors have interests that are different from, or in addition
      to, those of Superior stockholders generally.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      executive officers and directors of Superior in some cases have interests in
      the
      combination that are different from, or are in addition to, those of Superior
      stockholders generally. The receipt of compensation or other benefits in the
      combination, including independent contractor agreements, and the provision
      and
      continuation of indemnification and insurance arrangements for current directors
      of Superior following completion of the combination may influence these
      directors in making their recommendation that you vote in favor of the adoption
      of the merger agreement. You should be aware of these interests when you
      consider the Superior board&#8217;s recommendation that you vote in favor of adoption
      of the merger agreement. See the section entitled &#8220;The Combination &#8212; Interests
      of Certain Superior Persons in the Combination&#8221; below beginning on page
      53.</div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>Risks
      Related to the Combined Company After the Combination</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>To
      facilitate a reading of the risks that we believe will apply to DGSE and
      Superior as a combined company following completion of the combination, in
      referring to &#8220;we&#8221;, &#8220;us&#8221; and other first person declarations in these risk
      factors, we are referring to the combined company as it would exist following
      the combination.</i></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Changes in customer
      demand for our products and services could result in a significant decrease
      in
      revenues.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Although
      our customer base commonly uses our products and services, our failure to meet
      changing demands of our customers could result in a significant decrease in
      our
      revenues.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Changes in
      governmental rules and regulations applicable to the specialty financial
      services industry could have a negative impact on our lending
      activities.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our
      lending is subject to extensive regulation, supervision and licensing
      requirements under various federal, state and local laws, ordinances and
      regulations. New laws and regulations could be enacted that could have a
      negative impact on our lending activities.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">24</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong><i>Fluctuations
      in our inventory turnover and sales.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      regularly experience fluctuations in our inventory balances, inventory turnover
      and sales margins, yields on loan portfolios and pawn redemption rates. Changes
      in any of these factors could materially and adversely affect our profitability
      and ability to achieve our planned results.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Changes in our
      liquidity and capital requirements could limit our ability to achieve our
      plans.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      require continued access to capital, and a significant reduction in cash flows
      from operations or the availability of credit could materially and adversely
      affect our ability to achieve our planned growth and operating results.
      Similarly, if actual costs to build new stores significantly exceeds planned
      costs, our ability to build new stores or to operate new stores profitably
      could
      be materially restricted. The DGSE credit agreement also limits the allowable
      amount of capital expenditures in any given fiscal year, which could limit
      our
      ability to build new stores.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Changes in
      competition from various sources could have a material adverse impact on our
      ability to achieve our plans.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      encounter significant competition in connection with our retail and lending
      operations from other pawnshops, cash advance companies and other forms of
      financial institutions and other retailers, many of which have significantly
      greater financial resources than us. Significant increases in these competitive
      influences could adversely affect our operations through a decrease in the
      number or quality of payday loans and pawn loans or our ability to liquidate
      forfeited collateral at acceptable margins.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      coins and other collectibles business, we will compete with a number of
      comparably sized and smaller firms, as well as a number of larger firms
      throughout the United States. Our primary competitors are Heritage Auction
      Galleries, a large scale coin dealer and auctioneer, and American Numismatic
      Rarities, a comparably-sized coin auctioneer. Many of our competitors have
      the
      ability to attract customers as a result of their reputation and the quality
      collectibles they obtain through their industry connections. Additionally,
      other
      reputable companies that sell or auction rare coins and other collectibles
      may
      decide to enter our markets to compete with us. These companies have greater
      name recognition and have greater financial and marketing resources than we
      do.
      If these auction companies are successful in entering the specialized market
      for
      premium collectibles in which we participate or if dealers and sellers
      participate less in our auctions, we may attract fewer buyers and our revenue
      could decrease.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Our earnings
      could
      be negatively impacted by an unfavorable outcome of litigation, regulatory
      actions, or labor and employment matters.</i></strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>A failure in
      our
      information systems could prevent us from effectively managing and controlling
      our business or serving our customers.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We rely
      on our information systems to manage and operate our stores and business. Each
      store is part of an information network that permits us to maintain adequate
      cash inventory, reconcile cash balances daily and report revenues and expenses
      timely. Any disruption in the availability of our information systems could
      adversely affect our operation, the ability to serve our customers and our
      results of operations.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>A failure of
      our
      internal controls and disclosure controls and procedures, or our inability
      to
      comply with the requirements of section 404 of the Sarbanes-Oxley Act in a
      timely fashion could have a material adverse impact on us and our investors&#8217;
confidence in our reported financial information.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Effective
      internal controls and disclosure controls and processes are necessary for us
      to
      provide reliable financial reports and to detect and prevent fraud. We are
      currently performing the system and process evaluation required to comply with
      the management certification and auditor attestation requirements of Section
      404
      of the Sarbanes-Oxley Act. This evaluation may conclude that enhancements,
      modifications or changes to our controls are necessary. Completing this
      evaluation, performing testing and implementing any required remedial changes
      will require significant expenditures and management attention. We cannot be
      certain as to the timing of completion of our evaluation, testing and
      remediation actions or the impact of these on our operations. We cannot be
      certain that significant deficiencies or material weaknesses will not be
      identified, or that remediation efforts will be timely to allow us to comply
      with the requirements of Section 404 of the Sarbanes-Oxley Act. If we are unable
      to comply </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">25</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">with
      the requirements of Section 404 of the Sarbanes-Oxley Act, investors could
      lose
      confidence in our reported financial information.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Changes in general
      economic conditions could negatively affect loan performance and demand for
      our
      products and services.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">A
      sustained deterioration in the economic environment could adversely affect
      our
      operations by reducing consumer demand for the products we sell.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Interest rate
      fluctuations could increase our interest expense.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Although
      the U.S. Federal Reserve halted a sustained period of regular interest rate
      hikes in August 2006, interest rates could continue to rise which would, in
      turn, increase our cost of borrowing.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Our success depends
      on our ability to attract, retain and motivate management and other skilled
      employees.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our
      future success and growth depend on the continued services of our key management
      and employees. The loss of the services of any of these individuals or any
      other
      key employee or contractor could materially affect our business. Our future
      success also depends on our ability to identify, attract and retain additional
      qualified personnel. Competition for employees in our industry is intense and
      we
      may not be successful in attracting or retaining them. There are a limited
      number of people with knowledge of, and experience in, our industry. We do
      not
      have employment agreements with many of our key employees. We do not maintain
      life insurance polices on many of our employees. Our loss of key personnel,
      especially without advance notice, or our inability to hire or retain qualified
      personnel, could have a material adverse effect on sales and our ability to
      maintain our technological edge. We cannot guarantee that we will continue
      to
      retain our key management and skilled personnel, or that we will be able to
      attract, assimilate and retain other highly qualified personnel in the
      future.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Superior has
      a
      history of losses and may incur future losses.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      recorded a net loss of $2,489,000 for its fiscal year ended June 30, 2006 and
      a
      net loss of $616,000 for its fiscal year ended June 30, 2005. Superior recorded
      net income of $552,000 for its fiscal year ended June 30, 2004 and has incurred
      losses in prior fiscal years since July 1999. We cannot be certain that
      following the combination, Superior will become profitable as a subsidiary
      of
      DGSE. If Superior does not become profitable and sustain profitability, the
      market price of our common stock may decline.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>The voting power
      in
      our company is substantially controlled by a small number of stockholders,
      which
      may, among other things, delay or frustrate the removal of incumbent directors
      or a takeover attempt, even if such events may be beneficial to our
      stockholders.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stanford
      International Bank Ltd. and Dr. L.S. Smith will collectively have the power
      to
      vote approximately 58% of our voting securities, and beneficially own
      approximately 57% of our voting securities on a fully-diluted basis, upon
      consummation of the combination. Consequently, these two stockholders may have
      sufficient voting power to control the outcome of virtually all corporate
      matters submitted to the vote of our common stockholders. Those matters could
      include the election of directors, changes in the size and composition of the
      board of directors, mergers and other business combinations involving DGSE,
      or
      the liquidation of DGSE. In addition, SIBL and Dr. Smith are expected to enter
      into a corporate governance agreement with DGSE in connection with the
      combination, which entitles SIBL and Dr. Smith to each nominate two
&#8220;independent&#8221; directors to the DGSE board and entitles Dr. Smith, our chairman
      and chief executive officer, and William H. Oyster, our president and chief
      operating officer, to be nominated to the DGSE board for so long as he remains
      an executive officer of DGSE. Through this control of company nominations to
      the
      board of directors and through their voting power, SIBL and Dr. Smith are able
      to exercise substantial control over certain decisions, including decisions
      regarding the qualification and appointment of officers, dividend policy, access
      to capital (including borrowing from third-party lenders and the issuance of
      additional equity securities), and our acquisition or disposition of assets.
      Also, the concentration of voting power in the hands of SIBL and Dr. Smith
      could
      have the effect of delaying or preventing a change in control of our company,
      even if the change in control would benefit our other stockholders, and may
      adversely affect the market price of our common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">26</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong><i>We
      could be subject to sales taxes, interest and penalties on interstate sales
      for
      which we have not collected taxes.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      has not collected California sales tax on mail-order sales to out-of-state
      customers, nor has it collected use tax on its interstate mail order sales.
      We
      believe that our sales to interstate customers are generally tax-exempt due
      to
      varying state exemptions relative to the definitions of being engaged in
      business in particular states and the lack of current Internet taxation. While
      we have not been contacted by any state authorities seeking to enforce sales
      or
      use tax regulations, we cannot assure you that we will not be contacted by
      authorities in the future with inquiries concerning our compliance with current
      statutes, nor can we assure you that future statutes will not be enacted that
      affect the sales and use tax aspects of our business.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>We may incur
      losses
      as a result of accumulating inventory.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition to auctioning rare coins on consignment, a substantial portion of
      the
      rare coins that Superior sells comes from its own inventory. Superior purchases
      these rare coins from dealers and collectors and assumes the inventory and
      price
      risks of these items until they are sold. If Superior is unable to resell the
      rare coins that it purchases when it wants or needs to, or at prices sufficient
      to generate a profit from their resale, or if the market value of the inventory
      of purchased rare coins were to decline, our revenue would likely decline.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>If we experience
      an
      increase in the rescission of sales, our revenue and profitability could
      decrease.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our
      operating results could suffer if we experience a significant increase in the
      number of sales that are rescinded due to questions about title, provenance
      or
      authenticity of an item. Superior warrants the title, provenance and
      authenticity of each item that it sells at auction. A buyer who believes that
      any of these characteristics is in doubt must notify Superior in writing within
      a certain number of days after the date of sale of the property. If Superior
      cannot substantiate the questioned characteristics, the buyer may rescind the
      purchase and Superior will refund the price paid at auction to the buyer. When
      a
      purchase is rescinded, the seller is required to refund the item&#8217;s sale price
      less sellers&#8217; commissions and other sellers&#8217; fees.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Our planned
      expansion and enhancement of our website and Internet operations may not result
      in increased profitability.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      satisfactory performance, reliability and availability of our website and
      network infrastructure are and will be critical to our reputation and our
      ability to attract and retain customers and technical personnel and to maintain
      adequate customer service levels. Any system interruptions or reduced
      performance of our website could materially adversely affect our reputation
      and
      our ability to attract new customers and technical personnel. We are in the
      process of development and/or enhancement of several portions of our websites
      that will offer content and auctions for rare coins that may have a lower
      average selling price than many of the rare coins in the markets we currently
      serve, and in the future we plan to integrate various of our websites. Continued
      development of our websites will require significant resources and expense.
      If
      the planned expansion of our websites does not result in increased revenue,
      we
      may experience decreased profitability.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Our website may
      be
      vulnerable to security breaches and similar threats which could result in our
      liability for damages and harm to our reputation.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Despite
      the implementation of network security measures, our websites are vulnerable
      to
      computer viruses, break-ins and similar disruptive problems caused by Internet
      users. These occurrences could result in our liability for damages, and our
      reputation could suffer. The circumvention of our security measures may result
      in the misappropriation of customer or other confidential information. Any
      such
      security breach could lead to interruptions and delays and the cessation of
      service to our customers and could result in a decline in revenue and
      income.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Changes to
      financial accounting standards and new exchange rules could make it more
      expensive to issue stock options to employees, which would increase compensation
      costs and may cause us to change our business practices.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      prepare our financial statements to conform with generally accepted accounting
      principles, or GAAP, in the United States. These accounting principles are
      subject to interpretation by the Public Company Accounting Oversight Board,
      the
      SEC and various other bodies. A change in those policies could have a
      significant effect on our reported results and may affect our reporting of
      transactions completed before a change is announced.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">27</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">For
      example, we have used stock options and other long-term equity incentives as
      a
      fundamental component of our employee compensation packages. We believe that
      stock options and other long-term equity incentives directly motivate our
      employees to maximize long-term stockholder value and, through the use of
      vesting, encourage employees to remain with our company. Several regulatory
      agencies and entities are considering regulatory changes that could make it
      more
      difficult or expensive for us to grant stock options to employees. For example,
      the Financial Accounting Standards Board has issued SFAS 123R that will require
      us to record a charge to earnings for employee stock option grants. As a result
      of these changes, we may incur increased compensation costs, change our equity
      compensation strategy or find it difficult to attract, retain and motivate
      employees, each of which could materially and adversely affect our business,
      operating results and financial condition.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>We are subject
      to
      new corporate governance and internal control reporting requirements, and our
      costs related to compliance with, or our failure to comply with existing and
      future requirements could adversely affect our business.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We face
      new corporate governance requirements under the Sarbanes-Oxley Act of 2002,
      as
      well as new rules and regulations subsequently adopted by the SEC, the Public
      Company Accounting Oversight Board and the Nasdaq Capital Market. These laws,
      rules and regulations continue to evolve and may become increasingly stringent
      in the future. In particular, we will be required to include management and
      independent registered public accounting firm reports on internal controls
      as
      part of our annual report for the year ending December 31, 2007 pursuant to
      Section 404 of the Sarbanes-Oxley Act. We are in the process of evaluating
      our
      control structure to help ensure that we will be able to comply with Section
      404
      of the Sarbanes-Oxley Act. We cannot assure you that we will be able to fully
      comply with these laws, rules and regulations that address corporate governance,
      internal control reporting and similar matters. Failure to comply with these
      laws, rules and regulations could materially adversely affect our reputation,
      financial condition and the value and liquidity of our securities.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, DGSE is currently eligible (and has elected) to be a &#8220;controlled
      company&#8221; for purposes of the corporate governance provisions of the Nasdaq
      Marketplace Rules. As a result, DGSE does not currently have a nominating or
      compensation committee of its board of directors, or any committee performing
      similar functions. Upon the consummation of the combination, DGSE may no longer
      be eligible to be a &#8220;controlled company&#8221; under applicable rules, and, if not,
      will need to phase in independent nomination and compensation committees. </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>The revolving
      credit facilities with Stanford International Bank Ltd. and Texas Capital Bank,
      N.A. is each collateralized by a general security interest in Superior&#8217;s and
      DGSE&#8217;s assets, respectively. If either company were to default under the terms
      of its credit facility, the lender would have the right to foreclose on our
      assets.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      December 2005, DGSE entered into a revolving credit facility with Texas Capital
      Bank, N.A., which currently permits borrowings up to a maximum principal amount
      of $4 million. Borrowings under the revolving credit facility are collateralized
      by a general security interest in substantially all of DGSE&#8217;s assets. As of
      December 31, 2006, $3.785 million was outstanding under the revolving credit
      facility. If DGSE were to default under the terms and conditions of the
      revolving credit facility, Texas Capital Bank would have the right to accelerate
      any indebtedness outstanding and foreclose on our assets in order to satisfy
      our
      indebtedness. Such a foreclosure could have a material adverse effect on our
      business, liquidity, results of operations and financial position.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      October 2003, Superior entered into a revolving credit facility with Stanford
      Financial Group Company, which we refer to as SFG, which has assigned the
      facility to SIBL. The facility currently permits borrowings up to a maximum
      principal amount of $19.89 million, and will be reduced to $11.5 million in
      connection with the closing of the combination (after the exchange of
      approximately $8.4 million of outstanding debt into shares of Superior common
      stock). Borrowings under the revolving credit facility are collateralized by
      a
      general security interest in substantially all of Superior&#8217;s assets. As of
      December 31, 2006, $10.85 million was outstanding under the revolving credit
      facility; however, in connection with the combination, it is expected that
      $8.4
      million of that debt will be exchanged for Superior common stock and up to
      $6
      million of the credit facility will be made available to DGSE. If Superior
      were
      to default under the terms and conditions of the revolving credit facility,
      SIBL
      would have the right to accelerate any indebtedness outstanding and foreclose
      on
      Superior&#8217;s assets, and, subject to intercreditor arrangements with Texas Capital
      Bank, DGSE&#8217;s assets, in order to satisfy Superior&#8217;s indebtedness. Such a
      foreclosure could have a material adverse effect on our business, liquidity,
      results of operations and financial position.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">28</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong><i>DGSE
      has not paid dividends on its common stock in the past and does not anticipate
      paying dividends on its common stock in the foreseeable
      future.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      has
      not paid common stock dividends since its inception and does not anticipate
      paying dividends in the foreseeable future. Our current business plan provides
      for the reinvestment of earnings in an effort to complete development of our
      technologies and products, with the goal of increasing sales and long-term
      profitability and value. In addition, our revolving credit facility with Texas
      Capital Bank currently restricts, and any other credit or borrowing arrangements
      that we may enter into may in the future restrict or limit, our ability to
      pay
      dividends to our stockholders.</div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>SPECIAL
      NOTE REGARDING FORWARD-LOOKING
      STATEMENTS</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The SEC
      encourages companies to disclose forward-looking information so that investors
      can better understand a company&#8217;s future prospects and make informed investment
      decisions. This joint proxy statement/prospectus contains such &#8220;forward-looking
      statements&#8221; within the meaning of the Private Securities Litigation Reform Act
      of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the
      Securities Exchange Act of 1934.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Words
      such as &#8220;anticipate,&#8221; &#8220;believe,&#8221; &#8220;estimate,&#8221; &#8220;expect,&#8221; &#8220;intend,&#8221; &#8220;may,&#8221; &#8220;plan,&#8221;
&#8220;project,&#8221; &#8220;seek,&#8221; &#8220;will&#8221; and words and terms of similar substance used in
      connection with any discussion of future operating or financial performance,
      or
      expected strategic benefits, advantages and other effects of the combination
      or
      any statements about Superior&#8217;s business or operating results identify
      forward-looking statements. In particular, statements that involve risks and
      uncertainties regarding the expected strategic benefits, objectives, advantages,
      expectations and intentions and other effects of the combination described
      in
      sections such as &#8220;The Combination &#8212; DGSE Reasons for the Combination&#8221;, &#8220;The
      Combination &#8212; Superior Reasons for the Combination&#8221;, &#8220;The Combination &#8212; Other
      Factors Considered by the DGSE Board&#8221; and &#8220;The Combination &#8212; Other Factors
      Considered by the Superior Board&#8221;, on pages 42, 43, 44 and 45, respectively, and
      elsewhere in this joint proxy statement/prospectus are forward-looking
      statements. In addition, some statements concerning DGSE&#8217;s or Superior&#8217;s
      business, revenues, revenue mix, gross margin, operating expense levels,
      financial outlook, commitments under existing leases, sales and marketing
      initiatives and competition, such as the following, are forward-looking
      statements:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">projections of revenues, synergies
      and other financial items;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">statements of strategies and
      objectives for future operations;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">expectations regarding the
      completion of the combination;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">statements regarding integration
      plans;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">statements concerning proposed
      products or services;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">statements regarding future
      economic conditions, performance or business prospects;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">statements regarding competitors
      or
      competitive actions; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">statements of assumptions
      underlying any of the foregoing.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">All
      forward-looking statements are present expectations of future events and are
      subject to a number of factors and uncertainties that could cause actual results
      to differ materially from those described in the forward-looking statements.
      The
      risks related to the combination and to the combined businesses after the
      combination discussed in the section entitled &#8220;Risk Factors&#8221; beginning on page
      22 of this joint proxy statement/prospectus, among others, could cause actual
      results to differ materially from those described in the forward-looking
      statements. Such risks include, among others: the competitive environment and
      competitive responses to the combination; whether the combined company can
      successfully develop new products and the degree to which these products will
      gain market acceptance; whether anticipated cost and product synergies can
      be
      achieved; whether the integration of DGSE and Superior will be more difficult
      and costly than expected; uncertainties as to the timing of the combination;
      approval of the proposals described herein by the respective stockholders of
      DGSE and Superior; and the satisfaction of other closing conditions to the
      combination. Neither DGSE nor Superior makes any representation as to whether
      any projected or estimated information or results contained in any
      forward-looking statements will be obtained or achieved. Stockholders are
      cautioned not to place undue reliance on the forward-looking statements, which
      speak only as of the date of this joint proxy statement/prospectus or the date
      of the documents incorporated by reference in </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">29</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">this
      joint proxy statement/prospectus. Neither DGSE nor Superior is under any
      obligation, and each expressly disclaims any obligation, to update or alter
      any
      forward-looking statements after the date of this joint proxy
      statement/prospectus, whether as a result of new information, future events
      or
      otherwise.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For
      additional information about factors that could cause actual results to differ
      materially from those described in the forward-looking statements, please see
      the section entitled &#8220;Risk Factors&#8221;, beginning on page 22, and the annual
      reports on Form 10-K and the quarterly reports on Form 10-Q that DGSE and
      Superior have filed with the SEC.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Please
      see the section entitled &#8220;Where You Can Find More Information&#8221; on page
      155.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">30</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SPECIAL
      MEETING OF DGSE STOCKHOLDERS</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      is
      furnishing this joint proxy statement/prospectus to you in order to provide
      you
      with important information regarding the matters to be considered at the special
      meeting of DGSE stockholders and at any adjournment or postponement of the
      special meeting. DGSE first mailed this joint proxy statement/prospectus and
      the
      accompanying form of proxy to its stockholders on or about [&#9679;], 2007.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Date, Time and Place
      of the Special Meeting</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      will
      hold a special meeting of its stockholders at DGSE&#8217;s executive offices at 2817
      Forest Lane, Dallas, Texas 75234, on [&#9679;],&#160;[&#9679;], 2007, at [&#9679;]&#160;AM Central
      Time.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Matters to be
      Considered at the Special Meeting</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">At the
      special meeting, stockholders of DGSE will be asked to consider and vote upon
      the following proposals:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">1.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Proposal No. 1.</strong> To
      adopt and approve the Amended and Restated Agreement and Plan of Merger and
      Reorganization, which we refer to in this joint proxy statement/prospectus
      as
      the merger agreement, made and entered into as of January 6, 2007, by and among
      DGSE, DGSE Merger Corp., a Delaware corporation and wholly owned subsidiary
      of
      DGSE, Superior Galleries, Inc., a Delaware corporation, and Stanford
      International Bank Ltd., as stockholder agent, and to approve the reorganization
      contemplated thereby, including the issuance of shares of DGSE common stock
      to
      Superior stockholders, and the issuance of options and warrants to acquire
      shares of DGSE common stock, pursuant to the merger agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">2.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Proposal No. 2.</strong> To
      approve an amendment to DGSE&#8217;s articles of incorporation to increase the number
      of authorized shares of common stock by 20,000,000 shares, to a total of
      30,000,000 shares.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">3.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Proposal No. 3.</strong> To
      adjourn the special meeting, if necessary, to establish a quorum or to solicit
      additional proxies if there are not sufficient votes in favor of the
      proposals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">While
      these proposals are being voted upon separately, both of the first two proposals
      may have to be approved in order for either of them to be implemented.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Record Date;
      Stockholders Entitled to Vote</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      record date for determining the DGSE stockholders entitled to vote at the
      special meeting is [&#9679;],&#160;[&#9679;], 2007. Only holders of record of DGSE common
      stock at the close of business on that date are entitled to vote at the special
      meeting. On the record date, 4,913,290 shares of DGSE common stock were issued
      and outstanding.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      the
      record date, the directors and executive officers of DGSE and their affiliates
      beneficially owned 4,214,280 shares of DGSE common stock representing 67.9%
      of
      the outstanding shares of DGSE common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">A list
      of
      stockholders eligible to vote at the special meeting will be available for
      your
      review during DGSE&#8217;s regular business hours at its principal place of business
      in Dallas, Texas for at least ten days prior to the special meeting for any
      purpose germane to the special meeting.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Voting and Revocation
      of Proxies</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The proxy
      card accompanying this joint proxy statement/prospectus is solicited on behalf
      of the board of directors of DGSE for use at the special meeting.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>General.</i>
      Shares represented by a properly signed and dated proxy will be voted at the
      special meeting in accordance with the instructions indicated on the proxy.
      Proxies that are properly signed and dated but that do not contain voting
      instructions will be voted as follows: FOR Proposal No. 1, to adopt and approve
      the merger agreement, and to approve the reorganization contemplated thereby,
      including the issuance of shares of DGSE common stock to Superior stockholders,
      and the issuance of options and warrants to acquire shares of DGSE common stock,
      pursuant to the merger agreement; FOR Proposal No. 2, to approve an amendment
      to
      DGSE&#8217;s articles of incorporation to increase the number of authorized shares of
      common stock by 20,000,000 shares, to a total of 30,000,000; and FOR Proposal
      No. 3. to adjourn the special meeting, if necessary, whether or not a quorum
      </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">31</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">is
      present, to establish a quorum or to solicit additional proxies if there are
      not
      sufficient votes in favor of the proposals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Abstentions.</i>DGSE
      will count a properly executed proxy marked ABSTAIN with respect to a particular
      proposal as present for purposes of determining whether a quorum is present,
      but
      the shares represented by that proxy will not be voted at the special meeting
      with respect to that proposal. Because approval of Proposal No. 2 requires
      the
      affirmative vote of a majority of the voting power of the DGSE shares
      outstanding and approval of Proposal No. 3 requires the affirmative vote of
      a
      majority of the voting power of the DGSE shares present in person or by proxy,
      abstentions on either proposal will have the same effect as a vote AGAINST
      the
      proposal. Abstentions will have no direct effect on the outcome of Proposal
      No.
      1. However, while Proposals Nos. 1 and 2 are being voted upon separately, both
      Proposal No. 1 and 2 may have to be approved in order for either of them to
      be
      implemented.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Broker
      Non-Votes.</i> If your shares are held by your broker, your broker will vote
      your shares for you if you instruct your broker how to vote. You should follow
      the directions provided by your broker regarding how to instruct your broker
      to
      vote your shares. &#8220;Broker non-votes&#8221; are shares held by a broker or other
      nominee that are represented at the special meeting, but with respect to which
      the broker or nominee is not instructed by the beneficial owner of the shares
      to
      vote on the particular proposal and the broker does not have discretionary
      voting power on the proposal. Broker non-votes will be counted for purposes
      of
      determining the presence or absence of a quorum but will not be counted for
      purposes of determining the number of shares represented and voting with respect
      to a proposal. Failure to instruct your broker on how to vote your shares on
      Proposal No. 2 or 3 will have the effect of voting AGAINST the proposal. Failure
      to instruct your broker on how to vote your shares on Proposal No. 1 will have
      no effect on the outcome of that proposal, assuming that a quorum is present
      at
      the special meeting, but will reduce the number of votes required to approve
      that proposal. While Proposals No. 1 and No. 2 are being voted upon separately,
      both Proposal No. 1 and 2 may have to be approved in order for either of them
      to
      be implemented.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Voting
      Shares in Person that are Held Through Brokers.</i> If your shares are held of
      record by your broker, bank or another nominee and you wish to vote those shares
      in person at the special meeting, you must obtain from the nominee holding
      your
      shares a properly executed legal proxy identifying you as a DGSE stockholder
      on
      the record date for the special meeting, authorizing you to act on behalf of
      the
      nominee at the DGSE special meeting and identifying the number of shares with
      respect to which the authorization is granted.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Revocation
      of Proxies.</i> If you submit a proxy, unless you have entered into a support
      agreement to support the combination, you may revoke it at any time before
      it is
      voted in three ways:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">First, you can deliver a written,
      dated notice to the Secretary of DGSE prior to the date of the special meeting,
      stating that you would like to revoke your proxy.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Second, you can complete, date
      and,
      prior to the date of the special meeting, submit a new, later-dated proxy to
      the
      Secretary of DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Third, you can attend the special
      meeting and vote in person. Your attendance alone will not revoke your
      proxy.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Notices
      to the Secretary of DGSE should be sent to 2817 Forest Lane, Dallas, Texas
      75234, Attention: Corporate Secretary.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If you
      have instructed your broker to vote your shares, you must follow directions
      received from your broker to change those instructions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Support
      Agreement.</i>Dr. L.S. Smith, who holds the power to vote approximately 51.7% of
      the outstanding shares of DGSE common stock, has entered into a support
      agreement with DGSE and Superior solely in his capacity as a stockholder of
      DGSE. Pursuant to that agreement, Dr. Smith agreed to vote all of his shares
      of
      DGSE common stock in favor of the reorganization and related transactions,
      and
      against any proposal or action that could reasonably be expected to delay,
      impede or interfere with the approval of the reorganization or any related
      transaction. This constitutes sufficient votes for both Proposals No. 1 and
      2 to
      be approved. For more information, see the section entitled &#8220;The Merger
      Agreement &#8212; Support Agreements&#8221; beginning on page&#160;69.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">32</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>Required
      Stockholder Vote</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In order
      to conduct business at the DGSE special meeting, a quorum must be present.
      The
      holders of a majority of the votes entitled to be cast by holders of common
      stock at the special meeting, present in person or represented by proxy,
      constitutes a quorum under DGSE&#8217;s bylaws. DGSE will treat shares of DGSE common
      stock represented by a properly signed and returned proxy, including abstentions
      and broker non-votes, as present at the DGSE special meeting for the purposes
      of
      determining the presence of a quorum. If a quorum is not present, it is expected
      that the special meeting will be adjourned to solicit additional proxies.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">With
      respect to any matter submitted to a vote of the DGSE stockholders at the
      special meeting, each holder of DGSE common stock will be entitled to one vote,
      in person or by proxy, for each share of DGSE common stock held in his, her
      or
      its name on the books of DGSE on the record date.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 1.</strong> If the shares of DGSE common stock continue to be listed on the
      Nasdaq Capital Market at the time of the closing of the combination, pursuant
      to
      the Nasdaq Marketplace Rules, the affirmative vote of a majority of the shares
      of DGSE common stock voting on the proposal will be required to adopt and
      approve the merger agreement and approve the reorganization, including the
      issuance of shares of DGSE common stock to be issued to Superior stockholders,
      and the issuance of options and warrants to acquire shares of DGSE common stock,
      pursuant to the merger agreement. If the shares of DGSE common stock are not
      listed on the Nasdaq Capital Market or another applicable national securities
      exchange which has a similar rule at the time of the closing of the combination,
      no applicable law or regulation will require DGSE stockholder approval for
      the
      adoption and approval of the merger agreement or approval of the reorganization,
      including the issuance of the shares of DGSE common stock to be issued to
      Superior stockholders in connection with the combination. Nevertheless, in
      that
      case, the board of directors of DGSE would still seek stockholder approval
      of
      Proposal No. 1 as a matter of good corporate governance, and if the number
      of
      votes present in person or represented by proxy cast in favor of Proposal No.
      1
      does not exceed the number of votes present in person or represented by proxy
      cast in opposition to Proposal No. 1, the DGSE board of directors would, subject
      to its obligations in the merger agreement, reconsider its decision to approve
      the merger agreement and the reorganization, including the proposal to issue
      and
      reserve for issuance shares of DGSE common stock, and the issuance of options
      and warrants to acquire shares of DGSE common stock, pursuant to the merger
      agreement. In either case, abstentions and broker non-votes will be counted
      towards a quorum, but are not counted for any purpose in determining whether
      Proposal No. 1 has been approved.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 2.</strong> The affirmative vote of a majority of the outstanding shares of
      DGSE common stock is required to approve the amendment to DGSE&#8217;s articles of
      incorporation to increase the number of authorized shares of common stock by
      20,000,000 shares, to a total of 30,000,000 shares. Abstentions and broker
      non-votes will have the same effect as voting AGAINST Proposal No. 2.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 3. </strong>The affirmative vote of holders of a majority of the outstanding
      shares of DGSE common stock present in person or represented by proxy at the
      special meeting and entitled to vote is required to adjourn the special meeting,
      if necessary, whether or not a quorum is present, to establish a quorum or
      to
      solicit additional proxies if there are not sufficient votes in favor of
      Proposal Nos. 1 and 2. Abstentions and broker non-votes will have the same
      effect as voting AGAINST Proposal No. 3.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">While
      Proposals No. 1 and No. 2 are being voted upon separately, both of the proposals
      may have to be approved in order for either of them to be implemented.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      bylaws authorize the shares present at the meeting in person or by proxy to
      adjourn the special meeting if a quorum is not then in attendance.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      inspector of elections for the DGSE special meeting will tabulate the
      votes.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Unanimous
      Recommendations by the Board of Directors</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">After
      careful consideration, the board of directors of DGSE has unanimously determined
      that the reorganization and merger agreement are advisable and in the best
      interests of DGSE and its stockholders. <strong><i>The board of directors of
      DGSE unanimously recommends that you vote FOR Proposal No. 1 for the merger
      agreement and the reorganization, including the issuance of the shares of DGSE
      common stock to be issued to Superior stockholders, and the issuance of options
      and warrants to acquire shares of DGSE common stock, pursuant to the terms
      of
      the merger agreement.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">33</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">The
      DGSE board of directors has also determined that the increase in the number
      of
      authorized capital stock of DGSE is necessary for the completion of the
      combination and advisable and in the best interests of DGSE and its
      stockholders. <strong><i>The board of directors of DGSE unanimously recommends
      that you vote FOR Proposal No. 2 for the amendment to the DGSE articles of
      incorporation to increase the number of authorized shares of common stock from
      10,000,000 shares of common stock to 30,000,000 shares of common
      stock.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The DGSE
      board of directors has further determined that approving a proposal to adjourn
      the special meeting, if necessary, to establish a quorum or to solicit
      additional proxies is advisable and in the best interests of DGSE and its
      stockholders. <strong><i>The board of directors of DGSE unanimously recommends
      that you vote FOR Proposal No. 3 to adjourn the special meeting, if necessary,
      to establish a quorum or to solicit additional proxies if there are not
      sufficient votes in favor of the proposals.</i></strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Solicitation of
      Proxies</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      and
      Superior are conducting this proxy solicitation and will share the cost of
      soliciting proxies, including the preparation, assembly, printing and mailing
      of
      this joint proxy statement/prospectus, the proxy card and any additional
      information furnished to stockholders. DGSE will also make arrangements with
      brokerage houses and other custodians, nominees and fiduciaries to send the
      proxy materials to their principals and will reimburse them for their reasonable
      expenses in so doing. To the extent necessary in order to assure sufficient
      representation at the DGSE special meeting, officers and regular employees
      of
      DGSE may solicit the return of proxies from DGSE stockholders by mail,
      telephone, telegram and personal interview. No compensation in addition to
      regular salary and benefits will be paid to any such officer or regular employee
      for such solicitation. The total estimated cost of the solicitation of DGSE
      proxies is $75,000.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Security Ownership
      of
      Principal Stockholders, Directors and Executive Officers</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For
      information regarding the security ownership of DGSE common stock by principal
      stockholders, directors and executive officers of DGSE, see the section entitled
      &#8220;Ownership of DGSE Capital Stock&#8221; beginning on page&#160;114.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Stockholder Proposals
      and Nominations</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Requirements
      for Stockholder Proposals to be Brought Before an Annual Meeting. </i>For
      stockholder nominations to the board of directors or other proposals to be
      considered at an annual meeting of DGSE stockholders, the stockholder must
      have
      given DGSE timely notice of the proposal or nomination in writing to its
      Secretary pursuant to Rule 14a-4 (c) under the Exchange Act. To be timely for
      the 2007 annual meeting, a stockholder&#8217;s notice must be delivered to or mailed
      and received by DGSE&#8217;s Secretary at DGSE&#8217;s principal executive offices not later
      than March&#160;26, 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Requirements
      for Stockholder Proposals to be Considered for Inclusion in DGSE&#8217;s Proxy
      Materials.</i> Stockholder proposals submitted pursuant to Rule 14a-8(e) under
      the Exchange Act for inclusion in DGSE&#8217;s proxy materials and intended to be
      presented at DGSE&#8217;s 2007 annual meeting must be received by DGSE&#8217;s Secretary in
      writing not later than January 10, 2007 to be considered for inclusion in DGSE&#8217;s
      proxy materials for that meeting. The proposal also must meet the other
      requirements of the rules of the SEC relating to stockholder proposals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong><i>The
      matters to be considered at the special meeting are of great importance to
      the
      stockholders of DGSE. Accordingly, you are urged to read and carefully consider
      the information presented in this joint proxy statement/prospectus, and to
      submit your proxy by mail in the enclosed postage-paid
      envelope.</i></strong></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">34</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SPECIAL
      MEETING OF SUPERIOR STOCKHOLDERS</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      Galleries, Inc. is furnishing this joint proxy statement/prospectus to you
      in
      order to provide you with important information regarding the matters to be
      considered at the special meeting of the Superior stockholders and at any
      adjournment or postponement of the special meeting. Superior first mailed this
      joint proxy statement/prospectus and the accompanying form of proxy to its
      stockholders on or about [&#9679;], 2007.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Date, Time and Place
      of the Special Meeting</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      will hold its special meeting of its stockholders at Superior&#8217;s principal
      offices at 9478 West Olympic Blvd., Beverly Hills, California 90212, on [&#9679;],[&#9679;],
      2007, at [&#9679;] AM Pacific Time.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Matters to be
      Considered at the Special Meeting</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">At the
      special meeting, stockholders of Superior will be asked to consider and vote
      upon the following proposals:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">1.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Proposal No. 1. </strong>To
      adopt and approve the Amended and Restated Agreement and Plan of Merger and
      Reorganization, which we refer to in this joint proxy statement/prospectus
      as
      the merger agreement, made and entered into as of January 6, 2007, by and among
      DGSE Companies, Inc., a Nevada corporation, which we refer to as DGSE, DGSE
      Merger Corp., a Delaware corporation and wholly owned subsidiary of DGSE,
      Superior, and Stanford International Bank Ltd., which we refer to as SIBL,
      as
      stockholder agent, whom together with any successors in that capacity we refer
      to in this joint proxy statement/prospectus as the stockholder agent, and to
      approve the merger contemplated thereby.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">2.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Proposal No. 2.</strong> To
      approve the irrevocable appointment and constitution of SIBL, the largest
      Superior stockholder and its primary lender, including its successors as
      stockholder agent, as the exclusive agent, attorney-in-fact and representative
      of the Superior stockholders under the merger agreement and the related escrow
      agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">3.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><strong>Proposal No. 3.</strong> To
      adjourn the special meeting, if necessary, to establish a quorum or to solicit
      additional proxies if there are not sufficient votes in favor of the
      proposals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">While
      these proposals are being voted upon separately, both of the first two proposals
      must be approved in order for either of them to be implemented.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Record Date;
      Stockholders Entitled to Vote</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      record date for determining the Superior stockholders entitled to vote at the
      special meeting is [&#9679;], 2007. Only holders of record of Superior voting stock at
      the close of business on that date are entitled to vote at the special meeting.
      On the record date, 4,818,280 shares of Superior common stock and no shares
      of
      Superior preferred stock were issued and outstanding.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      the
      record date, the directors and executive officers of Superior and their
      affiliates (including DGSE) held 380,000 shares of Superior common stock
      representing approximately 5.2% of the outstanding shares of Superior common
      stock.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">A list
      of
      stockholders eligible to vote at the special meeting will be available for
      your
      review during Superior&#8217;s regular business hours at its principal place of
      business in Beverly Hills, California for at least ten days prior to the special
      meeting for any purpose germane to the special meeting.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Voting and Revocation
      of Proxies</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The proxy
      card accompanying this joint proxy statement/prospectus is solicited on behalf
      of the board of directors of Superior for use at the special meeting.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>General.</i>
      Shares represented by a properly signed and dated proxy will be voted at the
      special meeting in accordance with the instructions indicated on the proxy.
      Proxies that are properly signed and dated but that do not contain voting
      instructions will be voted as follows: FOR Proposal No. 1 for the merger
      agreement and the merger; FOR Proposal No. 2 to approve the irrevocable
      appointment and constitution of SIBL and its successors as the </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">35</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">stockholder
      agent under the merger agreement and the related escrow agreement; and FOR
      Proposal No. 3 to adjourn the special meeting, if necessary, whether or not
      a
      quorum is present, to establish a quorum or to solicit additional proxies if
      there are not sufficient votes in favor of the proposals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Abstentions.
      </i>Superior will count a properly executed proxy marked ABSTAIN with respect
      to
      a particular proposal as present for purposes of determining whether a quorum
      is
      present, but the shares represented by that proxy will not be voted at the
      special meeting with respect to such proposal. Because approval of Proposal
      No.
      1 requires the affirmative vote of a majority of the voting power of Superior
      shares outstanding and approval of Proposal No. 3 requires the affirmative
      vote
      of a majority of the voting power of the Superior shares present in person
      or by
      proxy, abstentions on either proposal will have the same effect as a vote
      AGAINST the proposal. Abstentions will have no direct effect on the outcome
      of
      Proposal No. 2. However, while Proposals No. 1 and No. 2 are being voted upon
      separately, both Proposal No. 1 and 2 must be approved in order for either
      of
      them to be implemented.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Broker
      Non-Votes.</i> If your shares are held by your broker, your broker will vote
      your shares for you if you instruct your broker how to vote. You should follow
      the directions provided by your broker regarding how to instruct your broker
      to
      vote your shares. &#8220;Broker non-votes&#8221; are shares held by a broker or other
      nominee that are represented at the special meeting, but with respect to which
      the broker or nominee is not instructed by the beneficial owner of the shares
      to
      vote on the particular proposal and the broker does not have discretionary
      voting power on the proposal. Broker non-votes will be counted for purposes
      of
      determining the presence or absence of a quorum but will not be counted for
      purposes of determining the number of shares represented and voting with respect
      to a proposal. Failure to instruct your broker on how to vote your shares on
      Proposal No. 1 or 3 will have the effect of voting AGAINST the proposal. Failure
      to instruct your broker on how to vote your shares on Proposal No. 2 will have
      no effect on the outcome of that proposal, assuming that a quorum is present
      at
      the special meeting, but will reduce the number of votes required to approve
      that proposal. While Proposals No. 1 and No. 2 are being voted upon separately,
      both Proposal No. 1 and 2 must be approved in order for either of them to be
      implemented.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Voting
      Shares in Person that are Held Through Brokers.</i> If your shares are held of
      record by your broker, bank or another nominee and you wish to vote those shares
      in person at the special meeting, you must obtain from the nominee holding
      your
      shares a properly executed legal proxy identifying you as a Superior stockholder
      on the record date of the special meeting, authorizing you to act on behalf
      of
      the nominee at the Superior special meeting and identifying the number of shares
      with respect to which the authorization is granted.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Revocation
      of Proxies.</i>If you submit a proxy, unless you have entered into a support
      agreement to support the merger, you may revoke it at any time before it is
      voted in three ways:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">First, you can deliver a written,
      dated notice to the Secretary of Superior prior to the date of the special
      meeting, stating that you would like to revoke your proxy.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Second, you can complete, date
      and,
      prior to the date of the special meeting, submit a new, later-dated proxy to
      the
      Secretary of Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Third, you can attend the special
      meeting and vote in person. Your attendance alone will not revoke your
      proxy.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Notices
      to the Secretary of Superior should be sent to 9478 West Olympic Blvd., Beverly
      Hills, California 90212, Attention: Corporate Secretary.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If you
      have instructed your broker to vote your shares, you must follow directions
      received from your broker to change those instructions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Support
      Agreement.</i>SIBL and other Superior stockholders who together hold
      approximately 75.6% of the outstanding shares of Superior common stock have
      entered into a support agreement with Superior and DGSE pursuant to which the
      stockholders agreed to vote all of their shares of Superior common stock in
      favor of the merger and related transactions, and against any proposal or action
      that could reasonably be expected to delay, impede or interfere with the
      approval of the merger or any related transaction. This constitutes sufficient
      votes for both Proposals No. 1 and 2 to be approved. For more information,
      see
      the section entitled &#8220;The Merger Agreement &#8212; Support Agreements&#8221; beginning on
      page 69.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">36</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>Required
      Stockholder Vote</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In order
      to conduct business at the Superior special meeting, a quorum must be present.
      The holders of a majority of the votes entitled to be cast by holders of
      Superior voting stock at the special meeting, present in person or represented
      by proxy, constitutes a quorum under Superior&#8217;s bylaws. Superior will treat
      shares of Superior voting stock represented by a properly signed and returned
      proxy, including abstentions and broker non-votes, as present at the Superior
      special meeting for the purposes of determining the existence of a quorum.
      If a
      quorum is not present, it is expected that the special meeting will be adjourned
      to solicit additional proxies.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">With
      respect to any matter submitted to a vote of the Superior stockholders at the
      special meeting, each holder of Superior common stock will be entitled to one
      vote, in person or by proxy, for each share of Superior common stock held in
      his, her or its name on the books of Superior on the record date. No Superior
      preferred stock is presently outstanding.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 1.</strong> The affirmative vote of shares representing a majority of the
      voting power of outstanding Superior voting stock is required to adopt and
      approve the merger agreement and approve the merger. Abstentions and broker
      non-votes will have the same effect as voting AGAINST Proposal No. 1.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 2.</strong> The number of votes present in person or represented by proxy
      cast in favor of the irrevocable appointment and constitution of Stanford
      International Bank Ltd. and its successors as the stockholder agent under the
      merger agreement and the related escrow agreement must exceed the number of
      votes present in person or represented by proxy cast in opposition to the
      proposal at the special meeting. Abstentions and broker non-votes will be
      counted toward a quorum but will not be counted for determining whether Proposal
      No. 2 has been approved.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Proposal
      No. 3. </strong>The affirmative vote of holders of shares representing a
      majority of the voting power of Superior stock present in person or represented
      by proxy at the special meeting and entitled to vote is required to adjourn
      the
      special meeting, if necessary, whether or not a quorum is present, to establish
      a quorum or to solicit additional proxies if there are not sufficient votes
      in
      favor of Proposal Nos. 1 and 2. Abstentions and broker non-votes will have
      the
      same effect as voting AGAINST Proposal No. 3.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">While
      Proposals No. 1 and No. 2 are being voted upon separately, both of the proposals
      must be approved in order for either of them to be implemented.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      bylaws authorize the shares present at the meeting in person or by proxy to
      adjourn the special meeting if a quorum is not then in attendance.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      inspector of elections for the Superior special meeting will tabulate the
      votes.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Unanimous
      Recommendations by the Board of Directors</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">After
      careful consideration, the board of directors of Superior has unanimously
      determined that the merger and merger agreement are advisable and in the best
      interests of Superior and its stockholders. <strong><i>The board of directors of
      Superior unanimously recommends that you vote FOR Proposal No. 1 for the merger
      agreement and the merger.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      Superior board of directors has also determined that the irrevocable appointment
      and constitution of Stanford International Bank Ltd. and its successors as
      the
      stockholder agent under the merger agreement and the related escrow agreement
      are necessary for the completion of the merger and advisable and in the best
      interests of Superior and its stockholders. <strong><i>The board of directors of
      Superior unanimously recommends that you vote FOR Proposal No. 2 for the
      irrevocable appointment and constitution of Stanford International Bank Ltd.
      and
      its successors as the stockholder agent under the merger agreement and the
      related escrow agreement.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      Superior board of directors has further determined that approving a proposal
      to
      adjourn the special meeting, if necessary, to establish a quorum or to solicit
      additional proxies is advisable and in the best interests of Superior and its
      stockholders. <strong><i>The board of directors of Superior unanimously
      recommends that you vote FOR Proposal No. 3 to adjourn the special meeting,
      if
      necessary, to establish a quorum or to solicit additional proxies if there
      are
      not sufficient votes in favor of the proposals.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">37</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>Solicitation
      of Proxies</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      and
      Superior are conducting this proxy solicitation and will share the cost of
      soliciting proxies, including the preparation, assembly, printing and mailing
      of
      this joint proxy statement/prospectus, the proxy card and any additional
      information furnished to stockholders. Superior will also make arrangements
      with
      brokerage houses and other custodians, nominees and fiduciaries to send the
      proxy materials to their principals and will reimburse them for their reasonable
      expenses in so doing. To the extent necessary in order to assure sufficient
      representation at the Superior special meeting, officers and regular employees
      of Superior may solicit the return of proxies from Superior stockholders by
      mail, telephone, telegram and personal interview. No compensation in addition
      to
      regular salary and benefits will be paid to any such officer or regular employee
      for such solicitation. The total estimated cost of the solicitation of Superior
      proxies is $75,000.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><strong>Security Ownership
      of Principal Stockholders, Directors and Executive Officers</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For
      information regarding the security ownership of Superior common stock by
      principal stockholders, directors and executive officers of Superior, see the
      section entitled &#8220;Ownership of Superior Capital Stock&#8221; beginning on
      page&#160;153.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><strong>Appraisal and
      Dissenters&#8217; Rights</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Holders
      of Superior common stock will have appraisal and dissenters&#8217; rights under
      Delaware law with respect to the proposed merger transaction. For information
      regarding these rights, see the section entitled &#8220;The Combination &#8212; Appraisal
      and Dissenters&#8217; Rights&#8221; beginning on page 57.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><strong>Interest of Certain
      Persons in Matters to be Acted Upon</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      executive officers and directors of Superior may have interests in the
      combination that are different from, or are in addition to, those of Superior
      stockholders generally. For information regarding the interests of Superior&#8217;s
      executive officers and directors in the combination see the section entitled
      &#8220;The Combination &#8212; Interests of Certain Superior Persons in the Combination&#8221;
beginning on page 53.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><strong>Stockholder
      Proposals and Nominations</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Requirements
      for Stockholder Proposals to be Brought Before an Annual Meeting. </i>For
      stockholder nominations to the board of directors or other proposals to be
      considered at an annual meeting of Superior stockholders, the stockholder must
      have given Superior timely notice of the proposal or nomination in writing
      to
      its Secretary pursuant to Rule 14a-4 (c) under the Exchange Act. To be timely
      for the 2007 annual meeting, a stockholder&#8217;s notice must be delivered to or
      mailed and received by Superior&#8217;s Secretary at Superior&#8217;s principal executive
      offices not later than September 2, 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Requirements
      for Stockholder Proposals to be Considered for Inclusion in Superior&#8217;s Proxy
      Materials. </i>Stockholder proposals submitted pursuant to Rule 14a-8(e) under
      the Exchange Act for inclusion in Superior&#8217;s proxy materials and intended to be
      presented at Superior&#8217;s 2007 annual meeting must be received by Superior&#8217;s
      Secretary in writing not later than June 19, 2007 to be considered for inclusion
      in Superior&#8217;s proxy materials for that meeting. The proposal also must meet the
      other requirements of the rules of the SEC relating to stockholder
      proposals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Due to
      the pendency of the combination, Superior did not hold an annual meeting of
      its
      stockholders in 2006. If the combination occurs, Superior will not hold its
      annual meeting of Superior stockholders for 2007. In that case, pre-combination
      Superior stockholder proposals must be submitted to the Secretary of DGSE in
      accordance with the procedures described in the section entitled &#8220;Special
      Meeting of DGSE Stockholders &#8212; Stockholder Proposals and Nominations&#8221; beginning
      on page 31.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong><i>The
      matters to be considered at the special meeting are of great importance to
      the
      stockholders of Superior. Accordingly, you are urged to read and carefully
      consider the information presented in this joint proxy statement/prospectus,
      and
      to submit your proxy by mail in the enclosed postage-paid
      envelope.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong><i>You
      should not submit any stock certificates with your proxy. A transmittal form
      with instructions for the surrender of stock certificates for Superior stock
      will be mailed to you as soon as practicable after completion of the
      combination.</i></strong></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">38</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>DGSE
      PROPOSAL NO. 1 AND SUPERIOR PROPOSAL NO. 1 &#8212; THE COMBINATION</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>This
      section of this joint proxy statement/prospectus describes the principal aspects
      of DGSE Proposal No. 1 and Superior Proposal No. 1, including the merger and
      reorganization and the merger agreement. While DGSE and Superior believe that
      this description covers the material terms of the combination and the related
      transactions, this summary may not contain all of the information that is
      important to DGSE and Superior stockholders. You can obtain a more complete
      understanding of the combination by reading the merger agreement, a copy of
      which is attached to this joint proxy statement/prospectus as Annex A. You
      are
      encouraged to read the merger agreement and the other annexes to this joint
      proxy statement/prospectus carefully and in their entirety.</i></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Background of the
      Combination</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      the summer of 2005, Superior attempted to raise equity capital using Wedbush
      Morgan as its exclusive investment bank. It was determined that no transaction
      could be presented that was either economically viable for Superior or
      acceptable to Stanford International Bank Ltd., which we refer to as SIBL,
      Superior&#8217;s largest stockholder and primary lender. </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      October 2005, SIBL indicated that Superior should seek potential merger and
      acquisition candidates as SIBL was reluctant to offer any additional financing
      to Superior under Superior&#8217;s extant operational and management structure.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      November 2005, Lawrence Fairbanks Abbott, Jr., executive vice-president and
      former chief operating officer of Superior, contacted William H. Oyster,
      president and chief operating officer of DGSE, to introduce himself and to
      explore ways in which the two companies might work together, including
      scheduling a tour of DGSE&#8217;s primary office for November 22. After touring the
      DGSE facility and meeting with Mr. Oyster, Mr. Abbott contacted Paul Biberkraut,
      then a director and the chief financial officer and executive vice president
      of
      Superior, to report Mr. Abbott&#8217;s favorable observations regarding DGSE&#8217;s
      business. Mr. Abbott suggested that Mr. Biberkraut tour the facility and meet
      DGSE management to gather information and discuss mutual areas of interest
      to
      DGSE and Superior. A meeting was arranged for December 6, 2005 between Messrs.
      Abbott, Biberkraut and Oyster, DGSE chairman and chief executive officer Dr.
      L.S. Smith, DGSE chief financial officer John Benson, and DGSE executive vice
      president Scott Williamson.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Shortly
      after the initial contact, Mr. Abbott inquired whether DGSE would consider
      being
      acquired by Superior. Mr. Oyster referred the matter to Dr. Smith. Dr. Smith
      advised Mr. Oyster that he did not think that the initial concept of DGSE being
      acquired by Superior was feasible but expressed that DGSE would consider other
      alternative business combinations. Mr. Oyster informed Mr. Abbott of this
      position.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      December 6, 2005, Messrs. Abbott and Biberkraut toured the DGSE facility with
      Mr. Oyster and met with the rest of the DGSE executive team. Dr. L.S. Smith
      led
      the meeting and expressed his interest in finding a strong partner to grow
      the
      business. The broadly outlined nature of the transaction discussed was that
      Superior would acquire DGSE and that the transaction would involve the cash
      purchase of a significant portion of Dr. Smith&#8217;s stockholdings in DGSE. During
      this meeting, both parties indicated interest in moving forward. Superior
      indicated that, at that time, Superior needed to involve its largest
      stockholder, SIBL, in the discussion.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      December 6, 2005, in connection with the tour and meeting, DGSE and Superior
      executed a mutual confidentiality agreement to explore a potential transaction
      between the parties.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      December 6, 2005, based upon the tours and meeting on that date, and upon review
      of DGSE&#8217;s financial reports, Messrs. Abbott and Biberkraut reported to Silvano
      DiGenova, then the chairman, president and chief executive officer of Superior,
      that a merger or acquisition with DGSE held significant promise and deserved
      serious further investigation and consideration. Mr. Biberkraut also advised
      SIBL of the meetings.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      December 2005, Messrs. Abbott and Biberkraut approached SIBL&#8217;s investment
      banking division to seek assistance for Superior in developing a case for
      merging Superior and DGSE. During December 2005, Superior continued to have
      discussions with SIBL&#8217;s investment banking division about both the potential
      synergies and the structure of the transaction, as well as the associated
      risks.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Late
      in
      December 2005, discussions with DGSE about the structure of a transaction were
      expanded to include SIBL. Discussions continued in early January 2006, and
      SIBL
      began negotiating directly with DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">39</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">On
      January 9, 2006, Dr. Smith and Mr. Oyster had a telephone conference with
      Michael Guptan and Josh Feidler of SIBL to discuss possible concepts for a
      business combination between the two entities.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      January 18, 2006, Dr. Smith and Messrs. Oyster, Benson and Williamson met in
      Dallas, Texas with Messrs. DiGenova, Abbott and Biberkraut, in a meeting
      designed to acquaint the two companies and to discuss various alternative
      possible transactions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      January 23, 2006, the Superior board of directors met and Mr. DiGenova delivered
      a report on his discussions with Osvaldo Pi, head of the merchant banking
      division of Stanford Financial Group Company, which we refer to as SFG, an
      affiliate of SIBL, regarding the viability of a potential merger with DGSE.
      The
      Superior board of directors discussed the potential benefits and risks of the
      merger and appointed Mr. Biberkraut to develop combined <i>pro forma</i>
      financial statements to facilitate further discussions regarding a potential
      merger.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February 1, 2006, Dr. Smith and Mr. Oyster met in Houston, Texas with Danny
      Bogar, Osvaldo Pi, Ronald Stein, Joe Frisard and James Davis, each a
      representative of SIBL, to discuss SIBL&#8217;s position on DGSE possibly acquiring
      Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February 6, 2006, Dr. Smith had a telephone conference with Mitchell T. Stoltz,
      a director of Superior, regarding Superior&#8217;s interest in extending discussions
      regarding a possible transaction.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February 7, 2006, Mr. Abbott sent Dr. Smith a plan for the merger developed
      jointly with Mr. Guptan which outlined terms of debt and equity for the
      transaction and organizational charts.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February 8, 2006, Dr. Smith had a telephone conference with Mr. Guptan, who
      proposed a potential acquisition of DGSE by Superior. Dr. Smith advised Mr.
      Guptan that the proposal was not acceptable to DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February 16, 2006, Dr. Smith met with Mr. Bogar in Dallas, Texas to explore
      additional areas that might lead to an acquisition of Superior by DGSE. During
      this meeting Mr. Bogar and Dr. Smith discussed alternatives that might be
      acceptable to DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      the month of February, Dr. Smith telephonically apprised the DGSE directors
      on
      the direction of the discussions with Superior on at least five separate
      occasions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February 23, 2006, Mr. Pi presented new proposed terms for the merger to
      DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February 27, 2006, Dr. Smith provided a preliminary term sheet to Mr. Pi
      outlining the proposed terms of a merger between Superior and DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In March,
      2006, DGSE and Superior negotiated a non-binding term sheet regarding the
      acquisition of Superior by DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On March
      22, 2006, Dr. Smith provided a revised preliminary term sheet to Mr. Pi,
      outlining, among other things, the terms of a proposed merger between Superior
      and DGSE as well as the terms of the restructuring of SIBL&#8217;s revolving line of
      credit with Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On March
      25, 2006, the Superior board of directors met to discuss the preliminary term
      sheet proposed by DGSE. After discussion of the preliminary term sheet and
      the
      potential issues associated with the contemplated transaction, the board of
      directors unanimously authorized management to commence due diligence.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On March
      29, 2006, DGSE had a telephonic meeting of its board of directors, with all
      members in attendance, to discuss the current state of the discussions with
      Superior and SIBL. The board of directors was advised of all of the events
      leading to the board meeting. The DGSE board authorized management to continue
      the discussions and to try and finalize terms leading to a definitive
      agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On March
      29, 2006, Superior&#8217;s board of directors retained a business advisory and
      valuation firm, Stenton Leigh Valuation Group, Inc., which we refer to as
      Stenton Leigh, to perform a fairness analysis in relation to the proposed merger
      and the resulting valuation to the Superior stockholders. The fairness opinion
      was presented by Stenton Leigh at a special meeting of Superior&#8217;s board of
      directors on June 27, 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Beginning
      in February 2006 and continuing through July 2006, the parties conducted
      extensive due diligence on each others&#8217; businesses and developed an integration
      plan to integrate the businesses following the merger. During this time the
      parties also negotiated the definitive merger agreement and set a timeline
      to
      complete the combination </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">40</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">subject
      to the approval of each company&#8217;s stockholders. From March through June, 2006,
      Dr. Smith was in almost daily contact with Messrs. Pi and Bogar, on behalf
      of
      SIBL, and the Superior management regarding due diligence matters and issues
      involving a possible transaction.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On April
      3, 2006, DGSE, Superior and SIBL entered into a confidentiality agreement and
      a
      shared expenses agreement, regarding the confidential treatment of information
      exchanged and the sharing of specified expenses, respectively, related to the
      exploration of a possible business combination between DGSE and Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On April
      13, 2006, DGSE distributed the initial draft of the original merger agreement
      for review by Superior and SIBL.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      the period from April 13 through July 14, 2006, the parties negotiated the
      original definitive merger agreement along with various related documents,
      including the revised loan documents between SFG and Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      21, 2006, Dr. Smith and Mr. Oyster met in Houston, Texas with Messrs. Bogar
      and
      Frisard, on behalf of SIBL, and Mr. Stoltz of Superior to discuss possible
      details that might lead to a definitive agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      29, 2006, the Superior board of directors met to discuss the original merger
      agreement and receive a presentation of an oral fairness opinion and
      presentation from Stenton Leigh. Following further review and discussion, the
      board of directors of Superior voted unanimously to adopt and approve the
      original merger agreement and to approve the merger and the other transactions
      contemplated by the merger agreement, and resolved to recommend that the
      Superior stockholders vote to approve and adopt the original merger agreement
      and to approve the merger and irrevocably to appoint and constitute SIBL and
      its
      successors as the stockholder agent under the original merger agreement and
      the
      related escrow agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On July
      5, 2006, the board of directors of DGSE met to review all of the details of
      the
      proposed Superior acquisition and to review all of the financial details and
      the
      definitive agreements. After a thorough review and discussion of all of these
      matters, the present directors voted unanimously to approve and adopt the
      original merger agreement and to approve the merger and the other transactions
      contemplated by the original merger agreement, and resolved to recommend that
      the DGSE stockholders vote to approve and adopt the original merger agreement
      and to approve the merger and the issuance of the shares of DGSE common stock
      to
      be issued to Superior stockholders pursuant to the terms of the original merger
      agreement. The absent DGSE director, Lee Ittner, later ratified the foregoing
      actions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On July
      14, 2006, the parties executed the original merger agreement. The signing of
      the
      original merger agreement was publicly announced on July 17, 2006, at the time
      of the opening for trading of the Nasdaq Capital Market.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">From
      August 20 through August 23, 2006 Dr. Smith and Messrs. Oyster and Benson met
      in
      Beverly Hills, California with Messrs. DiGenova, Pi and Charles Wiser to discuss
      Superior operations and financial results.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      November 22, 2006, Dr. Smith and Mr. Oyster met in Houston, Texas with Messrs.
      Bogar and Pi to discuss the pending transaction and to discuss possible revision
      of the terms of the original transaction.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Between
      November 22, 2006 and December 16, 2006, the parties negotiated a revised term
      sheet for the proposed acquisition.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      December 7, 2006, the board of directors of Superior engaged Stenton Leigh
      to
      perform a fairness analysis in relation to the revised terms of the proposed
      merger and the resulting valuation to the Superior stockholders. The fairness
      opinion was presented by Stenton Leigh at a special meeting of Superior&#8217;s board
      of directors on December 21, 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      December 20, 2006, the board of directors of DGSE met to review all of the
      details of the revised terms of the proposed Superior acquisition and to review
      all of the financial details and the definitive agreements. After a thorough
      review and discussion of all of these matters, the directors voted unanimously
      to approve and adopt the merger agreement and to approve the merger and the
      other transactions contemplated by the merger agreement, and resolved to
      recommend that the DGSE stockholders vote to approve and adopt the merger
      agreement and to approve the merger and the issuance of the shares of DGSE
      common stock to be issued to Superior stockholders pursuant to the terms of
      the
      merger agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">41</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">On
      December 21, 2006, the Superior board of directors met to discuss the merger
      agreement and receive a presentation of an oral fairness opinion and
      presentation from Stenton Leigh. Following further review and discussion, the
      board of directors of Superior voted unanimously to adopt and approve the merger
      agreement and to approve the merger and the other transactions contemplated
      by
      the merger agreement, and resolved to recommend that the Superior stockholders
      vote to approve and adopt the merger agreement and to approve the merger and
      irrevocably to appoint and constitute SIBL and its successors as the stockholder
      agent under the merger agreement and the related escrow agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      January 6, 2007, the parties executed the amended and restated merger agreement
      and the support agreements. The signing of the these agreements was publicly
      announced on January 9, 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      January 6, 2007, Silvano DiGenova resigned as chairman, chief executive officer,
      president and interim chief financial officer of Superior, and all board members
      but Mitchell T. Stoltz and David Rector resigned from the Superior board of
      directors. On that same date, the remaining Superior directors appointed William
      H. Oyster, Scott Williamson and John Benson to the Superior board to fill the
      vacancies. On that same date, Mr. Oyster was appointed interim chief executive
      officer of Superior, Mr. Williamson was appointed interim chief operating
      officer of Superior and Mr. Benson was appointed vice president, finance and
      interim chief financial officer of Superior.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>DGSE Reasons for
      the
      Combination</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">At a
      meeting on December 20, 2006, the DGSE board of directors unanimously approved
      the merger agreement and related agreements and the merger and reorganization
      and the related transactions contemplated thereby. The DGSE board believes
      that
      the reorganization is in the best interests of DGSE and its stockholders and
      unanimously recommends that DGSE&#8217;s stockholders vote FOR approval and adoption
      of the merger agreement and the approval of the reorganization, including the
      issuance of the shares of DGSE common stock to be issued as merger
      consideration, and the issuance of options and warrants to acquire shares of
      DGSE common stock, pursuant to the merger agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      reaching its determination, the DGSE board of directors consulted with DGSE&#8217;s
      management and considered the following material factors:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>A greater penetration of the
      rare coin and precious metals businesses.</i> DGSE is currently one of the
      largest public companies with activities dedicated to the wholesale and retail
      trade of rare coins and precious metals. With the acquisition of Superior,
      DGSE
      will have access to an expanded nationwide customer base, new activities in
      the
      area of auctions and a more robust supply network.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>A stronger financial position
      and reduced costs.</i> The contemplated structure of the acquisition provides
      the combined companies with significantly expanded credit facilities, including
      an $11.5 million line of credit with Stanford Financial Group Company and a
      $4.0
      million line of credit with Texas Capital Bank, NA. The combined company, on
      a
      pro forma basis at September 30, 2006, had an estimated $22 million in current
      assets, total assets of approximately $29 million, current ratio of 4 to 1
      and
      stockholders&#8217; equity of $18 million. This strong balance sheet and the available
      credit facilities should permit the combined company to expand its share of
      the
      market in all of its operating sectors. The acquisition of Superior contemplates
      the elimination of duplication in administrative functions and regulatory
      compliance costs, integration of operating staff and economies of scale. The
      combined company should have substantial professional resources which will
      allow
      the optimal deployment of existing personnel.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Enhanced trading liquidity
      and
      better market focus. </i>DGSE expects that the successful completion of the
      proposed combination will result in increased market capitalization and trading
      liquidity of the combined company, resulting in better market focus. Because
      of
      the increased market capitalization and liquidity of the combined company,
      DGSE
      expects that the combined company will have greater access to equity and debt
      capital markets than DGSE currently has, and greater appeal to institutional
      investors. DGSE expects that this access will provide management of the combined
      companies greater flexibility to execute its business plan under various
      financial market conditions.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Operational synergies from
      combined expertise.</i> DGSE believes that Superior has quality employees with
      broad numismatic expertise. DGSE hopes to retain the majority of these key
      employees following the successful completion of the acquisition to assist
      in
      DGSE&#8217;s business and operations going forward. DGSE&#8217;s expertise in the jewelry,
      precious metals, watch and diamond businesses should diversify the </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">42</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">operations
      of Superior and provide for more stable revenue growth and operating earnings.
      The combined company will have substantial expertise in jewelry, precious
      metals, numismatics, fine watches and diamonds.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Substantially enhanced growth
      opportunities.</i> The DGSE board of directors believes that the larger volume
      and greater diversity of the combined businesses should enable the combined
      company to exceed the rates of growth of revenue and cash flows that DGSE might
      achieve on a stand-alone basis.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>The acquisition provides DGSE
      with a new location to expand its jewelry, fine watch, diamond and precious
      metals businesses. </i>DGSE believes that Superior&#8217;s retail location in Beverly
      Hills, California is underutilized and contemplates that DGSE can introduce
      its
      SuperStore jewelry, watch and diamond lines with relatively minor modifications
      to the physical location. DGSE believe that existing Superior personnel can
      manage the retail location with additional training in DGSE systems and methods.
      Expanding the activities of Superior in its Beverly Hills, California location
      will diversify its revenue stream and enhance cash flows, while giving DGSE
      an
      additional distribution channel for its inventory. Additional volume generated
      at the Superior location will also assist DGSE in diversifying its vendor
      sources.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>DGSE&#8217;s staff and expertise in
      jewelry and watch repair will be more efficiently utilized. </i>The added volume
      generated by a new Beverly Hills, California location will allow DGSE to achieve
      higher repair and manufacturing revenue and allow DGSE to better absorb overhead
      related thereto.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Fixed range of exchange ratio
      limits dilution of DGSE stockholders. </i>DGSE will issue approximately 3.7
      million shares of its common stock for the proposed acquisition. DGSE&#8217;s board of
      directors believes that the fixed exchange ratio being used for the merger
      reduces DGSE&#8217;s exposure to stock market fluctuations.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Superior Reasons
      for
      the Combination</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      Superior board of directors has determined unanimously that the merger and
      reorganization, the merger agreement and the transactions contemplated thereby
      are advisable and fair to and in the best interests of Superior and its
      stockholders. The Superior board has directed that the proposed merger and
      reorganization be submitted for consideration by the Superior stockholders
      and
      recommended that Superior stockholders vote in favor of the approval of the
      merger, the merger agreement and the transactions contemplated thereby.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      reaching the determination that the merger, the merger agreement and the
      transactions contemplated thereby are fair to and in the best interests of
      Superior and its stockholders, the Superior board considered that the
      combination will assist Superior with the following competitive
      challenges:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Unavailability of Continued
      Financing from SFG. </i>Superior has historically required, and continues to
      require, financing for its operations. In the past, SFG and SIBL have provided
      the majority of this financing, but SFG informed Superior that it is unwilling
      to provide additional equity or debt financing to Superior so long as it
      continues to have its current operational and management structure, and so
      long
      as there continues to be only a limited market for Superior&#8217;s securities.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Lack of Adequate
      Capitalization.</i> Superior&#8217;s key competitors (both public and private) are
      better capitalized, have better access to debt financing and are substantially
      larger than Superior. These competitors&#8217; access to equity and debt financing
      provides them with greater flexibility to respond to competitive challenges
      and
      to take advantage of business opportunities.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Small Margins.</i> The margins
      in the rare coin industry are slim and the regulatory compliance requirements
      of
      being a small public company in a highly regulated environment add substantial
      cost. Due to its size, Superior&#8217;s legal, accounting and other costs associated
      with being a publicly held company comprise a much higher percentage of
      operating overhead, as compared to its competitors.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>High Debt. </i>Superior&#8217;s high
      level of debt has resulted in very high interest costs, further reducing
      profitability.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Lack of Diversification.</i>
      Because its focus is primarily rare coins, Superior has a higher degree of
      business risk due to lack of diversification, as compared to its
      competitors.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">43</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Reliance on a Few Key
      Employees.</i> Superior relies heavily on a few key employees to generate a
      substantial portion of its revenue.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Continued Substantial Losses.
      </i>Over the past 18 months, Superior&#8217;s level of net losses has increased,
      further eroding Superior&#8217;s capital base and working capital needed to maintain
      business operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Retention
      of Employees. </i>Superior&#8217;s diminished capacity to operate its business due to
      financial constraints has resulted in the loss of some sales and operational
      employees to competitors. There is a continuing risk of further employee losses
      due to Superior&#8217;s worsening financial condition.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Other Factors
      Considered by the DGSE Board</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      reaching its conclusion to approve the merger agreement and recommend that
      DGSE
      stockholders vote FOR the approval and adoption of the merger agreement and
      the
      approval of the reorganization, including the issuance of the shares of DGSE
      common stock required to be issued as merger consideration pursuant to the
      merger agreement, the DGSE board of directors considered a number of factors,
      including the following:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The judgment, advice and analysis
      of DGSE&#8217;s management with respect to the potential strategic, financial and
      operational benefits of the acquisition, including management&#8217;s favorable
      recommendation of the transaction, based in part on the business, technical,
      financial, accounting and legal due diligence investigations performed with
      respect to Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The importance of the combination
      for pursuing DGSE&#8217;s strategic plan.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The potential benefits to DGSE
      stockholders of growth opportunities following the combination.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The competitive and market
      environments in which DGSE and Superior operate.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The expected qualification of the
      transaction contemplated by the merger agreement as a reorganization within
      the
      meaning of Section 368(a) of the Code.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The likelihood that DGSE will be
      able to retain key management and other personnel of Superior who may be
      critical to the ongoing success of each company and to the successful
      integration of the businesses.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The results of operations and
      financial condition of DGSE and Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The terms of the merger agreement
      and the related agreements, including consideration paid by DGSE and the
      structure of the combination, which were deemed by both the board of directors
      and management to provide a fair and equitable basis for the transaction.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The likelihood that the transaction
      will be completed in a timely manner.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The nature and depth of the
      relationship between Superior and SIBL.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Historical and current information
      about each of the companies and their respective businesses, prospects,
      financial performance and condition, operations, management and competitive
      position, including market data and management&#8217;s knowledge of the rare coin,
      precious metals and jewelry, fine watch and diamond businesses.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Financial market conditions,
      historic market prices, volatility and trading information for DGSE and
      Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The terms and conditions of the
      merger agreement and related transactions, including:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 54pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt">the conversion by SIBL and Silvano
      DiGenova of all of their shares of Superior preferred stock into Superior common
      stock in connection with the execution of the merger agreement;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 54pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt">the condition to closing the merger
      that SIBL exchange approximately $8.4 million of existing Superior debt for
      approximately 5 million Superior common stock prior to the closing and that
      Stanford Financial Group Company, an affiliate of SIBL which we refer to as
      SFG,
      provide Superior with a 4 year term credit facility with a committed credit
      facility of $11.5 million;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">44</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 54pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt">the agreement by SFG to provide
      the
      ability of DGSE to upstream loan proceeds from the Superior credit facility
      to
      DGSE or any other subsidiary for working capital purposes; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 54pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt">the corporate governance
      agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      board of directors also considered a number of risks and potentially negative
      factors in its deliberation concerning the combination, including in
      particular:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The risk that the benefits sought
      to be achieved by the transaction, including those outlined above, will not
      be
      achieved.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The general challenges and costs
      of
      combining the operations of two companies and the substantial expenses to be
      incurred in connection with the combination.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The effect of public announcement
      of the transaction on DGSE&#8217;s common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The risks of unexpected expenses
      or
      liabilities associated with the combination, including the potential for
      inventory valuation issues and contingent liabilities associated with
      litigation.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The diversion of management
      resources from other strategic opportunities and operational matters.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The risk that the current favorable
      market for precious metals and other collectibles will cease or deteriorate,
      thus affecting volume and profit margins.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The risk that the current economic
      environment will deteriorate and impact discretionary spending on items such
      as
      jewelry.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The potential disruption of third
      party business relationships important to either company as a result of the
      combination.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The potential that DGSE will
      experience delays in the approval of registration statements required as a
      condition of closing.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The possibility that the
      combination might not close or that the closing might be delayed.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The availability of appraisal
      rights for Superior stockholders under Section 262 of the DGCL.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The possibility that the company
      will be delisted from the Nasdaq Capital Market.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The DGSE
      board did not consider it necessary to, and did not, engage a financial advisor
      to issue a fairness opinion for the combination.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      foregoing discussion of the information and factors which were given weight
      by
      the DGSE board is not intended to be exhaustive. The DGSE board did not assign
      specific weights to the foregoing factors and individual directors may have
      given different weights to different factors.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Other Factors
      Considered by the Superior Board</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      reaching its conclusion to approve the merger agreement and recommend that
      Superior stockholders vote FOR the approval and adoption of the merger agreement
      and the approval of the merger, the Superior board of directors, together with
      the assistance of its financial and legal advisors, also considered how the
      following factors would address many of Superior&#8217;s competitive challenges:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Capitalization.</i> SIBL&#8217;s
      conversion into equity of approximately $8.4 million of Superior debt in
      connection with the merger and DGSE&#8217;s capital base should create a more
      financially stable organization. In addition, SFG has agreed to expand the
      combined company&#8217;s line of credit to facilitate expansion. The increased
      capitalization is expected significantly to decrease financing expenses and,
      thus, potentially enhance profitability of the combined entity.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Economies of Scale. </i>The
      combined companies should be able to (a) eliminate, over time, duplicate
      expenses in the areas of regulatory compliance, finance and administration,
      (b)
      eliminate certain elements of operational costs, and (c) have increased buying
      power by virtue of the size of the combined entity.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">45</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Diversification.</i> The
      combined entity should be able to leverage the complementary expertise and
      experience of the constituent entities. Superior&#8217;s expertise lies in rare coin
      dealing and auctioneering services, and DGSE&#8217;s core competency lies in retail
      buying and selling of jewelry and watches. Superior&#8217;s auction and web expertise
      may be expanded from rare coins to jewelry and watches. Likewise, DGSE&#8217;s retail
      store experience may be expanded to Superior&#8217;s Beverly Hills gallery.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Potential for Expansion in
      Many
      Operating Areas.</i> The combination of financial stability, increased equity
      capitalization, diversified product lines and stronger management may enhance
      the combined company&#8217;s ability to expand market share in auctions, retail,
      web-based and wholesale activities in both rare coins and jewelry/watches.
      The
      larger capital base and borrowing ability of the combined entity should also
      aid
      the combined entity in competing for buying opportunities for very large
      collections where cash commitments are front-loaded, without hampering the
      company&#8217;s ability to continue other business activities requiring capital and
      without resorting to expensive short-term bridge financing. The enhanced capital
      base should also improve the combined company&#8217;s ability to take advantage of
      other opportunities for strategic acquisitions of small rare coin operations,
      should they arise in the future.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Prior
      to
      approving the merger, the Superior board also took the following actions to
      validate the merger:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Fairness Opinion. </i>The
      Superior board received oral and written presentations of Stenton Leigh
      Valuation Group, Inc. and their opinion that, as of December 21, 2006, the
      exchange ratio is fair to the minority stockholders of Superior from a financial
      point of view and the analyses forming the bases for such opinions. See &#8220;&#8212;
Opinions of Superior&#8217;s Financial Advisors&#8221; beginning on page 47 for a discussion
      of the factors considered in rendering the opinions. The opinion, which is
      subject to limitations, qualifications and assumptions, is attached as Annex
      K
      to this joint proxy statement/prospectus and should be read in its
      entirety.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Alternative Transactions.
</i>The Superior Board requested
      that management approach other potential
      strategic partners about possible business combinations. Management did
      investigate other possible business combinations, but these efforts were
      unsuccessful.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      Superior board also considered certain risks and potential disadvantages
      associated with the combination, including the following:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">that the positive synergies of
      the
      combination will not be realized to the degree anticipated if key management
      personnel of both companies are not successfully retained and productively
      integrated into the combined organization;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the effect of management
      distractions necessarily associated with such a business combination and the
      potential disruption to the businesses of DGSE and Superior;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">that the transaction might not
      be
      completed as a result of a failure to satisfy the conditions in the merger
      agreement;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the effect of the availability
      of
      appraisal rights for Superior stockholders under Section 262 of the DGCL;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the possibility that regulatory
      authorities might delay or impose unacceptable conditions in connection with
      qualifying the shares of DGSE common stock to be issued in one or more
      states;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the possibility that there will
      be
      delays in the approval of registration statements to be filed by DGSE required
      as a condition of closing;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the potential adverse effect on
      customer relationships as a result of the combination; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the general costs and challenges
      of
      combining the operations of Superior and DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      foregoing discussion of the information and factors which were given weight
      by
      the Superior board is not intended to be exhaustive. The Superior board did
      not
      assign specific weights to the foregoing factors and individual directors may
      have given different weights to different factors. After considering all such
      factors, THE SUPERIOR BOARD UNANIMOUSLY RECOMMENDS TO SUPERIOR STOCKHOLDERS
      THAT
      THEY VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND FOR THE
      APPROVAL OF THE MERGER AND THE TRANSACTIONS CONTEMPLATED THEREBY.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">46</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>Opinion
      of Financial Advisor to the Board of Directors of Superior</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stenton
      Leigh Valuation Group, Inc., which we refer to in this joint proxy
      statement/prospectus as Stenton Leigh, delivered its opinion dated December
      21,
      2006 to the Superior board of directors to the effect that, as of such date
      and
      based upon and subject to the assumptions made, matters considered, and
      limitations on its review as set forth in the opinion, the merger is fair,
      from
      a financial point of view, to the non-affiliated Superior stockholders. The
      full
      text of Stenton Leigh&#8217;s written opinion, which sets forth the assumptions made,
      matters considered and limitations on the review undertaken by Stenton Leigh,
      has been attached to this document as Annex K and is incorporated by reference
      into this joint proxy/prospectus. Stenton Leigh&#8217;s opinion is directed only to
      the fairness to the minority Superior stockholders, from a financial point
      of
      view, of the merger consideration, and is not intended to constitute, and does
      not constitute, a recommendation as to how a stockholder should vote with
      respect to the adoption and approval of the merger agreement or the approval
      of
      the merger. You are urged to read the Stenton Leigh opinion carefully and in
      its
      entirety for a description of the assumptions made, matters considered,
      procedures followed and limitations on the review undertaken by Stenton Leigh
      in
      rendering its opinion. The summary of the Stenton Leigh opinion set forth in
      this information statement is qualified in its entirety by reference to the
      full
      text of the opinion.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to an engagement letter dated December 7, 2006, the Superior board of directors
      retained Stenton Leigh to render an opinion as to the fairness to Superior,
      from
      a financial point of view, of the merger consideration. Stenton Leigh is a
      business advisory and valuation firm that is regularly engaged in the valuation
      of businesses in connection with mergers, acquisitions, corporate restructurings
      and private placements and for other purposes. Superior engaged the services
      of
      Stenton Leigh because it is a recognized business valuation firm that has
      substantial experience in similar matters. Stenton Leigh does not beneficially
      own any interest in either Superior or DGSE and has not provided either company
      with any other services in the past.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      27, 2006, at a meeting of the Superior board of directors, Stenton Leigh made
      an
      oral presentation and delivered to the Superior board of directors its written
      opinion, which stated that, as of June 15, 2006, based upon and subject to
      the
      assumptions made, matters considered, and limitations on its review as set
      forth
      in the opinion, the merger, as originally structured, is fair, from a financial
      point of view, to the non-affiliated Superior stockholders. On December 22,
      2006, at a meeting of the Superior board of directors, Stenton Leigh made an
      oral presentation and delivered to the Superior board of directors its written
      opinion, which stated that, as of December 15, 2006, based upon and subject
      to
      the assumptions made, matters considered, and limitations on its review as
      set
      forth in the opinion, the merger, as amended, is fair, from a financial point
      of
      view, to the non-affiliated Superior stockholders.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stenton
      Leigh was not requested to opine as to, and the opinion does not in any manner
      address, the relative merits of the merger as compared to any alternative
      business strategy that might exist for Superior, Superior&#8217;s underlying business
      decision to proceed with the merger, and other alternatives to the merger that
      might exist for Superior. Furthermore, Stenton Leigh has not negotiated the
      terms of the merger on Superior&#8217;s behalf and the merger, including the merger
      consideration to be paid, was negotiated by Superior without any recommendations
      by Stenton Leigh.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      arriving at its fairness opinion, Stenton Leigh took into account an assessment
      of general economic, market and financial conditions, as well as its experience
      in connection with similar transactions and securities valuations generally.
      In
      so doing, among other things, Stenton Leigh:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed the merger
      agreement;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed publicly available
      financial information and other data with respect to Superior, including the
      Annual Report on Form 10-K for the years ended June 30, 2005, and June 30,
      2006;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed publicly available
      financial information and other data with respect to Superior, including the
      Quarterly Reports on Form 10-Q for the quarters ended September 30, 2005,
      December 31, 2005, March 31, 2006, and September 30, 2006, and discussed
      performance to December 15, 2006 with Superior management;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed publicly available
      financial information and other data with respect to DGSE, including the Annual
      Report on Form 10-K for the year ended December 31, 2005;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">47</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed publicly available
      financial information and other data with respect to DGSE, including the
      Quarterly Report on Form 10-Q for the quarters ended March 31, 2006, June 30,
      2006, and September 30, 2006, and discussed performance to December 15, 2006
      with Superior management;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed and analyzed the merger&#8217;s
<i>pro-forma</i> impact on Superior&#8217;s capitalization;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed and analyzed the merger&#8217;s
<i>pro-forma</i> impact on Superior&#8217;s securities outstanding
      and stockholder
      ownership;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed the planned conversion
      features of debt to equity by SIBL and planned issuance of warrants to SIBL
      at
      the closing of the merger;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Considered the historical financial
      results and present financial condition of Superior and DGSE;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed the trading market for
      the
      common stock of Superior and DGSE;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed and analyzed certain
      financial characteristics of publicly-traded companies that were deemed to
      have
      characteristics comparable to Superior and DGSE;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Reviewed and analyzed certain
      financial characteristics of target companies in transactions where such target
      company was deemed to have characteristics comparable to that of Superior and
      DGSE; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Performed such other analyses and
      examinations as Stenton Leigh deemed appropriate and held discussions with
      Superior and DGSE management in relation to certain financial and operating
      information furnished to Stenton Leigh, including financial analyses with
      respect to their respective business and operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      arriving at its opinion, Stenton Leigh relied upon and assumed the accuracy
      and
      completeness of all of the financial and other information that was used without
      assuming any responsibility for any independent verification of any such
      information. Further, Stenton Leigh relied upon the assurances of Superior
      and
      DGSE management that they were not aware of any facts or circumstances that
      would make any such information inaccurate or misleading. With respect to the
      financial information and projections utilized, Stenton Leigh assumed that
      such
      information has been reasonably prepared on a basis reflecting the best
      currently available estimates and judgments, and that such information provides
      a reasonable basis upon which it could make an analysis and form an opinion.
      Stenton Leigh did not make a physical inspection of the properties and
      facilities of Superior or DGSE. In addition, Stenton Leigh did not attempt
      to
      confirm whether Superior and DGSE had good title to their respective
      assets.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stenton
      Leigh assumed that the merger will be consummated in a manner that complies
      in
      all respects with the applicable provisions of the Securities Act of 1933,
      the
      Securities Exchange Act of 1934, and all other applicable federal and state
      statutes, rules and regulations. Stenton Leigh assumed that the merger will
      be
      consummated substantially in accordance with the terms set forth in the merger
      agreement, without any further amendments thereto, and that any amendments,
      revisions or waivers thereto will not be detrimental to the stockholders of
      Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stenton
      Leigh&#8217;s opinion is necessarily based upon market, economic and other conditions
      as they existed on, and could be evaluated as of December 15, 2006. Accordingly,
      although subsequent developments may affect its opinion, Stenton Leigh has
      not
      assumed any obligation to update, review or reaffirm its opinion. In connection
      with rendering its opinion, Stenton Leigh performed certain financial,
      comparative and other analyses as summarized below. Each of the analyses
      conducted by Stenton Leigh was carried out to provide a different perspective
      on
      the merger, and to enhance the total mix of information available. Stenton
      Leigh
      did not form a conclusion as to whether any individual analysis, considered
      in
      isolation, supported or failed to support an opinion as to the fairness of
      the
      merger, from a financial point of view, to the non-affiliated stockholders
      of
      Superior. Further, the summary of Stenton Leigh&#8217;s analyses described below is
      not a complete description of the analyses underlying Stenton Leigh&#8217;s
      opinion.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      preparation of a fairness opinion is a complex process involving various
      determinations as to the most appropriate and relevant methods of financial
      analysis and the application of those methods to the particular circumstances
      and, therefore, a fairness opinion is not readily susceptible to partial
      analysis or summary description. In arriving at its opinion, Stenton Leigh
      made
      qualitative judgments as to the relevance of each analysis and factor that
      it
      considered. In addition, Stenton Leigh may have given various analyses more
      or
      less weight than other analyses, and may have deemed various assumptions more
      or
      less probable than other assumptions, so that the range </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">48</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">of
      valuations resulting from any particular analysis described above should not
      be
      taken to be Stenton Leigh&#8217;s view of the value of Superior&#8217;s assets. The
      estimates contained in Stenton Leigh&#8217;s analyses and the ranges of valuations
      resulting from any particular analysis are not necessarily indicative of actual
      values or actual future results, which may be significantly more or less
      favorable than suggested by such analyses. In addition, analyses relating to
      the
      value of businesses or assets neither purports to be appraisals nor do they
      necessarily reflect the prices at which businesses or assets may actually be
      sold. Accordingly, Stenton Leigh&#8217;s analyses and estimates are inherently subject
      to substantial uncertainty. Stenton Leigh believes that its analyses must be
      considered as a whole and that selecting portions of its analyses or the factors
      it considered, without considering all analyses and factors collectively, could
      create an incomplete and misleading view of the process underlying the analyses
      performed by Stenton Leigh in connection with the preparation of its opinion.
      The analyses performed were prepared solely as part of Stenton Leigh&#8217;s analysis
      of the fairness, from a financial point of view, of the merger to the
      non-affiliated Superior stockholders, and were provided to Superior&#8217;s board of
      directors in connection with the delivery of Stenton Leigh&#8217;s opinion. The
      opinion of Stenton Leigh was just one of the many factors taken into account
      by
      Superior&#8217;s board of directors in making its determination to approve and
      recommend the merger, including those described in the sections entitled &#8220;The
      Combination &#8212; Superior Reasons for the Combination&#8221; and &#8220;&#8212; Other Factors
      Considered by the Superior Board&#8221; beginning on pages 43 and 45. Stenton Leigh
      undertook a review of Superior&#8217;s historical financial data in order to
      understand and interpret its operating and financial performance and
      strength.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      has paid Stenton Leigh fees of $139,500 for its services in connection with
      the
      engagement letter and issuing its fairness opinions. No portion of the fee
      is
      contingent upon the consummation of the merger or the conclusions reached in
      the
      opinion. No other compensation was paid to Stenton Leigh or any other financial
      advisor. No instructions or limitations were placed on Stenton Leigh by Superior
      or DGSE, nor are there any material relationships between Stenton Leigh and
      Superior or DGSE. Stenton Leigh was selected to render the fairness opinion
      following interviews with other candidates who each provided proposals for
      the
      engagement. The method of determination for selecting the advisor was based
      upon
      the quality of the proposal, the experience of the candidates, and the
      recommendations of legal counsel and other business professionals. In addition,
      Superior has agreed to indemnify Stenton Leigh for any liabilities that may
      arise out of the rendering if its services to Superior.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Financial
      Review</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Superior
      Financial Review. </i>Stenton Leigh reviewed Superior&#8217;s historical financial
      data for the three fiscal years ended June 30, 2006 and the three months ended
      September 30, 2006 and the two and a half months ended December 15, 2006 and
      noted the following:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Revenue increased from $20,355,000
      in the fiscal year ended June 30, 2003 to $29,997,000 in the fiscal year ended
      June 30, 2004. This is an increase of $9,642,000, or 47.4%. Revenue increased
      another $9,538,000 to $39,535,000 in the fiscal year ended June 30, 2005, or
      31.8%, and increased by $6,782,000 to $46,317,000 for the fiscal year ended
      June
      30, 2006, an increase of 17.2%. For the quarter ended September 30, 2006,
      revenue was $8,560,000, a decline of $3,093,000 from the $11,653,000 for the
      quarter ended September 30, 2005.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Similar increases occurred in the
      cost of sales, which grew from $15,952,000 in the fiscal year ended June 30,
      2003 to $23,382,000 in the fiscal year ended June 30, 2004. This is an increase
      of $7,430,000 or 46.6%, which mirrored the growth rate in revenues. For the
      fiscal year ended June 30, 2005, the cost of sales increased $8,645,000 to
      $32,027,000, or 37.0%. This increase exceeded the increase in gross revenues
      for
      the year. For the fiscal year ended June 30, 2006, the cost of sales increased
      $6,366,000 to $38,393,000, or 19.9%, which again exceeded the growth rate in
      revenues. For the quarter ended September 30, 2006, the cost of sales was
      $7,054,000, a decline of $2,288,000 from the $9,342,000 for the quarter ended
      September 30, 2005. Following a discussion with Superior management, no material
      differences in revenues or cost of sales were noted for the period of September
      30, 2006 to December 15, 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Superior&#8217;s net operating income on
      a normalized basis increased from a loss of nearly $2.9 million in the fiscal
      year ended June 30, 2003 to an income of $656,000 for the fiscal year ended
      June
      30, 2004, but returned to a loss of $200,000 for the fiscal year ended June
      30,
      2005, and a loss of over $1.8 million for the fiscal year ended June 30, 2006.
      For the quarter ended September 30, 2006, the net operating loss was
      $755,000.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">49</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Similar results occurred in the
      net
      income, which was only positive in the fiscal year ended June 30, 2004, in
      the
      amount of $552,000. The net loss for the fiscal year ended June 30, 2003 was
      nearly $3.5 million, while the net loss for the fiscal year ended June 30,
      2005
      was $616,000, and for the fiscal year ended June 30, 2006, the net loss was
      nearly $2.5 million. For the quarter ended September 30, 2006, the net loss
      was
      $939,000. Following a discussion with Superior management, no material
      differences were noted for the period of September 30, 2006 to December 15,
      2006.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">As of September 30, 2006, Superior
      had approximately $1,673,000 in cash, $5.8 million in receivables, and $4.8
      million in inventory, which accounted for most of the current assets. Superior
      also had $400,000 in net fixed assets. Total assets exceeded $12.9 million.
      The
      current liabilities of Superior amounted to nearly $14.3 million, and long-term
      liabilities were $300,000 as of September 30, 2006. Total stockholders&#8217; equity
      was a deficit of $1.7 million as of September 30, 2006. Following a discussion
      with Superior management, no material differences in account balances were
      noted
      for the period of September 30, 2006 to December 15, 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Superior
      Stock Performance Review.</i> Stenton Leigh reviewed the daily closing market
      price and trading volume of Superior&#8217;s common stock during the period prior to
      the announcement, and after the announcement of the merger. Stenton Leigh noted
      the following:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">In the pre-announcement and post
      announcement period, Superior&#8217;s stock had a very sporadic, thinly traded (low
      volume), and therefore illiquid trading volume, ranging from a low volume of
      0
      shares to a high volume of 38,400 shares. Superior&#8217;s shares traded over the last
      two years to a high of $4.75 per share and a low of $0.65 per share. In the
      30
      days prior to the date of the fairness opinion, the shares traded between $0.75
      per share and $1.00 per share.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Stenton Leigh noted that during
      the
      current fiscal year. Superior&#8217;s stock has traded in a range between $0.75 per
      share and $1.85 per share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>DGSE
      Financial Review.</i> Stenton Leigh reviewed DGSE&#8217;s historical financial data
      for the three fiscal years ended December 31, 2005, for the nine months ended
      September 30, 2006, and for the two and a half months ended December 15, 2006,
      noted the following:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Revenue increased from $25,244,000
      in the fiscal year ended December 31, 2003 to $28,386,000 in the fiscal year
      ended December 31, 2004. This is an increase of $3,142,000, or 12.4%. Revenue
      increased another $6,933,000 to $35,319,000, or 24.4%, in the fiscal year ended
      December 31, 2005. For the nine months ended September 30, 2006, revenue was
      $31,876,000, an increase of $11,143,000, or 53.7% over the nine months ended
      September 30, 2005.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Similar increases occurred in the
      cost of sales, which increased from $24,264,000 in the fiscal year ended
      December 31, 2003 to $27,591,000 in the fiscal year ended December 31, 2004.
      This is an increase of $3,327,000, or 13.7%, which slightly exceeded the growth
      rate of revenues. For the fiscal year ended December 31, 2005, the cost of
      sales
      increased to $34,612,000, an increase of $7,021,000, or 25.4%, which also
      exceeded the growth rate of revenues. For the nine months ended September 30,
      2006, the cost of sales increased $10,813,000, to $30,848,000, an increase
      of
      54.0% over the nine months ended September 30, 2005, closely in line with the
      increase in revenues. Following a discussion with management, no material
      differences in revenues or cost of sales were noted for the period of September
      30, 2006 to December 15, 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The operating income for DGSE
      declined from $1,162,000 in the fiscal year ended December 31, 2003 to
      $1,052,000 in the fiscal year ended December 31, 2004. This is a decrease of
      9.5% from year to year. The operating income declined again to $1,027,000 in
      the
      fiscal year ended December 31, 2005, or another 2.4%. For the nine months ended
      September 30, 2006, the operating income was $1,028,000, an increase of
      $330,000, or 47.3% over the nine months ended September 30, 2005. Following
      a
      discussion with management, no material differences in operating income were
      noted for the period of September 30, 2006 to December 15, 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">As of September 30, 2006, DGSE
      had
      approximately $217,000 in cash, $948,000 in receivables, and $8.45 million
      in
      inventory, which accounted for most of the current assets. DGSE also had over
      $1.0 million in net fixed assets. Total assets amounted to nearly $12.4 million.
      The current liabilities of DGSE were nearly </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">50</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">$1.8
      million, and long-term liabilities were nearly $4.0 million as of September
      30,
      2006. Total stockholders&#8217; equity was over $6.6 million as of September 30, 2006.
      Following a discussion with management, no material differences in account
      balances were noted for the period of September 30, 2006 to December 15,
      2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pro
      Forma<i> Capitalization and Stockholder Ownership Review. </i>In order to better
      understand the merger and its impact on the capitalization and stockholder
      ownership of DGSE, Stenton Leigh reviewed DGSE&#8217;s estimated <i>pro forma</i>
      capitalization and<i> pro forma </i>securities ownership. Based upon the <i>pro
      forma</i> review, Stenton Leigh noted the following:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The combination is expected to
      result in the issuance of $9,805,000 worth of DGSE common stock to the Superior
      stockholders. This consists of 3,700,000 shares currently valued at $2.65 per
      share.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Valuation
      Overview</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Based
      upon a review of the historical and forecasted financial data and certain other
      qualitative data for Superior, Stenton Leigh utilized several valuation
      methodologies and analyses to determine ranges of values. Stenton Leigh utilized
      the discounted cash flow method, the comparable company method, and the
      comparable transaction method of analysis (all of which are discussed in more
      detail hereinafter) for the valuation of Superior. Stenton Leigh weighted each
      of the approaches for Superior equally to determine the indicated equity value
      of approximately $8.2 million, which took into consideration the planned
      conversion by SIBL of $8.5 million of their debt to equity, at closing of the
      combination, on terms fair to the minority shareholders.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Discounted
      Cash Flow Analysis.</i> Based upon management&#8217;s forecasted revenues and
      expenses, Stenton Leigh prepared a discounted cash flow analysis to arrive
      at
      the value of Superior stockholders&#8217; equity. The discounted cash flow analysis
      included the fiscal years ending June 30, 2007 through June 30, 2011. The
      resulting present value of the net cash flow to equity is $8,416,000 as of
      December 15, 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Comparable
      Company Analysis.</i> The selected comparable company analysis reviewed the
      trading multiples of publicly-traded companies that are similar to Superior
      with
      respect to business and revenue model, operating sector, size and target
      customer base. Because of the unique characteristics of Superior and the limited
      availability of appropriate comparable companies involved only in the rare
      coins
      and precious metals industry, Stenton Leigh identified the following comparable
      companies:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">&#160;&#8220;Rare Coins and Precious
      Metals&#8221; &#8212; includes publicly listed companies that are involved in the rare coin
      and precious metals, wholesale, retail, online and auction business. One of
      the
      companies is smaller than Superior in terms of annual revenue, and one company
      has annual revenues larger than Superior. Two of the comparable companies are
      larger than Superior in terms of enterprise value, and all are more profitable
      than Superior. Based on publicly available information as of September 30,
      2006,
      the enterprise value for the comparable companies ranged from approximately
      $16.5 million to approximately $74.9 million, compared with approximately $15.2
      million for Superior. Stenton Leigh noted the following with respect to the
      multiples generated:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 54pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt">The enterprise value to Last Twelve
      Months, or LTM, revenue multiple ranged from 0.353 times revenue to 1.976 times
      revenue, with a mean and median of 1.165 times revenue.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 54pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt">The enterprise value to LTM EBIT
      (earnings before interest and taxes) multiple ranged from 12.696 times EBIT
      to
      14.683 times EBIT, with a mean and median of 13.689 times EBIT.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 54pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt">The enterprise value to LTM EBITDA
      (earnings before interest, taxes, depreciation and amortization) multiple ranged
      from 11.700 times EBITDA to 12.696 times EBITDA, with a mean and median of
      12.198 times EBITDA.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Based
      on
      the selected multiple ranges, Stenton Leigh calculated a range of enterprise
      values for Superior based on the LTM period ended September 30, 2006. Stenton
      Leigh then deducted net debt of approximately $11.350 million to derive an
      indicated equity value range of approximately $5.6 million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Based
      on
      the selected multiple ranges, Stenton Leigh calculated a range of enterprise
      values for Superior based on the forecast data for the fiscal year ending June
      30, 2007. Stenton Leigh then deducted net debt of approximately of $11.350
      million to derive an indicated equity value range of approximately $8.0
      million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">51</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">None
      of the comparable companies have characteristics identical to Superior. An
      analysis of publicly traded comparable companies is not mathematical; rather
      it
      involves complex consideration and judgments concerning differences in financial
      and operating characteristics of the comparable companies and other factors
      that
      could affect the public trading of the comparable companies.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Comparable
      Transaction Analysis. </i>The comparable transaction analysis was based on a
      review of merger, acquisition and asset purchase transactions involving target
      companies that are in related industries to Superior. The comparable transaction
      analysis generally provides the widest range of value due to the varying
      importance of an acquisition to a buyer (i.e., a strategic buyer is willing
      to
      pay more than a financial buyer) in addition to the potential differences in
      the
      transaction process (i.e., competitiveness among potential buyers). As in the
      comparable company analysis, Stenton Leigh identified comparable
      transactions:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">&#8220;Rare Coin and Precious Metals&#8221; &#8212;
includes those transactions involving
      target companies that are involved in the
      rare coin and precious metals wholesale, retail, online and auction businesses.
      Due to the unique characteristics of Superior, no reasonably comparable
      transactions were identified, and no conclusion of value was derived from this
      methodology.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Conclusion</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Based on
      the
      information and analyses set forth above, Stenton Leigh delivered its written
      opinion to Superior&#8217;s board of directors, which stated that, as of December 15,
      2006, based upon and subject to the assumptions made, matters considered, and
      limitations on its review as set forth in the opinion, the merger is fair,
      from
      a financial point of view, to the Superior minority stockholders.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stenton
      Leigh is a business advisory and valuation firm that is regularly engaged in
      the
      valuation of businesses in connection with mergers, acquisitions, corporate
      restructurings and private placements and for other purposes. Superior engaged
      the services of Stenton Leigh because it is a recognized business valuation
      firm
      that has substantial experience in similar matters. Stenton Leigh received
      a
      $139,500 fee in connection with the preparation and issuance of its opinions.
      In
      addition, Superior has agreed to indemnify Stenton Leigh for any liabilities
      that may arise out of the rendering of its opinion. Stenton Leigh does not
      beneficially own any interest in either Superior or DGSE and has not provided
      either company with any other services in the past.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Interests of Certain
      DGSE Persons in the Combination</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      considering the recommendation of the DGSE board of directors regarding the
      merger agreement, DGSE stockholders should be aware that some of DGSE&#8217;s
      directors and executive officers may have interests in the combination that
      are
      different from, or in addition to, their interests as DGSE stockholders. These
      interests may create an appearance of a conflict of interest. The DGSE board
      of
      directors was aware of these potential conflicts of interest during its
      deliberations on the merits of the combination and in making its decision to
      recommend to the DGSE stockholders that they vote to adopt the merger agreement.
      For more information see &#8220;Management of DGSE After the Combination &#8212; Information
      Regarding DGSE&#8217;s Directors and Executive Officers&#8221; beginning on
      page&#160;115.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Employment
      Agreements. </i>The DGSE board of directors has approved amended and restated
      employment agreements for Dr. L.S. Smith, the chairman and chief executive
      officer of DGSE, and William H. Oyster, a director and the president and chief
      operating officer of DGSE and a director and interim chief executive officer
      of
      Superior, and a new employment agreement for John Benson, the chief financial
      officer of DGSE and a director and interim chief financial officer and vice
      president &#8211; finance of Superior, in each case contingent upon the closing of the
      combination. For more information about these employment agreements, see the
      section entitled &#8220;Post-Combination Employment Agreements&#8221; beginning on
      page&#160;75.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>DGSE
      Board Seats.</i> In connection with the combination, DGSE has agreed to enter
      into a corporate governance agreement, a copy of which is attached to this
      joint
      proxy statement/prospectus as Annex G, with SIBL and Dr. L.S. Smith. Pursuant
      to
      this agreement, subject to the applicable fiduciary duties of the DGSE board
      of
      directors, and compliance by DGSE in good faith with applicable law and
      regulations, DGSE has agreed to recommend that, among others, Dr. L.S. Smith,
      the current chairman and chief executive officer of DGSE, William H. Oyster,
      a
      director and the current president and chief operating officer of DGSE and
      a
      director and interim chief executive officer of Superior, and two current
&#8220;independent&#8221; directors of the DGSE Board, who are expected to be William P.
      Cordeiro and Craig Alan-Lee, constitute the DGSE board of directors upon the
      consummation of the combination. </div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">52</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">For
      more information about the corporate governance agreement, see the section
      entitled &#8220;The Merger Agreement &#8212; DGSE Corporate Governance&#8221; beginning on page
      70.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>The
      interests described above may influence DGSE&#8217;s directors and executive officers
      in making their recommendation that you vote in favor of the adoption and
      approval of the merger agreement and the approval of the combination. You should
      be aware of these interests when you consider the DGSE board&#8217;s recommendation
      that you vote in favor of adoption and approval of the merger agreement and
      the
      approval of the combination.</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Interests of Certain
      Superior Persons in the Combination</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      considering the recommendation of the Superior board of directors regarding
      the
      merger agreement, Superior stockholders should be aware that some of Superior&#8217;s
      directors and executive officers may have interests in the combination that
      are
      different from, or in addition to, their interests as Superior stockholders.
      These interests may create an appearance of a conflict of interest. The Superior
      board of directors was aware of these potential conflicts of interest during
      its
      deliberations on the merits of the merger and in making its decision to
      recommend to the Superior stockholders that they vote to adopt the merger
      agreement. In addition, pursuant to the terms of the merger agreement, the
      board
      of directors of DGSE after the combination will have seven members, two of
      whom
      are current members of the Superior board. For more information see the section
      entitled &#8220;Information Regarding DGSE Companies, Inc. &#8212; Management of DGSE After
      the Combination&#8221; beginning on page 115.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Repayment
      of DiGenova Note. </i>In connection with the execution of the merger agreement,
      Superior repaid in full its note in the principal amount of $400,000 owed to
      Silvano DiGenova, who was then the chairman, president and chief executive
      officer of Superior and the beneficial owner of approximately 40% of Superior
      common stock. At the time of the payment, Superior had a negative stockholders&#8217;
equity of $3.1 million and Mr. DiGenova&#8217;s debt was subordinate to SIBL&#8217;s debt,
      which was at that time undersecured.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Stanford
      Line of Credit.</i> In connection with the combination, Stanford Financial Group
      Company, an affiliate of Superior&#8217;s largest stockholder, SIBL, is expected to
      enter into a new credit facility with Superior. In addition, a closing condition
      to the merger is that SIBL exchange approximately $8.4 million of Superior
      secured debt into approximately 5 million shares of Superior common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Warrants.</i>
      In connection with the combination, as consideration for the exchange of debt
      by
      SIBL and the new credit facility which will be largely available to DGSE, DGSE
      will issue seven-year warrants, in the form attached as Annex H to this joint
      proxy statement/prospectus, to SIBL and its designees. These warrants will
      entitle the holders thereof to purchase 845,634 shares of DGSE common stock
      at
      an exercise price of $1.89 per share and 863,000 shares of DGSE common stock
      at
      an exercise price equal to their par value of $0.01 per share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>New
      Independent Contractor Agreement with DGSE. </i>At the execution of the merger
      agreement, Silvano DiGenova, who is a former member of the Superior board of
      directors and a former Superior executive officer, became an independent
      contractor of Superior with the nominal title of Managing Director-Numismatics.
      In connection with this arrangement, Mr. DiGenova has entered into a letter
      agreement with the DGSE merger subsidiary which is contingent upon the closing
      of the combination. Either DGSE or Mr. DiGenova may terminate the arrangement
      at
      any time for any reason with 30 days notice or, upon material breach by the
      other party and a failure to cure, upon 5 days notice. A summary of the material
      terms of the independent contractor arrangement with Superior follows:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Title.</i> Mr. DiGenova has the
      title of Managing Director-Numismatics. However, this title is purely nominal,
      and Mr. DiGenova will not be an officer or employee of DGSE, Superior or any
      of
      their respective subsidiaries.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Net Profits Account.</i> Mr.
      DiGenova is paid a minimum of $25,000 per month, payable bi-monthly from a
      net
      profits account, and will also have profit participation in a separate profit
      center which he heads, subject to the supervision and direction of Superior.
      The
      profit center will be allocated $2,500,000 in either inventory or capital to
      facilitate wholesale activities by Mr. DiGenova, which we will refer to as
      the
      allocated inventory, upon the consummation of the merger. Superior will generate
      monthly profit and loss statements for the profit center. Revenues will include
      all wholesale and retail revenues generated by the profit center, exclusive
      of
      auction commissions but including commissions for retail sales of Superior
      inventory other than allocated inventory and gross profits realized on allocated
      inventory. Expenses will </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">53</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">include
      all direct expenses of the profit center, including interest on the allocated
      inventory at the prime rate. Forty percent of the net profit or loss will be
      allocated each month to Mr. DiGenova&#8217;s net profit account. At the end of each
      fiscal quarter, Mr. DiGenova will be entitled to receive any positive balance
      in
      the net profits account.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Other Services.</i> Mr. DiGenova
      will be entitled to separate compensation for other services he performs for
      DGSE or Superior, including a commission, at the then standard salesman&#8217;s rate,
      for retail auction consignments of inventory (other than allocated inventory),
      and earned commission, at the then standard salesman&#8217;s rate, for any
      auctions.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Competitive Activities.</i> Mr.
      DiGenova will not be obligated to devote any time, energy or skill to Superior
      and will not be restricted from engaging in independent business activities
      for
      his own account, except that during the term of the arrangement, he may not
      engage in any activity involving rare coins, bullion products and jewelry (other
      than antique jewelry), solicit retail consignments, service retail clients
      or
      solicit auctions, except in each case on behalf of Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><i>Benefits. </i>As an independent
      contractor, Mr. DiGenova will not be entitled to participate in DGSE&#8217;s employee
      benefits plans or programs.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>DGSE
      Board Seats.</i> Following the closing of the combination, two current members
      of the Superior board of directors, Messrs. Stoltz and Rector, will become
      members of DGSE&#8217;s board of directors as &#8220;independent&#8221; board members.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Indemnification;
      Directors&#8217; and Officers&#8217; Insurance. </i>Under the terms of the merger agreement,
      DGSE has, subject to certain limitations, agreed to cause to be maintained
      directors&#8217; and officers&#8217; liability insurance policies for acts or omissions
      occurring prior to the combination covering each Superior officer or director
      on
      terms with respect to coverage and amounts, to the extent reasonably available,
      no less favorable than those of the policy in effect on the date of the merger
      agreement. As of the date of the merger agreement, Superior maintained
      directors&#8217; and officers&#8217; liability insurance in the policy amount of $2
      million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Additionally,
      Article VII of Superior&#8217;s certificate of incorporation eliminates the personal
      liability of a Superior director to Superior or its stockholders for monetary
      damages for breach of fiduciary duty as a director, except for liability:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">for any breach of the director&#8217;s
      duty of loyalty to Superior or its stockholders;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">for acts or omissions not in good
      faith or which involve intentional misconduct or a knowing violation of
      law;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">under Section 174 of the General
      Corporation Law of the State of Delaware, which provides for director liability
      in the event of a willful or negligent dividend on or purchase or redemption
      of
      a corporation&#8217;s capital stock; or</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">for any transaction from which
      the
      director derived any improper personal benefit.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, Superior has entered into indemnification agreements to indemnify
      its
      executive officers and directors. These indemnification agreements provide
      that
      Superior will indemnify Superior&#8217;s directors and officers to the fullest extent
      permitted by the DGCL if the officer or director was or is or becomes or is
      threatened to be made a party to or witness or other participant in any
      threatened, pending or completed action, suit, proceeding or alternative dispute
      resolution mechanism, or any hearing, inquiry or investigation that the officer
      or director in good faith believes might lead to the institution of any such
      action, suit, proceeding or alternative dispute resolution mechanism whether
      civil, criminal, administrative, or investigative, which we collectively refer
      to as a claim, by reason of or arising out of any event or occurrence related
      to
      the fact that the officer or director is or was a director, officer, employee,
      agent or fiduciary of Superior, or by reason of any action or inaction on the
      part of the officer or director while serving in such capacity, against any
      and
      all expenses (including attorney&#8217;s fees, judgments, fines, penalties and amounts
      paid in settlement if such settlement is approved in advance by Superior)
      related to the claim.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, Superior is required to advance expenses on behalf of the officer
      or
      director in connection with the officer&#8217;s or director&#8217;s defense in any claim,
      provided that the officer or director undertakes in writing to repay the </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">54</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">amounts
      advanced to the extent that it is ultimately determined that the officer or
      director is not entitled to indemnification by Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      has no obligation to indemnify or advance expenses to the officer or director
      (i) for acts, omissions or transactions from which the officer or director
      may
      not be relieved of liability under applicable law; (ii) with respect to claims
      initiated or brought voluntarily by the officer or director and not by way
      of
      defense, except (a) with respect to actions or proceedings brought to establish
      or enforce a right to indemnification under the indemnification agreement or
      any
      other agreement or insurance policy or under Superior&#8217;s certificate of
      incorporation or bylaws in effect, (b) in specific cases if the Superiors board
      of directors has approved the initiation or bringing of the claim, or (c) as
      otherwise required under Section 145 of the DGCL, regardless of whether the
      officer or director ultimately is determined to be entitled to indemnification,
      advance expense payment or insurance recovery, as the case may be; (iii) with
      respect to any proceeding instituted by the officer or director to enforce
      or
      interpret the indemnification agreement, unless a court of competent
      jurisdiction determines that each of the material assertions made by the officer
      or director in the proceeding was not made in good faith or was frivolous;
      and
      (iv) for expenses and the payment of profits arising from the purchase and
      sale
      by the officer or director of securities in violation of Section 16(b) of the
      Exchange Act, or any similar successor statute.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To the
      extent Superior maintains liability insurance applicable to directors, officers,
      employees, agents or fiduciaries, the officer or director has the right to
      be
      covered by those policies with the same rights and benefits as are provided
      to
      the most favorably insured of Superior&#8217;s directors, if the indemnitee is a
      director; or of Superior&#8217;s officers, if the indemnitee is not a director but an
      officer.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>The
      interests described above may influence Superior&#8217;s directors and executive
      officers in making their recommendation that you vote in favor of the adoption
      and approval of the merger agreement and the approval of the merger. You should
      be aware of these interests when you consider the Superior board&#8217;s
      recommendation that you vote in favor of adoption and approval of the merger
      agreement and the approval of the merger.</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Material United States
      Federal Income Tax Considerations</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following discussion summarizes the anticipated material United States federal
      income tax consequences of the merger applicable to U.S. holders of Superior
      common stock. These consequences are based upon tax representation letters
      from
      each of DGSE, Merger Sub and Superior. This discussion is based upon the
      Internal Revenue Code of 1986, as amended, which we refer to as the Code,
      Treasury Regulations, judicial authorities, published positions of the Internal
      Revenue Service, which we refer to in this proxy statement/prospectus as the
      IRS, and other applicable authorities, all as in effect on the date of this
      document and all of which are subject to change or differing interpretations
      (possibly with retroactive effect).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For
      purposes of this discussion, we use the term &#8220;U.S. holder&#8221; to mean:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">an individual who is a citizen
      or
      resident of the United States;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">a corporation created or organized
      under the laws of the United States, any state or the District of
      Columbia;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">a trust that (i) is subject to
      the
      supervision of a court within the United States and the control of one or more
      United States persons or (ii) has a valid election in effect under applicable
      United States Treasury regulations to be treated as a United States person;
      or</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">an estate that is subject to United
      States federal income tax on its income regardless of its source.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">This
      discussion assumes that holders of Superior common stock hold their stock as
      capital assets within the meaning of Section 1221 of the Code. This discussion
      does not address all aspects of United States federal income taxation that
      may
      be important to a Superior stockholder in light of his or her particular
      circumstances or particular tax status, including the following:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">stockholders who are not U.S.
      holders;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">stockholders who are subject to
      the
      alternative minimum tax provisions of the Code;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">banks and other financial
      institutions;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">55</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">tax-exempt organizations and
      governmental entities;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">insurance companies;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">S corporations, entities taxable
      as
      partnerships, and other pass-through entities;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">stockholders who have a functional
      currency other than the U.S. dollar;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">brokers or dealers in securities
      or
      foreign currency;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">traders in securities who elect
      the
      mark-to-market method of accounting for their securities holdings;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">stockholders who acquired their
      shares in connection with stock option or stock purchase plans or in other
      compensatory transactions; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">persons holding shares as part
      of a
      hedge, straddle, conversion transaction or risk reduction transaction.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, the following discussion does not address the tax consequences
      relating to other transactions effectuated prior to, concurrently with, or
      after
      the merger (including the conversion of Superior preferred stock into Superior
      common stock or the exchange of Superior debt for Superior common stock),
      whether or not such transactions are in connection with the merger. Furthermore,
      no foreign, state or local tax considerations are addressed. <strong>Therefore,
      we urge you to consult your own tax advisor as to the specific federal, state,
      local and foreign tax consequences to you of the merger and related transactions
      and related reporting obligations.</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>The
      Merger.</i> Assuming that (i) all representations, warranties and statements
      made or agreed to by DSGE, Merger Sub and Superior, their managements,
      employees, officers, directors and shareholders in connection with the merger,
      including, but not limited to, those set forth in the merger agreement
      (including the exhibits thereto) and the tax representation letters are true
      and
      accurate at all relevant times, (ii) all covenants contained in the merger
      agreement (including exhibits thereto) and the tax representation letters are
      performed without waiver or breach of any material provision thereof; (iii)
      the
      merger will be consummated in accordance with the merger agreement without
      any
      waiver or breach of any material provision thereof (except for waivers not
      affecting the structure of the merger or the consideration to be paid in
      connection therewith), and (iv) the merger will be effective under applicable
      state law, the merger will be treated as a &#8220;reorganization&#8221; within the meaning
      of Section 368(a) of the Code. Assuming that it so qualifies, the material
      United States federal income tax consequences of the merger are as
      follows:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">No gain or loss will be recognized
      by Superior, Merger Sub or DGSE solely as a result of the merger.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">No gain or loss will be recognized
      by holders of Superior common stock solely upon their receipt of DGSE common
      stock in the merger.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The aggregate tax basis of the
      DGSE
      common stock received in the merger by a holder of Superior common stock will
      be
      the same as the aggregate tax basis of the Superior common stock surrendered
      in
      exchange therefor.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">The holding period of DGSE common
      stock received in the merger by a holder of Superior common stock will include
      the holding period of the Superior common stock surrendered in exchange
      therefor.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Neither
      DGSE nor Superior will request a ruling from the Internal Revenue Service
      regarding the tax consequences of the merger to Superior stockholders. The
      actual tax consequences of the merger could be different from the treatment
      described above.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Dissenting
      Stockholders.</i> If all of the shares of Superior common stock actually or
      constructively owned by a Superior stockholder are exchanged solely for cash
      as
      a result of the exercise of dissenter rights, the transaction will be treated
      as
      a sale by the Superior stockholder of his or her shares of Superior common
      stock
      exchanged, and such stockholder will recognize capital gain or loss measured
      by
      the difference between such stockholder&#8217;s tax basis in the shares of Superior
      common stock actually owned by him or her and the amount of cash received by
      him
      or her in exchange for those shares. If shares of Superior common stock are
      held
      by a stockholder as capital assets, gain or loss recognized by that stockholder
      will be capital gain or loss, which will be long-term capital gain or loss
      if
      that stockholder&#8217;s holding period for the shares of Superior common stock
      exceeds one year at the time of the exchange. Capital gains recognized by an
      individual upon a disposition of shares of Superior common stock held for more
      than </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">56</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">one
      year generally will be subject to a maximum United States federal income tax
      rate of 15% or, in the case of shares that have been held for one year or less,
      will be subject to tax at ordinary income tax rates. In addition, there are
      limits on the deductibility of capital losses. The amount and character of
      gain
      or loss must be determined separately for each block of Superior common stock
      (i.e., shares acquired at the same cost in a single transaction) exchanged
      for
      cash.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If a
      Superior stockholder exchanges all the shares of Superior common stock actually
      owned by him or her solely for cash as a result of the exercise of dissenter
      rights, but shares of Superior common stock treated as constructively owned
      by
      him or her are exchanged in whole or in part for DGSE common stock, then the
      tax
      consequences to that stockholder will depend upon whether the exchange has
      the
&#8220;effect of a distribution of a dividend.&#8221; If the exchange has the &#8220;effect of a
      distribution of a dividend,&#8221; as determined under Section 302 of the Code, then
      the cash received will be treated: (i) first, as a taxable dividend to the
      extent of allocable earnings and profits, if any; (ii) second, as a tax-free
      return of capital to the extent of the stockholder&#8217;s tax basis in the exchanged
      shares; and (iii) finally, as gain or loss from the sale or exchange of the
      exchanged shares. Amounts treated as a taxable dividend should be treated as
      qualified dividend income, taxable at the capital gains rate. Further, a
      corporate taxpayer (other than an S corporation) may be allowed a dividends
      received deduction subject to applicable limitations and other special rules.
      If
      the exchange does not have the &#8220;effect of a distribution of a dividend,&#8221; then
      the cash received will be taxed as capital gain or loss. In certain limited
      circumstances, and pursuant to certain procedures set forth in the Code, the
      application of the constructive ownership rules as they apply to family members
      of the Superior stockholder can be waived, in which case the transaction will
      be
      treated as a sale and the stockholder will recognize capital gain or loss on
      the
      exchange as described in the preceding paragraph.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Information
      Reporting and Backup Withholding.</i> Non-corporate dissenting stockholders may
      be subject to information reporting and backup withholding on any cash payments
      received in respect of Superior common stock. A non-corporate holder will not
      be
      subject to backup withholding, however, if such holder: (i) furnishes a correct
      taxpayer identification number and certifies that the holder is not subject
      to
      backup withholding on the substitute Form W-9 or successor form included in
      the
      letter of transmittal to be delivered to the holder following the completion
      of
      the merger; or (ii) is otherwise exempt from backup withholding. Any amounts
      withheld under the backup withholding rules will be allowed as a refund or
      credit against United States federal income tax liability, provided the required
      information is furnished to the Internal Revenue Service.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Reporting.</i>Superior
      stockholders will be required to attach a statement to their United States
      federal income tax returns for the year of the merger that contains the
      information listed in Treasury Regulation Section 1.368-3(b). Such statement
      must include the stockholder&#8217;s tax basis in shares of Superior common stock and
      a description of the DGSE common stock received.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>THE
      PRECEDING DISCUSSION OF MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
      IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT PURPORT TO BE A
      COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO.
      THE FOREGOING DISCUSSION NEITHER BINDS THE IRS NOR PRECLUDES IT FROM ADOPTING
      A
      CONTRARY POSITION. SUPERIOR STOCK&#172;HOLDERS ARE URGED TO CONSULT THEIR OWN TAX
      ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
      REPORTING REQUIRE&#172;MENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL,
      FOREIGN AND OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY CHANGES IN TAX
      LAWS.</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Anticipated Accounting
      Treatment</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      intends to account for the combination as a purchase transaction for financial
      reporting and accounting purposes under accounting principles generally accepted
      in the United States. After the combination, the results of operations of
      Superior will be included in the consolidated financial statements of DGSE.
      The
      purchase price, which is equal to the aggregate merger consideration, will
      be
      allocated based on the fair values of the Superior assets acquired and the
      Superior liabilities assumed. These allocations will be based upon valuations
      and other studies that have not yet been finalized.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">57</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>Appraisal
      and Dissenters&#8217; Rights</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under
      the
      Delaware General Corporation Law, which we refer to as the DGCL, any Superior
      stockholder who does not wish to accept the merger consideration provided in
      the
      merger agreement has the right to dissent from the merger and to seek an
      appraisal of, and to be paid the fair value (exclusive of any element of value
      arising from the accomplishment or expectation of the merger) for his or her
      shares of Superior common stock, so long as the stockholder strictly complies
      with the provisions of Section 262 of the DGCL.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Holders
      of record of Superior common stock who do not vote in favor of the merger
      agreement and who otherwise comply with the applicable statutory procedures
      summarized in this joint proxy statement/prospectus will be entitled to
      appraisal rights under Section 262 of the DGCL. A person having a beneficial
      interest in shares of Superior common stock held of record in the name of
      another person, such as a broker or nominee, must act promptly to cause the
      record holder to follow the steps summarized below properly and in a timely
      manner to perfect appraisal rights.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">THE
      FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO
      APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL
      TEXT OF SECTION 262 OF THE DGCL, WHICH IS REPRINTED IN ITS ENTIRETY AS ANNEX
      L
      TO THIS JOINT PROXY STATEMENT/PROSPECTUS. ALL REFERENCES IN SECTION 262 OF
      THE
      DGCL AND IN THIS SUMMARY TO A &#8220;STOCKHOLDER&#8221; OR &#8220;HOLDER&#8221; ARE TO THE RECORD HOLDER
      OF THE SHARES OF COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under
      Section 262 of the DGCL, holders of shares of Superior common stock who follow
      the procedures set forth in Section 262 of the DGCL will be entitled to have
      their Superior common stock appraised by the Delaware Chancery Court and to
      receive payment in cash of the &#8220;fair value&#8221; of those shares, exclusive of any
      element of value arising from the accomplishment or expectation of the merger,
      together with a fair rate of interest, if any, as determined by that
      court.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under
      Section 262 of the DGCL, when a proposed merger is to be submitted for approval
      at a meeting of stockholders, the corporation, not less than 20 days prior
      to
      the meeting, must notify each of its stockholders who was a stockholder on
      the
      record date for this meeting with respect to shares for which appraisal rights
      are available, that appraisal rights are so available, and must include in
      that
      required notice a copy of Section 262 of the DGCL.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">This
      joint proxy statement/prospectus constitutes the required notice to the holders
      of those Superior shares and the applicable statutory provisions of the DGCL
      are
      attached to this joint proxy statement/prospectus as Annex L. Any Superior
      stockholder who wishes to exercise appraisal rights or who wishes to preserve
      the right to do so should review the following discussion and Annex L carefully,
      because failure to timely and properly comply with the procedures specified
      in
      Annex L will result in the loss of appraisal rights under the DGCL.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">A holder
      of Superior shares wishing to exercise his or her appraisal rights must (a)
      not
      vote in favor of the merger agreement, and (b) prior to the vote on the merger
      agreement and merger at the Superior special meeting, deliver to Superior a
      written demand for appraisal of his or her Superior shares. This written demand
      for appraisal must be in addition to and separate from any proxy or vote
      abstaining from or against the merger. The demand must reasonably inform
      Superior of the identity of the stockholder and of the stockholder&#8217;s intent
      thereby to demand appraisal of his or her shares. A holder of Superior common
      stock wishing to exercise his or her holder&#8217;s appraisal rights must be the
      record holder of these Superior shares on the date the written demand for
      appraisal is made and must continue to hold the Superior shares until the
      consummation of the merger. Accordingly, a holder of Superior common stock
      who
      is the record holder of Superior common stock on the date the written demand
      for
      appraisal is made, but who thereafter transfers these Superior shares prior
      to
      consummation of the merger, will lose any right to appraisal in respect of those
      Superior shares.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Only
      a
      holder of record of Superior common stock is entitled to assert appraisal rights
      for the Superior shares registered in that holder&#8217;s name. A demand for appraisal
      should be executed by or on behalf of the holder of record, fully and correctly,
      as the holder&#8217;s name appears on the holder&#8217;s stock certificates. If the Superior
      shares are owned of record in a fiduciary capacity, such as by a trustee,
      guardian or custodian, execution of the demand should be made in that capacity,
      and if the Superior common stock is owned of record by more than one owner
      as in
      a joint tenancy or tenancy in common, the demand should be executed by or on
      behalf of all joint owners. An authorized agent, including one or more joint
      owners, may execute a demand for appraisal on behalf of a holder of record.
      The
      agent, however, must identify the record owner or owners and expressly disclose
      the fact that, in executing the </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">58</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">demand,
      the agent is agent for the owner or owners. A record holder such as a broker
      who
      holds Superior common stock as nominee for several beneficial owners may
      exercise appraisal rights with respect to the Superior shares held for one
      or
      more beneficial owners while not exercising appraisal rights with respect to
      the
      Superior common stock held for other beneficial owners. In this case, the
      written demand should set forth the number of Superior shares as to which
      appraisal is sought. If a number of Superior shares is not expressly mentioned,
      the demand will be presumed to cover all Superior common stock in brokerage
      accounts or other nominee forms, and those who wish to exercise appraisal rights
      under Section 262 of the DGCL are urged to consult with their brokers to
      determine the appropriate procedures for the making of a demand for appraisal
      by
      such a nominee.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">ALL
      WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO SUPERIOR GALLERIES,
      INC., 9478 WEST OLYMPIC BLVD., BEVERLY HILLS, CALIFORNIA 90212, ATTENTION:
      CORPORATE SECRETARY.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Within
      ten days after the effective time of the merger, DGSE will notify each
      stockholder who has properly asserted appraisal rights under Section 262 of
      the
      DGCL and has not voted in favor of the merger agreement of the date the merger
      became effective.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Within
      120 days after the effective time of the merger, but not thereafter, DGSE or
      any
      stockholder who has complied with the statutory requirements summarized above
      may file a petition in the Delaware Chancery Court demanding a determination
      of
      the fair value of the shares of Superior common stock of all those stockholders.
      None of DGSE, DGSE Merger Corp. or Superior is under any obligation to and
      none
      of them has any present intention to file a petition with respect to the
      appraisal of the fair value of the Superior shares. Accordingly, it is the
      obligation of stockholders wishing to assert appraisal rights to initiate all
      necessary action to perfect their appraisal rights within the time prescribed
      in
      Section 262 of the DGCL.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Within
      120 days after the effective time of the merger, any Superior stockholder who
      has complied with the requirements for exercise of appraisal rights will be
      entitled, upon written request, to receive from DGSE a statement setting forth
      the aggregate number of Superior shares not voted in favor of adoption of the
      merger agreement and with respect to which demands for appraisal have been
      received and the aggregate number of holders of those Superior shares. That
      statement must be mailed to those stockholders within ten days after a written
      request therefor has been received by DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If a
      petition for an appraisal is timely filed, at a hearing on the petition, the
      Delaware Chancery Court will determine the stockholders entitled to appraisal
      rights. After determining those stockholders, the Delaware Chancery Court will
      appraise the &#8220;fair value&#8221; of their Superior shares, exclusive of any element of
      value arising from the accomplishment or expectation of the merger, together
      with a fair rate of interest, if any, to be paid upon the amount determined
      to
      be the fair value. Stockholders considering seeking appraisal should be aware
      that the fair value of their Superior shares as determined under Section 262
      of
      the DGCL could be more than, the same as or less than the value of the merger
      consideration they would receive pursuant to the merger agreement if they did
      not seek appraisal of their Superior shares and that financial advisor opinions
      as to fairness from a financial point of view are not necessarily opinions
      as to
      fair value under Section 262 of the DGCL. The Delaware Supreme Court has stated
      that &#8220;proof of value by any techniques or methods which are generally considered
      acceptable in the financial community and otherwise admissible in court&#8221; should
      be considered in the appraisal proceedings.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      Delaware Chancery Court will determine the amount of interest, if any, to be
      paid upon the amounts to be received by stockholders whose Superior shares
      have
      been appraised. The costs of the appraisal proceeding may be determined by
      the
      Delaware Chancery Court and taxed upon the parties as the Delaware Chancery
      Court deems equitable. The Delaware Chancery Court may also order that all
      or a
      portion of the expenses incurred by any stockholder in connection with the
      appraisal proceeding, including reasonable attorneys&#8217; fees and the fees and
      expenses of experts used in the appraisal proceeding, be charged <i>pro rata</i>
      against the value of all of the Superior shares entitled to appraisal.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Any
      holder of Superior common stock who has duly demanded an appraisal in compliance
      with Section 262 of the DGCL will not, after the effective time of the merger,
      be entitled to vote the Superior shares subject to that demand for any purpose
      or be entitled to the payment of dividends or other distributions on those
      Superior shares (except dividends or other distributions payable to holders
      of
      record of Superior common stock as of a record date prior to the effective
      time
      of the merger).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">59</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">If
      any stockholder who properly demands appraisal of his or her Superior common
      stock under Section 262 of the DGCL fails to perfect, or effectively withdraws
      or loses, his or her right to appraisal, as provided in Section 262 of the
      DGCL,
      the Superior shares of that stockholder will be converted into the right to
      receive the consideration receivable with respect to these Superior shares
      in
      accordance with the merger agreement. A stockholder will fail to perfect, or
      effectively lose or withdraw, his or her right to appraisal if, among other
      things, no petition for appraisal is filed within 120 days after the
      consummation of the merger, or if the stockholder delivers to Superior or DGSE,
      as the case may be, a written withdrawal of his or her demand for appraisal.
      Any
      attempt to withdraw an appraisal demand in this matter more than 60 days after
      the consummation of the merger will require the written approval of the
      surviving corporation.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Failure
      to follow the steps required by Section 262 of the DGCL for perfecting appraisal
      rights may result in the loss of these rights, in which event a Superior
      stockholder will be entitled to receive the merger consideration receivable
      with
      respect to his or her Superior shares in accordance with the merger
      agreement.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Delisting and
      Deregistration of Superior Common Stock</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If the
      combination is completed, the shares of Superior common stock will be delisted
      from the OTC Bulletin Board and will be deregistered under the Securities
      Exchange Act of 1934. The stockholders of Superior will become stockholders
      of
      DGSE and their rights as stockholders will be governed by DGSE&#8217;s articles of
      incorporation and bylaws and by the laws of the State of Nevada. See the section
      entitled &#8220;Comparison of Stockholders&#8217; Rights&#8221; beginning on page 93.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Governmental and
      Regulatory Matters</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To
      complete the combination, DGSE must comply with applicable federal and state
      securities laws and the rules and regulations of the Nasdaq Capital Market
      in
      connection with the issuance of the DGSE common stock pursuant to the
      combination and the filing of this joint proxy statement/prospectus with the
      SEC
      and applicable state securities agencies.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Listing of DGSE
      Common Stock to be Issued in the Combination</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      shares of DGSE common stock to be issued in the combination and the shares
      of
      DGSE common stock to be reserved for issuance in connection with the assumption
      of outstanding Superior stock options and the issuance of warrants pursuant
      to
      the merger agreement are required to be approved for listing on the Nasdaq
      Capital Market.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Delisting of
      DGSE
      Common Stock</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under
      Nasdaq Marketplace Rule 4340(a), an issuer must apply for initial inclusion
      on
      the Nasdaq Capital Market following a transaction in which the issuer combines
      with a non-Nasdaq entity if the combination results in a change of control
      of
      the issuer and thereby potentially allows the non-Nasdaq entity to obtain a
      Nasdaq listing. Superior is a non-Nasdaq entity and DGSE does not currently,
      and
      may not at the time of the combination, satisfy the initial listing requirements
      of the Nasdaq Capital Market. Accordingly, if Nasdaq determines that the
      combination will result in a &#8220;change of control&#8221; of DGSE for purposes of its
      Marketplace Rule 4340(a), Nasdaq may initiate proceedings to delist shares
      of
      DGSE common stock from the Nasdaq Capital Market. In this case, DGSE may seek
      to
      be listed on the American Stock Exchange, though there can be no assurances
      that
      it will be successful with its application.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Restriction on
      Resales of DGSE Common Stock</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The DGSE
      common stock to be issued in the combination will be registered under the
      Securities Act, thereby allowing such shares to be freely transferable without
      restriction by all former holders of Superior common stock who are not deemed
      under the Securities Act to be &#8220;affiliates&#8221; of Superior at the time of the
      Superior special meeting and who do not become &#8220;affiliates&#8221; of DGSE after the
      combination. Persons who may be deemed to be &#8220;affiliates&#8221; of DGSE or Superior
      generally include individuals or entities that control, are controlled by or
      are
      under common control with DGSE or Superior, and may include some of their
      respective executive officers and directors, as well as their respective
      significant stockholders.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Shares
      of
      DGSE common stock received by those stockholders of Superior who are deemed
      to
      be &#8220;affiliates&#8221; of Superior or DGSE under the Securities Act may not be sold
      except pursuant to an effective registration statement </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">60</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">under
      the Securities Act covering the resale of those shares, or pursuant to Rule
      145
      under the Securities Act or any other applicable exemption under the Securities
      Act. Superior has agreed to provide a list of those stockholders considered
      to
      be &#8220;affiliates&#8221; to DGSE prior to the closing of the combination, which list is
      expected to include SIBL and Mr. DiGenova. The merger agreement requires
      Superior to use its best efforts to cause each of its directors, executive
      officers and individuals or entities who Superior believes may be deemed to
      be
&#8220;affiliates&#8221; of Superior to execute and deliver to DGSE a written agreement to
      the effect that those persons will not sell, assign or transfer any of the
      DGSE
      shares issued to them as a result of the combination unless that sale,
      assignment or transfer has been registered under the Securities Act, is in
      conformity with Rule 145 or is otherwise exempt from the registration
      requirements under the Securities Act.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">This
      joint proxy statement/prospectus does not cover the resale of any DGSE common
      stock received in the combination by any person who may be deemed to be an
      &#8220;affiliate&#8221; of DGSE or Superior, and no person is authorized to make any use of
      this joint proxy statement/prospectus in connection with any resale.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Voting
      Procedures</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If the
      shares of DGSE common stock continue to be listed on the Nasdaq Capital Market
      at the time of the closing of the combination, pursuant to the Nasdaq
      Marketplace Rules, the affirmative vote of a majority of the shares of DGSE
      common stock voting on the proposal will be required to approve this proposal.
      If the shares of DGSE common stock are not listed on the Nasdaq Capital Market
      or another applicable national securities exchange at the time of the closing
      of
      the combination, no applicable law or regulation will require DGSE stockholder
      approval for this proposal. Nevertheless, in that case, the board of directors
      of DGSE would still seek stockholder approval of this proposal as a matter
      of
      good corporate governance, and if the proposal does not obtain sufficient votes,
      the DGSE board of directors would reconsider its decision to approve the merger
      agreement and the reorganization, including the proposal to issue and reserve
      for issuance shares of DGSE common stock, and to issue options and warrants
      to
      acquire shares of DGSE common stock, in connection with the combination. In
      either case, abstentions and broker non-votes will be counted towards a quorum,
      but are not counted for any purpose in determining whether this proposal has
      been approved.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      affirmative vote of a majority of the outstanding shares of Superior common
      stock is required to approve this proposal. Accordingly, abstentions and broker
      non-votes by a Superior stockholder will have the same effect as voting AGAINST
      this proposal.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">61</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>THE
      MERGER AGREEMENT</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>The
      following summary describes the material provisions of the merger agreement.
      This summary may not contain all of the information about the merger agreement
      that is important to you. The following summary is qualified in its entirety
      by
      reference to the complete text of the merger agreement, which is attached to
      this joint proxy statement/prospectus as Annex A and is incorporated by
      reference into this joint proxy statement/prospectus. We encourage you to read
      it, including the exhibits thereto, carefully in its entirety for a more
      complete understanding of the merger agreement.</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>The
      merger agreement has been included to provide you with information regarding
      its
      terms. It is not intended to provide any other factual information about DGSE
      or
      Superior. Such information can be found elsewhere in this joint proxy
      statement/prospectus and in the other public filings DGSE makes with the
      Securities and Exchange Commission, which are available without charge at
      www.sec.gov.</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>The
      merger agreement contains representations and warranties which DGSE and Superior
      have made to each other. The assertions embodied in those representations and
      warranties are qualified by information in confidential disclosure schedules
      that DGSE and Superior have exchanged in connection with the execution of the
      merger agreement. While we do not believe that these schedules contain
      information required to be publicly disclosed by DGSE or Superior under the
      applicable securities laws other than information that has already been so
      disclosed, the disclosure schedules do contain information that modifies,
      qualifies and creates exceptions to the representations and warranties set
      forth
      in the merger agreement. Accordingly, you should not rely on the representations
      and warranties as current characterizations of factual information about DGSE
      and Superior, since they were made as of the date of the merger agreement and
      are modified in important part by the underlying disclosure schedules. These
      disclosure schedules contain information that has been included in the general
      prior public disclosures of DGSE and Superior, as well as additional non-public
      information. Moreover, information concerning the subject matter of the
      representations and warranties may have changed since the date of the merger
      agreement, which subsequent information may or may not be fully reflected in
      the
      public disclosures of DGSE.</i></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>The
      Combination</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      merger agreement provides that, upon the closing, DGSE Merger Corp., a
      wholly-owned subsidiary of DGSE, will merge with and into Superior, with
      Superior surviving as a wholly-owned subsidiary of DGSE and Superior
      stockholders receiving shares of DGSE common stock. We refer to this transaction
      as the &#8220;combination&#8221;.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Exchange of Superior
      Common Stock</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As
      consideration for the merger, Superior stockholders will be entitled to receive
      0.2731 shares of DGSE common stock for every share of Superior common stock
      they
      own at the effective time of the combination, which we refer to in this joint
      proxy statement/prospectus as the exchange ratio.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Fifteen
      percent of the number of shares of DGSE common stock to be issued at the closing
      of the combination, less 33,648 shares to which DGSE is entitled as an indemnity
      under the merger agreement due to the fact that Superior&#8217;s estimated
      stockholders&#8217; equity as of December 31, 2006 was inaccurate, will be deposited
      in an escrow account as security for the payment of indemnification claims
      made
      under the merger agreement in the event Superior&#8217;s representations and
      warranties concerning its capitalization are inaccurate. For more information,
      see the section entitled &#8220;&#8212; Escrow&#8221; beginning on page 63.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a
      result of the exchange, Superior stockholders will become DGSE stockholders
      and
      Superior will become a wholly-owned subsidiary of DGSE.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Each
      outstanding share of DGSE common stock will remain unchanged in the
      combination.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Superior Options
      and
      Warrants</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">At the
      effective time of the combination, each outstanding option and warrant to
      purchase shares of Superior common stock will be assumed by DGSE and converted
      into options or warrants to purchase shares of DGSE common stock. Each assumed
      Superior option or warrant will be exercisable for a number of shares of DGSE
      common stock equal to the number of Superior shares covered by the Superior
      option or warrant, multiplied by the exchange ratio, rounded to the nearest
      whole number of shares (with no cash being payable for any fractional share
      </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">62</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">eliminated
      by such rounding), and will have an exercise price equal to the exercise price
      of the Superior option or warrant divided by the exchange ratio, but not less
      than the par value of DGSE common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">After
      adjusting the assumed options and warrants to reflect the application of the
      exchange ratio and the substitution of DGSE for Superior, the other terms of
      the
      assumed options and warrants will remain the same. Superior option or warrant
      holders will need to surrender their option agreement or warrant to DGSE to
      receive the substitute option or warrant.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If the
      combination (including the exchange by SIBL of Superior debt for common stock)
      had been completed as of February 23, 2007, DGSE would have issued approximately
      3,702,713 shares of its common stock to the Superior stockholders (including
      the
      96,971 shares to be issued to Mr. DiGenova pursuant to his warrant), with 33,648
      of those shares paid back to DGSE as an indemnity and approximately 521,759
      of
      those shares placed in the escrow account, and options to acquire approximately
      95,380 shares of its common stock to the Superior option holders. Accordingly,
      Superior stockholders would have beneficially owned approximately 43.6% of
      the
      outstanding shares of common stock of the combined company (31.2% on a fully
      diluted basis). Based upon that assumption, the DGSE stock issued to Superior
      stockholders would have represented a 5% discount to the closing price of
      Superior stock on the trading day preceding the announcement of the revised
      terms of the proposed combination.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Completion and
      Effectiveness of the Combination</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      parties will consummate the combination when all of the conditions to the
      completion of the combination contained in the merger agreement, including
      adoption and approval of the merger agreement by the stockholders of Superior
      and DGSE and the approval of the increase in the number of authorized shares
      of
      DGSE common stock by the stockholders of DGSE, are satisfied or waived. As
      soon
      as practicable after the satisfaction or waiver of the closing conditions,
      the
      parties will cause the merger to be effected by filing a certificate of merger
      with the Secretary of State of the State of Delaware. DGSE and Superior will
      use
      their best efforts to complete the combination expeditiously, including using
      their respective reasonable efforts to satisfy each applicable closing
      condition.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      and
      Superior plan to complete the combination soon after the special meetings of
      their stockholders occur and anticipate that they will be in a position to
      complete the combination on or prior to March 31, 2007.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Share
      Adjustments</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Fractional
      Shares. </i>DGSE will not issue any fractional shares of DGSE common stock in
      connection with the combination. Instead, any fractional share will be rounded
      up to the nearest whole number of shares of DGSE common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Capitalization
      Adjustments.</i>The number of shares of DGSE common stock which are payable as
      merger consideration are subject to appropriate adjustment to reflect fully
      the
      effect of any capitalization adjustment of DGSE common stock, such as a stock
      split, reverse stock split, stock dividend, combination, reclassification or
      similar event.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Escrow</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Escrow
      Account.</i> At the closing of the combination, DGSE will, on behalf of the
      Superior stockholders, and for the benefit of DGSE and related indemnified
      parties under the merger agreement, deposit a portion of the shares it is
      issuing in the merger into an escrow account, which we will refer to in this
      joint proxy statement/prospectus as the escrow account. The number of shares
      placed in escrow will equal 15% of the DGSE common stock to be distributed
      to
      the Superior stockholders at the closing of the combination, less 33,648 shares
      to which DGSE is entitled under the merger agreement due to the fact that
      Superior&#8217;s actual December 31, 2006 stockholders&#8217; equity was $89,840 less than
      the amount estimated for purposes of determining the amount of debt to be
      converted by SIBL under the note exchange agreement, or about $1.4 million
      in
      DGSE common stock. The escrow account will be used as security for the payment
      of indemnification claims made by DGSE and certain related parties under the
      merger agreement, and to reimburse the surviving corporation for up to $100,000,
      or such larger amount as DGSE may in its sole discretion approve, which the
      surviving corporation may be obligated to pay in cash to the stockholder agent
      for the out-of-pocket fees and expenses, including reasonable attorneys&#8217; fees,
      reasonably incurred by the stockholder agent in performing its duties and
      exercising its powers and rights under the merger agreement and the related
      escrow agreement. If an eligible person has a claim for indemnification or
      the
      surviving corporation has a claim for reimbursement of amounts paid to the
      stockholder agent against the escrow account, for purposes of </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">63</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">satisfying
      the claim, the shares of DGSE common stock will be valued at $2.67 per-share,
      which reflects the closing price of the DGSE common stock, as reported by the
      Nasdaq Capital Market, three days before the execution of the merger
      agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      escrow account will be opened at the closing and is scheduled to be closed
      one
      full year after the consummation of the proposed combination. All shares of
      DGSE
      common stock, if any, which are in the escrow account at the end of the escrow
      period will be distributed by the escrow agent to the pre-merger Superior
      stockholders, except that if any party entitled to indemnification under the
      merger agreement makes a claim against the Superior stockholders during the
      escrow period with respect to the capitalization or balance sheet matters
      covered by the indemnity, the escrow period will be extended and a sufficient
      number of shares and other assets will remain in the escrow account as security
      for that claim and to satisfy the expected maximum reimbursement claims in
      connection with the claim, and will not be released to the Superior stockholders
      until that claim (and any other pending claims) have been resolved and
      satisfied.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Escrow
      Agreement.</i> The escrow account will be administered pursuant to the terms of
      an escrow agreement among DGSE, the escrow agent and the stockholder agent.
      The
      form of escrow agreement is attached to this joint proxy statement/prospectus
      as
      Annex B.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Transfer
      of
      Contingent Rights.</i> No person may transfer any interest in, or any right to
      obtain proceeds from, the escrow account, except for involuntary transfers
      required by law.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Stockholder
      Agent. </i>The stockholder agent under the merger agreement will serve as the
      stockholder agent under the escrow agreement. See the discussion under the
      caption &#8220;&#8212; Stockholder Agent&#8221; below beginning on page 71. The stockholder agent
      will serve as the exclusive agent, attorney-in-fact and representative of the
      pre-merger Superior stockholders in relation to the merger agreement, the escrow
      agreement and the transactions contemplated thereby, including the
      combination.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Escrow
      Agent.</i> The escrow agent will be responsible for establishing, maintaining
      and administrating the escrow account. DGSE and the stockholder agent have
      informally agreed to appoint Texas Capital Bank, which is also DGSE&#8217;s principal
      lender, as the initial escrow agent under the escrow agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      will
      pay the escrow agent customary fees for its services and will reimburse the
      escrow agent&#8217;s out-of-pocket expenses. In performing any duties under the escrow
      agreement, the escrow agent will not be liable to any party for damages, losses
      or expenses, except for gross negligence or willful misconduct on the part
      of
      the escrow agent. The escrow agent will not incur any liability for any action
      taken or omitted in reliance upon an instrument, including any written statement
      or affidavit, that the escrow agent in good faith believes to be genuine. DGSE
      and, to the extent of the assets on deposit in the escrow account, the
      pre-merger Superior stockholders are obligated jointly and severally to
      indemnify and hold the escrow agent harmless against any and all losses,
      including reasonable costs of investigation, attorneys fees and disbursements,
      that may be imposed on or incurred by the escrow agent in connection with the
      performance of its duties under the escrow agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      escrow agent may resign at any time by written notice to DGSE and the
      stockholder agent, and the escrow agent may be removed at any time by DGSE.
      DGSE
      will be responsible for appointing a successor escrow agent.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Exchange of Stock
      Certificates</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Surrender
      of Certificates.</i> Promptly following completion of the combination, the
      exchange agent for the combination will mail to each record holder of Superior
      common stock a letter of transmittal and instructions for surrendering and
      exchanging the record holder&#8217;s stock certificates. Only those holders of
      Superior common stock who properly surrender their Superior stock certificates
      in accordance with the exchange agent&#8217;s instructions will receive (1) the number
      of shares of DGSE common stock (which may be in uncertificated book-entry form
      unless a physical certificate is requested) representing the number of whole
      shares of DGSE common stock to which the holder is entitled (not including
      the
      shares being deposited in the escrow account), and (2) dividends or other
      distributions, if any, to which the holder is entitled under the terms of the
      merger agreement. See the section entitled &#8220;Escrow &#8212; Escrow Account&#8221; beginning
      on page 63 for more information about the escrow account. No interest will
      be
      paid or accrued on any unpaid dividends and distributions payable to Superior
      stockholders upon surrender of their stock certificates. The surrendered
      certificates representing Superior common stock will be canceled. After the
      completion of the combination, each certificate representing shares of Superior
      common stock that has not been surrendered will represent only the right to
      receive the merger consideration described above. Following the </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">64</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">completion
      of the merger, Superior will not register any transfers of Superior common
      stock
      on its stock transfer books.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Distributions
      With Respect to Unexchanged Shares.</i> No dividends or other distributions
      declared or made with respect to DGSE common stock with a record date thirty
      or
      more days after the closing of the combination but prior to the surrender of
      a
      certificate (or the delivery of an affidavit and any required bond in lieu
      of a
      lost, stolen or mutilated certificate) for Superior common stock will be paid
      to
      the holder of that certificate on account of the shares of DGSE common stock
      for
      which that stock certificate may be exchanged.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Transfers
      of Ownership.</i> If any certificate for shares of DGSE common stock is to be
      issued in a name other than that of the registered holder of the certificates
      surrendered in the stock transfer books of Superior, it will be a condition
      of
      its issuance that the certificates so surrendered will be properly endorsed
      and
      otherwise in proper form for transfer and that the person requesting the
      exchange will have paid to DGSE (or any agent designated by it) any transfer
      or
      other taxes required by reason of the issuance of a certificate for shares
      of
      DGSE common stock in any name other than that of the registered holder of the
      certificates surrendered, or established to the satisfaction of DGSE (or any
      agent designated by it) that the tax has been paid or is not payable.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Lost
      Stock Certificates.</i> If any certificate evidencing shares of Superior common
      stock has been lost, stolen or destroyed, DGSE will deliver the merger
      consideration exchangeable for those shares only upon (i) the making of an
      affidavit of that fact by the applicable holder of record claiming the
      certificate to be lost, stolen, or destroyed, and (ii) if DGSE or the exchange
      agent requires in its discretion, the posting by the holder of a bond in a
      reasonable amount directed by DGSE or the exchange agent, as applicable, to
      serve as indemnity against any claim that may be made against it with respect
      to
      such certificate.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Representations and
      Warranties</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      merger agreement contains substantially reciprocal and customary representations
      and warranties made by Superior, on the one hand, and DGSE, on the other, to
      each other. These representations and warranties are subject, in some cases,
      to
      specified exceptions and qualifications contained in the merger agreement or
      in
      the disclosure schedules delivered in connection with the merger agreement.
      <strong><i>You should not rely on the representations and warranties as current
      characterizations of factual information about DGSE and
      Superior.</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      representations and warranties relate to, among other things:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">corporate organization,
      qualification, subsidiaries and similar corporate matters;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">capital structure, including
      options, warrants and commitments to acquire equity interests, and rights
      related to equity interests;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">corporate authority to enter into
      and carry out the obligations under the merger agreement and the related
      agreements, including board approval, and the enforceability of the merger
      agreement and the related agreements;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the absence of any conflict with
      or
      violation of corporate charter documents, applicable law, permits or material
      contracts as a result of entering into and carrying out the obligations under
      the merger agreement and the related agreements;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the absence of a need to obtain
      governmental consents, authorizations or filings in order to complete the
      combination;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">possession of all material
      governmental permits and compliance with all material governmental filing,
      application and registration requirements;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">compliance with applicable law
      and
      possession of necessary governmental permits;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">filings and reports with the SEC,
      compliance with securities laws, including the Sarbanes-Oxley Act of 2002,
      and
      the accuracy of financial statements;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the accuracy and adequacy of the
      information provided to the other party for inclusion in this joint proxy
      statement/prospectus;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">65</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">absence of certain adverse effects,
      events or other changes since the date of the last financial statements filed
      with the SEC;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">employee compensation, benefit
      plan, labor relations and other matters, including compliance with applicable
      laws and contracts relating to employee benefit plans;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">disputes or disagreements with
      significant customers;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">identification of and compliance
      with material contracts;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the absence of litigation;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">compliance with environmental
      laws;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">ownership and disclosure of
      intellectual property and the absence of misappropriation or infringement of
      third party intellectual property rights;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">proper preparation and timely
      filing of tax returns and timely withholding and payment of taxes;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">insurance coverage;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">in the case of Superior, receipt
      of
      a written fairness opinion from Stenton Leigh;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">disclosure of broker, investment
      banker or financial advisor fees;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">ownership and leases of real
      property;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">disclosure of interested party
      transactions; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">completeness of representations
      and
      warranties.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Notice of Other
      Acquisition Proposals</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      merger agreement contains provisions requiring each of DGSE and Superior to
      notify the other of them of the details of any acquisition proposal, including
      inquiries or expressions of interest that may lead to an acquisition proposal.
      An acquisition proposal refers to any proposal to purchase 10% or more of
      outstanding voting securities, a merger, consolidation or other business
      combination, or the sale (other than in the ordinary course of business) of
      assets representing 10% or more of total revenues or operating assets.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Change of
      Recommendation</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The board
      of directors of either Superior or DGSE may withdraw its recommendation to
      their
      stockholders to vote to approve and adopt the merger agreement provided the
      applicable board acts in good faith. Neither company is relieved of its
      obligation to call and hold a special meeting of its stockholders if the other
      company&#8217;s board withdraws its recommendation.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Obligations of the
      DGSE Board of Directors and Superior Board of Directors with Respect to their
      Recommendations and Holding a Meeting of their Stockholders</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Both
      DGSE
      and Superior have agreed to take all lawful and commercially reasonable action
      to call, give notice of, convene and hold stockholder meetings for their
      respective stockholders, and to use their respective best efforts to hold the
      meeting within forty-five days of the date on which the registration statement,
      of which this joint proxy statement/prospectus forms a part, becomes effective.
      Subject to applicable law, both companies have agreed to use their best efforts
      to obtain the approval of their respective stockholders for the
      combination-related proposals described in this joint proxy
      statement/prospectus.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Either
      company may postpone or adjourn its stockholder meeting to establish a quorum
      (if insufficient shares are present in person or represented by proxy), to
      solicit additional proxies (if insufficient votes have been cast to approve
      a
      combination-related proposal), or to ensure that any required supplement or
      amendment to the registration statement or this joint proxy statement/prospectus
      is provided to its stockholders.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">66</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">Each
      company&#8217;s obligation to call, give notice and convene and hold its stockholder
      meeting will not be affected by the commencement, disclosure, announcement
      or
      submission to the other company of any acquisition proposal or superior offer,
      or by the other company&#8217;s board of directors withholding, withdrawing or
      modifying its recommendation to its stockholders to vote in favor of the
      combination-related proposals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><strong>Employee Benefits
      Matters</strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If DGSE
      does not continue the employee welfare benefit plans sponsored and maintained
      by
      Superior, it will take commercially reasonable efforts after the combination
      to
      cause Superior employees who continue to work for Superior or DGSE to be
      eligible for employee welfare benefits that are substantially similar in the
      aggregate to the benefits provided to similarly situated employees of DGSE.
      To
      the extent DGSE elects to have these continuing employees (and their eligible
      dependents where applicable) participate in DGSE&#8217;s employee benefit plans,
      programs or policies following the combination, DGSE will allow these continuing
      employees (and their eligible dependents where applicable) to participate in
      these plans, programs and policies on terms substantially similar to those
      provided to similarly situated employees of DGSE; these continuing employees
      will, to the extent reasonably practicable, receive credit for purposes of
      eligibility to participate and vesting under these plans, programs and policies
      for years of service with Superior prior to the combination (provided that
      the
      credit does not result in the duplication of benefits); and DGSE, to the extent
      required by applicable law and as permitted by the terms of the applicable
      group
      health plans, will give credit for any co-payments or deductibles paid during
      the year in which the combination occurs and will use its commercially
      reasonable efforts to have waived any pre-existing condition limitations,
      eligibility waiting periods and evidence of insurability requirements under
      any
      group health plans of DGSE in which these continuing employees and their
      eligible dependents will participate.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Subject
      to the foregoing, the merger agreement further provides that effective as of
      the
      day immediately preceding the combination date, Superior must terminate any
      and
      all benefit plans intended to include a Code Section 401(k) arrangement (also
      known as a &#8220;401(k) Plan&#8221;).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><strong>Refinancings</strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior,
      SFG and SIBL have agreed to amend and restate the Superior credit facility
      in
      the form attached as Annex E to this joint proxy statement/prospectus if the
      combination is consummated. The amendments would extend the maturity date of
      the
      credit facility to 2010, and, provided DGSE issues a suitable secured guarantee
      in favor of SFG, authorize Superior to upstream up to $6.5 million of loan
      proceeds to DGSE and its subsidiaries. For more information about the amended
      and restated credit facility, please see the section entitled &#8220;Post-Combination
      Stanford Credit Facility&#8221; beginning on page 75.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><strong>Conversion and
      Exchange Agreements, Warrants and Registration Rights</strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On the
      date of the execution of the merger agreement, each of SIBL (Superior&#8217;s largest
      stockholder and primary lender) and Mr. DiGenova (Superior&#8217;s former chairman,
      president and chief executive officer) entered into a conversion agreement
      with
      Superior. Pursuant to these conversion agreements, SIBL converted all of its
      8,500,000 shares of Superior preferred stock into 3,600,806 shares of Superior
      common stock, and Mr. DiGenova converted all of his 400,000 shares of Superior
      preferred stock into 202,330 shares of Superior common stock. The conversions
      were effected in accordance with the conversion provisions of the applicable
      series of preferred stock. As a result of these conversions, Superior no longer
      has any shares of preferred stock outstanding.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On the
      date of the execution of the merger agreement, Mr. DiGenova also entered into
      a
      securities exchange agreement with DGSE. Pursuant to this agreement, DGSE issued
      a non-transferable warrant to Mr. DiGenova to acquire 96,951 shares of DGSE
      common stock upon consummation of the merger for an exercise price of $0.01
      per
      share, in exchange for 355,000 shares of Superior common stock, which reflects
      the same exchange ratio being used in the merger. The warrant is only
      exercisable if the merger is consummated, and will be automatically exercised
      in
      full upon the consummation of the merger. Upon exercise, approximately fifteen
      percent of the shares of DGSE common stock to be issued will be deposited in
      the
      escrow account. If the merger is not consummated, the warrant will terminate
      and
      DGSE will transfer the 355,000 shares of Superior common stock exchanged by
      Mr.
      DiGenova for the warrant to the designee specified by Mr. DiGenova in the
      securities exchange agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a
      condition to the closing of the combination, SIBL must enter into a note
      exchange agreement with Superior, a copy of which is attached to this joint
      proxy statement/prospectus as Annex D. The note exchange agreement provides
      for
      the exchange by SIBL of approximately $8.4 million of outstanding Superior
      debt
      into approximately 5 million shares of Superior common stock, at an exchange
      rate of $1.70 per share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">67</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">In
      consideration of the exchange by SIBL of its debt for common stock pursuant
      to
      the note exchange agreement, and for SIBL&#8217;s $11.5 million increase in the amount
      available under its credit facility with Superior, including the use of up
      to
      $6.5 million of that amount by DGSE and its other subsidiaries, the merger
      agreement provides that upon the consummation of the combination, DGSE will
      issue to SIBL and its designees two warrants, each of which can be exercised
      for
      a period of seven years after the combination date. The &#8220;A&#8221; warrants grant the
      right to purchase 845,634 shares of DGSE common stock at an exercise price
      of
      $1.89 per share, and the &#8220;B&#8221; warrants grant the right to purchase 863,000 shares
      of DGSE common stock at an exercise price of $0.01 per share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a
      condition to the closing of the combination, DGSE must enter into a registration
      rights agreement, substantially in the form of Annex F attached to this joint
      proxy statement/prospectus. This agreement grants registration rights to the
      holders of the &#8220;A&#8221; warrants and &#8220;B&#8221; warrants with respect to the shares of DGSE
      common stock which may be issued upon the exercise of the &#8220;A&#8221; warrants or &#8220;B&#8221;
warrants. In addition, the registration rights agreement grants SIBL and its
      designees &#8220;piggyback&#8221; registration rights (1) with respect to the shares of DGSE
      common stock which may be issued upon the exercise of the &#8220;A&#8221; warrants or &#8220;B&#8221;
warrants in the event DGSE files any registration statement, and (2) with
      respect to those shares and the shares being issued as merger consideration
      in
      the event DGSE registers for resale any DGSE common stock, other than stock
      acquired upon the exercise of stock options, held by Dr. L.S. Smith.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information about the note exchange agreement, the &#8220;A&#8221; and &#8220;B&#8221; warrants and the
      registration rights agreement, see the sections entitled &#8220;Note Exchange
      Agreement, Warrants and Registration Rights Agreement&#8221; beginning on page
      78.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Required Approvals
      and
      Cooperation of the Parties</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      and
      Superior have each agreed to use its best efforts to take all actions reasonably
      necessary or desirable to close the combination, and assist and cooperate with
      each other in doing so, including the following:</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">to obtain and deliver to the other
      company at or prior to the combination all consents, approvals and waivers
      which
      is required under any of its material contracts or from any governmental
      entity;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">taking all reasonable actions to
      satisfy the respective closing conditions to the combination; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">executing and delivering such other
      instruments and doing and performing such other acts and things as may be
      necessary or reasonably desirable to effect completely the consummation of
      the
      combination and the related transactions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      and
      Superior have also generally agreed to work cooperatively in an effort to obtain
      all required consents and approvals and to promptly consummate the combination,
      including by doing the following:</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">promptly advising and keeping
      informed the other company orally and in writing of any action or proceeding
      commenced against it or any of its directors by any of its stockholders relating
      to the merger agreement or any related agreement, or the combination or any
      related transaction;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">providing the other company the
      opportunity to consult with it regarding the defense or settlement of any action
      or proceeding described above and not settling such an action or proceeding
      without the prior written consent of the other company;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">providing to each other copies
      of
      any press releases or public written statements or filings related to the merger
      agreement or any related agreement, or the combination or any related
      transaction, consulting with each other before issuing or making any such
      release or written public statement or filing and, subject to applicable law,
      obtaining the prior written consent of the other company before issuing such
      a
      release or filing;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">notifying the other company in
      writing promptly after learning of any notice or other communication from any
      person alleging that the person&#8217;s consent or approval is or may be required in
      connection with the combination or any other related transaction;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">notifying the other company in
      writing promptly after learning of any notice or other communication from any
      governmental entity in connection with the combination or any related
      transaction, or of any action or proceeding by or before any governmental entity
      initiated by or against it, or known by it to be threatened against it or any
      of
      their respective directors, officers, employees or stockholders;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">68</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">notifying the other company in
      writing promptly after learning of any event not in the ordinary course of
      business that, individually or in the aggregate with any other such events,
      has
      a material adverse effect on it, or is reasonably likely to cause any of the
      conditions to closing set forth in the merger agreement not to be
      satisfied;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">notifying the other company in
      writing promptly after learning of any claim, or any verbal or written inquiry
      by any tax authority regarding taxes payable; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">giving prompt notice to the other
      company of any representation or warranty made by it contained in the merger
      agreement or any related agreement becoming untrue or inaccurate, or its failure
      to comply with or satisfy in any material respect any covenant, condition or
      agreement to be complied with or satisfied by it under the merger agreement
      or
      any related agreement.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Support
      Agreements</strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      connection with the signing of the merger agreement, Dr. L.S. Smith, DGSE&#8217;s
      chairman and chief executive officer and its largest stockholder, and DGSE
      entered into a support agreement with Superior. Dr. Smith has the power to
      vote
      approximately 52% of DGSE&#8217;s outstanding shares, which represents sufficient
      shares to approve all of the DGSE proposals. In addition, SIBL, some individual
      stockholders of Superior and Superior have entered into a corresponding support
      agreement with DGSE. These stockholders own approximately 76% of Superior&#8217;s
      outstanding shares, which represents sufficient shares to approve all of the
      Superior proposals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      support agreements, the signing stockholders have agreed to vote or consent,
      or
      cause to be voted or consented, all of their respective shares of Superior
      or
      DGSE common stock, as applicable, including shares of common stock acquired
      after the date of the support agreement:</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">in favor of the merger and related
      transactions or any matter that could be reasonably expected to facilitate
      the
      merger;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">against any proposal or action
      that
      could reasonably be expected to delay, impede or interfere with the approval
      of
      the merger or any related transaction; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">against any action or agreement
      that could reasonably be expected to result in a breach of any covenant,
      representation or warranty or any other obligation of Superior or DGSE, as
      applicable, under the merger agreement or any related agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Each
      of
      the signing DGSE stockholders has also granted to Superior, and each of the
      signing Superior stockholders has also granted to DGSE, an irrevocable proxy
      to
      vote their shares of DGSE or Superior common stock subject to the support
      agreements in accordance with its terms.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      support agreements and irrevocable proxies terminate upon the earliest to occur
      of (i) the effective time of the merger, (ii) the valid termination of the
      merger agreement in accordance with its terms, and (iii) the mutual agreement
      of
      the parties to the support agreement.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Management
      Agreement</strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      connection with the merger agreement, DGSE Merger Corp., a wholly-owned
      subsidiary of DGSE which will merge into Superior as part of the merger, entered
      into a management agreement with Superior, a copy of which is attached to this
      joint proxy statement/prospectus as Annex I. Under the management agreement,
      DGSE Merger Corp. will provide two or three senior executives to serve as the
      senior management to Superior on a part-time basis until the consummation of
      the
      merger or the earlier termination of the merger agreement. The management
      agreement is intended to turnaround Superior&#8217;s business prior to the
      consummation of the merger.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to the management agreement, Mr. Oyster, DGSE&#8217;s chief operating officer, has
      been appointed interim chief executive officer of Superior, Mr. Williamson,
      DGSE&#8217;s executive vice-present, has been appointed interim chief operating
      officer of Superior, and Mr. Benson, DGSE&#8217;s chief financial officer, has been
      appointed vice president, finance and interim chief financial officer of
      Superior. All three officers, whom we refer to in this joint proxy statement/
      prospectus as the interim Superior executives, are working part-time for
      Superior pursuant to the management agreement, and continue to provide services
      to DGSE on a part-time basis as part of senior management. Pursuant to the
      merger agreement, these three officers have also been elected to the Superior
      board of directors.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">69</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">The
      management agreement prohibits the interim Superior executives from effectuating
      any material business transaction between DGSE Merger Corp. (or any of its
      affiliates) and Superior (or any of its affiliates), except if expressly
      contemplated by the merger agreement, in the ordinary course of business of
      both
      companies, consistent with the permitted intercompany transactions on the terms
      described in the management agreement, or approved by the Special Interim
      Committee of the Superior board of directors, comprised of the Superior
      directors who are not affiliated with DGSE, initially to consist of Mitchell
      T.
      Stoltz and David Rector. The interim Superior executives must also obtain the
      approval of the special interim committee prior to materially changing the
      strategic direction of Superior, except for specific changes in strategic
      direction set forth in the management agreement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      has agreed to pay DGSE Merger Corp. a monthly fee of $50,000 for the services
      of
      the interim Superior executives, plus the hourly compensation rate (without
      markup) for the services of any other DGSE employees or consultants, and to
      reimburse DGSE Merger Corp. for its out-of-pocket expenses.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      management agreement will terminate upon the earliest to occur of (i) the
      effective time of the merger, (ii)&#160;the valid termination of the merger
      agreement in accordance with its terms, and (iii) the &#8220;outside date&#8221; in the
      merger agreement.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>DGSE Corporate
      Governance</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      has
      agreed to enter into a corporate governance agreement, a copy of which is
      attached to this joint proxy statement/prospectus as Annex G, with SIBL and
      Dr.
      L.S. Smith. Pursuant to this agreement, subject to the applicable fiduciary
      duties of the DGSE board of directors, and compliance by DGSE in good faith
      with
      applicable law and regulations, DGSE has agreed to recommend the following
      directors to constitute the DGSE board of directors upon the consummation of
      the
      combination: Dr. L.S. Smith, the current chairman and chief executive officer
      of
      DGSE; William H. Oyster, the current president and chief operating officer
      of
      DGSE; David Rector, a current director of Superior; two current &#8220;independent&#8221;
directors of the DGSE Board, who are expected to be William P. Cordeiro and
      Craig Alan-Lee; and two independent nominees designated by SIBL, the current
      largest Superior stockholder, who are expected to be Mitchell T. Stoltz and
      Richard Matthew Gozia. For more information about these nominees, see
&#8220;Management of DGSE After the Combination &#8212; Information Regarding DGSE&#8217;s
      Directors and Executive Officers&#8221; beginning on page 115.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Subject
      to the same limitations, effective as of the combination, each director of
      the
      DGSE board of directors not included in the post-combination DGSE board will
      resign, and the remaining directors of the DGSE board will fill any vacancies
      on
      the board as necessary to effectuate the foregoing.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Indemnification</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Indemnity.</i>Pursuant
      to the merger agreement, the Superior stockholders and Mr. DiGenova, which
      we
      refer to collectively as the indemnifying parties, will indemnify, defend and
      hold harmless DGSE, its affiliates (including Superior as the surviving
      corporation in the merger) and its representatives (including its officers,
      directors, employees, managers, consultants, contractors, agents and financial,
      banking or legal advisors), which we refer to collectively as the DGSE
      indemnified parties, against losses, liabilities and damages, which we refer
      to
      collectively as losses, directly or indirectly arising out of or resulting
      from
      the inaccuracy or breach of the representations, warranties or certifications
      of
      Superior contained in the merger agreement (without giving effect either to
      the
      update of Superior disclosure schedules after the signing of the merger
      agreement) relating to Superior&#8217;s capitalization, including outstanding options,
      warrants and other commitments, or transfer, preemptive, anti-dilutive or
      registration rights and qualification of the merger consideration under
      California law.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Exclusions.</i>
      The indemnity does not apply to losses which were reflected on the estimated
      balance sheet of Superior used for calculating Superior&#8217;s stockholders&#8217; equity
      at the signing of the merger agreement. For more information regarding the
      estimated balance sheet, see the section entitled &#8220;Conversion and Exchange
      Agreements, Warrants and Registration Rights Agreement &#8212; Note Exchange
      Agreement&#8221; beginning on page 67).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Stockholders&#8217;
      Equity.</i> In addition, the indemnifying parties will pay to DGSE 33,648 shares
      of DGSE common stock at the closing of the combination, which represents the
      amount by which Superior&#8217;s stockholders equity at December 31, 2006, as
      reflected in Superior&#8217;s quarterly report filed with the SEC for its fiscal
      quarter ended on December 31, 2006, was less than Superior&#8217;s estimated
      stockholders equity at December 31, 2006 used for purposes of calculating the
      merger consideration and the amount of debt SIBL is to exchange for common
      stock
      in connection with the merger (-$3,123,428).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">70</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><i>Stockholder
      Agent.</i> In addition, under the merger agreement, the surviving corporation is
      obligated to reimburse the stockholder agent in cash, up to $100,000 or such
      larger amount as DGSE may in its sole discretion approve, for the reasonable
      out-of-pocket fees and expenses incurred by the stockholder agent in performing
      its duties and exercising its powers and rights under the merger agreement
      and
      the related escrow agreement. The surviving corporation has the right to recover
      any amounts so paid to the stockholder agent from the escrow account.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Limited
      Recourse.</i> The DGSE indemnified parties may recover the losses described
      above solely from the escrow account described under the caption &#8220;&#8212; Escrow &#8212;
Escrow Account&#8221; beginning on page 63, until no additional amounts remain in the
      escrow account. The Superior stockholders will have no liability for losses
      in
      excess of the amounts deposited on their respective behalf in the escrow
      account.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Survival.</i>
      The representations and warranties made in the merger agreement will generally
      remain in effect until, and expire on, the closing of the combination. However,
      the representations and warranties in the merger agreement relating to
      capitalization described above will survive for one full year following the
      close of the combination. No contractual time limitation will apply to claims
      based on fraud or willful misrepresentation.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Threshold
      Amount. </i>The DGSE indemnified parties will not be entitled to indemnification
      until the total of all losses to the DGSE indemnified parties exceeds $100,000
      (except in the event of fraud or a willful or intentional breach of the merger
      agreement or a related agreement or certification, in which case the threshold
      does not apply), after which case the DGSE indemnified parties will be able
      to
      recover all losses, including the $100,000.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Arbitration
      of Conflicts.</i> The merger agreement provides that any disputes relating to
      indemnification for losses will be resolved by binding arbitration in Texas,
      and
      that the arbitrator&#8217;s written decision will be binding on all parties.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Stockholder
      Agent</strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">By virtue
      of the approval of the irrevocable appointment and constitution of SIBL,
      including its successors, as the stockholder agent under the merger agreement
      and the related escrow agreement, at the Superior stockholders meeting described
      in the section entitled &#8220;Superior Proposal No. 2 &#8212; Appointment and constitution
      of Stanford International Bank Ltd. as Stockholder Agent under the Merger
      Agreement and Escrow Agreement&#8221; beginning on page 84, each of the Superior
      stockholders will have irrevocably appointed and constituted SIBL as the
      stockholders&#8217; exclusive agent, attorney-in-fact and representative, whom we
      refer to in that capacity as the stockholder agent, under the merger agreement
      and related agreements, including the escrow agreement. Under the merger
      agreement and related escrow agreement, the stockholder agent serves as the
      exclusive agent, attorney-in-fact and representative of all Superior
      stockholders to do, among other things, the following:</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">provide and receive notices and
      other communications;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">agree to, negotiate, enter into
      settlements and compromises of, make claims and demand arbitration and comply
      with orders of courts and awards of arbitrators with respect to claims made
      or
      any other action to be taken by or on behalf of any Superior stockholders,
      or on
      its own behalf in its capacity as stockholder agent, under the merger agreement
      or the related escrow agreement, and to take all actions necessary or
      appropriate in the judgment of the stockholder agent for accomplishing the
      foregoing;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">to use the shares of DGSE common
      stock, cash, investments and other assets held from time to time in the escrow
      account, which we refer to collectively as the escrow assets, as collateral
      to
      secure the rights, and to demand and withdraw escrow assets to satisfy the
      claims, of the DGSE indemnified parties under the merger agreement or the
      related escrow agreement;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">to take all actions necessary or
      appropriate in the judgment of the stockholder agent for the accomplishment
      of
      any of the foregoing; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">to agree to amendments and waivers
      of the merger agreement and related escrow agreement, and time extensions under
      the merger agreement, on behalf of the stockholders, as described in the section
      entitled &#8220;&#8212; Amendment, Extension and Waiver of the Merger Agreement&#8221; beginning
      on page 74.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">A
      decision, act, omission, agreement, settlement, claim, consent or instruction
      of
      the stockholder agent in relation to any matter referred to in the merger
      agreement or related escrow agreement will constitute a decision, etc. for,
      and
      will be final, binding and conclusive upon, all pre-merger Superior
      stockholders, and DGSE and the escrow agent may, without further inquiry,
      conclusively rely thereupon.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">71</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">The
      stockholder agent will not receive compensation for its services and is not
      required to post a bond. The stockholder agent will not be liable for any act
      done or omitted under the merger agreement or related escrow agreement as
      stockholder agent while acting in good faith, including pursuant to the advice
      of counsel, or otherwise, except for the acts of gross negligence or willful
      misconduct of the stockholder agent.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      stockholder agent may also recover the out-of-pocket fees and expenses,
      including reasonable attorneys&#8217; fees, reasonably incurred by the stockholder
      agent in connection with performing and exercising its rights, authorities,
      powers, duties and obligations on behalf of the Superior stockholders under
      the
      merger agreement or related escrow agreement from the surviving corporation
      in
      cash, up to an aggregate amount of $100,000 (or such greater amount as DGSE
      may
      in its sole discretion agree at the request of the stockholder agent), which
      we
      refer to as the stockholder agent expense cap. The surviving corporation will
      have a claim against the escrow account for any amounts it is obligated to
      reimburse the stockholder agent. For more information, see the section entitled
      &#8220;&#8212; Escrow &#8212; Escrow Account&#8221; beginning on page 63.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      stockholder agent may resign at any time by written notice to DGSE and the
      escrow agent, and the stockholder agent may be removed at any time by written
      notice signed by pre-merger Superior stockholders holding not less than a
      majority of the shares of Superior outstanding immediately preceding the merger
      (exclusive of dissenting shares). The pre-merger Superior stockholders will
      be
      responsible for appointing a successor stockholder agent by act of such
      stockholders holding not less than a majority of the shares of Superior
      outstanding immediately preceding the merger (exclusive of dissenting shares).
      The successor stockholder agent must be a pre-merger affiliate of Superior,
      a
      current or prior director or officer of Superior or the surviving corporation,
      or reasonably acceptable to DGSE. If the stockholders fail to appoint a
      successor stockholder agent within 10 days of the resignation or removal of
      the
      stockholder agent, DGSE may, but will not be obligated to, petition a proper
      court to appoint a successor.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Any
      successor stockholder agent under the merger agreement will automatically,
      without any further act or notice, become the successor stockholder agent for
      all purposes of the escrow agreement.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Conditions to
      Completion of the Combination</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      obligation of DGSE and Superior to complete the combination is subject to the
      satisfaction or waiver of the following conditions:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the approval by the DGSE and
      Superior stockholders of the combination-related proposals contained in this
      joint proxy statement/prospectus (except, in case not required by DGSE&#8217;s trading
      market, the approval by DGSE stockholders of the proposal to adopt and approve
      the merger agreement and to approve the reorganization, including the issuance
      of the shares of DGSE common stock to Superior stockholders in connection
      therewith);</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">no governmental entity has enacted,
      issued, promulgated, enforced or entered any law, regulation, order or decree
      which is in effect and prevents or prohibits consummation of the combination
      or
      any related transaction;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the SEC has not issued a stop order
      suspending the effectiveness of the registration statement of which this joint
      proxy statement/prospectus forms a part, and has not initiated or threatened
      to
      initiate any proceedings for that purpose;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">any material state securities or
      &#8220;blue sky&#8221; laws applicable to the issuance of the shares of DGSE common stock
      constituting the merger consideration have been complied with and no stop order
      or similar order or decree has been issued or threatened in respect of those
      shares by any applicable state securities commissioner or court of competent
      jurisdiction; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">no order will be in effect which
      prohibits, restrains or substantially interferes with the consummation of the
      merger or any related transaction; relates to the merger or any related
      transaction and imposes material damages upon DGSE, DGSE Merger Corp. or
      Superior; prohibits or limits in any respect DGSE&#8217;s rights regarding Superior&#8217;s
      common stock or to own, operate or control the surviving corporation or any
      material portion of the business or property of DGSE or the surviving
      corporation; or has or would have a material adverse effect on Superior or
      on
      DGSE&#8217;s ability to operate the surviving corporation&#8217;s business, or to own, use
      and enjoy the property of the surviving corporation.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">72</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">In
      addition, the obligation of DGSE to complete the combination is subject to
      the
      satisfaction or waiver of the following additional conditions, among
      others:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">all outstanding shares of Superior
      preferred stock have been converted into Superior common stock, and all parties
      are in compliance with the terms of the conversion agreements;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">SIBL will have entered into the
      note exchange agreement and exchanged its debt for Superior common stock as
      provided therein;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Superior and SFG will have amended
      and restated the Stanford credit facility;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">SIBL, SFG, Stanford Venture Capital
      Holdings, Inc., Mr. DiGenova and Superior will have executed and delivered
      a
      termination and release agreement in the form of Annex E to this joint proxy
      statement/prospectus, terminating various agreements with Superior and releasing
      Superior and its affiliates of various liabilities;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">DGSE and the escrow agent will
      have
      entered into the escrow agreement;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">SIBL will have entered into the
      corporate governance agreement;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">both Superior and SIBL will have
      delivered officers&#8217; certificates and legal opinions; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">DGSE will have received an
      affiliate letter from SIBL.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, the obligation of Superior to complete the combination is subject
      to
      the satisfaction or waiver of the following additional conditions, among
      others:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Texas Capital Bank will have
      consented to the combination and the SIBL credit facility;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">DGSE will have tendered the &#8220;A&#8221; and
&#8220;B&#8221; warrants to SIBL and its designees,
      and shall have executed and delivered
      the registration rights agreement relating to the &#8220;A&#8221; and &#8220;B&#8221; warrants being
      issued under the merger agreement; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">DGSE will have delivered an
      officers&#8217; certificates and a legal opinion.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Termination of the
      Merger Agreement</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      and
      Superior may jointly agree to terminate the merger agreement without completing
      the combination pursuant to resolutions adopted by their respective boards
      of
      directors. In addition, either DGSE or Superior (acting through its independent
      committee) may terminate the merger agreement if any of the following events
      occurs:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the combination has not occurred
      on
      or before March 31, 2007 (or, if the registration statement of which this joint
      proxy statement/prospectus forms a part is reviewed by the SEC and the review
      delays the effectiveness of the registration statement, six months after the
      date of initial filing of the registration statement), which we refer to as
      the
      outside date, but this termination right is not available to either company
      if
      it is in material breach of the merger agreement or its failure to comply with
      the merger agreement resulted in the failure to complete the combination by
      that
      date;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">if SIBL declares an event of
      default under the Superior credit facility, forecloses on any collateral,
      exercises any of its rights or remedies as a creditor of Superior or makes
      demand for repayment of any of the Superior principal, or the forbearance period
      under the forbearance agreement executed concurrently with the merger agreement
      expires;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">a governmental entity has issued
      a
      final, nonappealable order, decree or ruling or taken any other action
      permanently restraining, enjoining or otherwise prohibiting the combination
      or
      other related transaction, but this termination right is not available to either
      company if it is in material breach of the merger agreement or its failure
      to
      comply with the merger agreement resulted in the order, decree, ruling or other
      action;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the Superior stockholders do not
      adopt the merger agreement or appoint SIBL as the stockholder agent, but this
      termination right is not available to either company if it is in material breach
      of the merger agreement or its failure to comply with the merger agreement
      resulted in failure to obtain the necessary approval; or</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">73</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">the other company cannot satisfy
      one of its closing conditions, but this termination right is not available
      to
      either company if it is in material breach of the merger agreement or its
      failure to comply with the merger agreement caused the impossibility to satisfy
      the closing condition.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">SIBL
      may
      also terminate the merger agreement if the merger has not been consummated
      by
      the outside date.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Fees and
      Expenses</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Subject
      to the terms of a letter agreement between Superior, DGSE and SIBL relating
      to
      sharing expenses, which is described below and remains in full force and effect,
      and to the stockholder agent expense reimbursement provisions in the merger
      agreement and related escrow agreement, each of DGSE, Superior and SIBL will
      bear all expenses it incurs in connection with the merger agreement or related
      agreements or the combination or the related transactions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On April
      3, 2006, Superior, DGSE and SIBL executed an expense sharing agreement related
      to the exploration of a possible business combination between DGSE and Superior.
      The agreement covers all of (but only) the following third party charges and
      expenses which are incurred between February 27, 2006 and the date DGSE or
      Superior informs the other company that it is no longer interested in pursuing
      a
      possible business combination, which will be shared equally by DGSE and
      Superior:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">all legal and accounting fees and
      expenses;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">all filing fees and related
      expenses, such as SEC registration statement filing fees, &#8220;blue sky&#8221; filing
      fees, Nasdaq listing and other stock exchange filing fees, including fees
      confirming eligibility for continued listing related to the combination;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">due diligence expenses payable
      to
      third parties;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">legal expenses related to the
      separate legal representation of Superior or DGSE officers who are selected
      to
      continue as executive officers of DGSE after completion of the combination,
      both
      in connection with new employment agreements to be entered into or to review
      other agreements related to the combination; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">travel expenses incurred by DGSE
      or
      Superior staff related to pursuit of the combination.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information on the reimbursement of the expenses of the stockholder agent,
      see
      the section entitled &#8220;&#8212; Stockholder Agent&#8221; beginning on page 71.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Amendment, Extension
      and Waiver of the Merger Agreement</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      merger agreement may be amended or otherwise modified prior to the combination
      by mutual written consent of DGSE, DGSE Merger Corp., Superior and SIBL. In
      addition, at any time prior to completion of the combination, any party to
      the
      merger agreement may extend any other party&#8217;s time for the performance of any of
      its obligations or other acts under the merger agreement, waive any inaccuracies
      in any other party&#8217;s representations and warranties and waive compliance by any
      other party with any of the agreements or conditions contained in the merger
      agreement. Any amendment or modification made or waiver granted after obtaining
      the required approvals of the stockholders of DGSE and Superior may not be
      made
      without the further approval of those stockholders if an additional stockholder
      approval is required by applicable law or the rules of the applicable trading
      market for the shares of DGSE or Superior common stock.</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>The
      DGSE board of directors unanimously recommends a vote FOR Proposal No. 1 to
      approve and<br>adopt the merger agreement and to approve the reorganization,
      including the issuance of shares<br>of DGSE common stock to holders of Superior
      securities, and the issuance of options and<br>warrants to acquire shares of
      DGSE common stock, pursuant to the merger agreement.</strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>The
      Superior board of directors unanimously recommends a vote FOR Proposal No.
      1<br>to approve and adopt the merger agreement and approve the
      merger.</strong></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">74</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>POST-COMBINATION
      STANFORD CREDIT FACILITY</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      has agreed in the merger agreement to use its best efforts to amend and restate
      the existing commercial loan and security agreement in effect between Superior
      and SIBL upon the consummation of the combination in the form attached as Annex
      C to this joint proxy statement/prospectus. We refer to the amended and restated
      commercial loan and security agreement between Superior and SFG as the amended
      credit facility.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      amended credit facility will decrease the current credit line from $19.89
      million to $11.5 million, split into two revolving loans of $5 million and
      $6.5
      million, respectively. After giving effect to the conversion by SIBL of $8.4
      million of debt into Superior common stock, as required for the consummation
      of
      the merger, however, the amended credit facility will continue to have the
      same
      availability as the current credit line. Interest on the outstanding principal
      balance will continue to accrue at the prime rate, as reported in the Wall
      Street Journal, or, during an event of default, at a rate 5% greater than the
      prime rate as so reported. Both loans mature and will be due in full four years
      after the combination, unless SFG extends the maturity, provided that in case
      any of several customary events of default occurs, SFG may declare the entire
      principal amount of both loans will be due immediately and take possession
      and
      dispose of the collateral described below.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Loan
      proceeds can only be used for customer loans consistent with specified loan
      policies and procedures and for permitted inter-company transactions. Permitted
      inter-company transactions are loans or dividends paid to DGSE, provided DGSE
      has guaranteed the repayment of the proceeds pursuant to a secured guaranty.
      In
      connection with the secured guarantee, SFG and Texas Capital Bank, N.A., DGSE&#8217;s
      primary lender, have agreed to enter into an intercreditor agreement
      acknowledged by DGSE, which subordinates SFG&#8217;s security interests to those of
      Texas Capital Bank. Superior will be obligated to repay the first revolving
      loan
      from the proceeds of the inventory or other collateral purchased with the
      proceeds of the loan.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      credit facility will be secured by a first priority security interest in
      substantially all of Superior&#8217;s assets, including inventory, accounts
      receivable, promissory notes, books and records and insurance policies, and
      the
      proceeds of the foregoing.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      credit facility includes a number of customary covenants applicable to Superior,
      including, among others: punctual payments of principal and interest under
      the
      credit facility; prompt payment of taxes, leases and other indebtedness;
      maintenance of corporate existence, qualifications, licenses, intellectual
      property rights, property and assets; maintenance of satisfactory insurance;
      preparation and delivery of financial statements for DGSE and separately for
      Superior in accordance with generally accepted accounting principles, tax
      returns and other financial information; inspection of offices and collateral;
      notice of certain events and changes; use of proceeds; notice of governmental
      orders which may have a material adverse effect, SEC filings and stockholder
      communications; maintenance of property and collateral; and payment of SFG
      expenses.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, Superior has agreed not to do a number of things, including, among
      others: create or suffer a lien or other encumbrance on any collateral, subject
      to customary exceptions; incur, guarantee or otherwise become liable for any
      indebtedness, subject to customary exceptions; acquire indebtedness of another
      person, subject to customary exceptions and permitted inter-company
      transactions; issue or acquire any shares of its capital stock; pay dividends
      other than permitted inter-company transactions or specified quarterly
      dividends, or directors&#8217; fees; sell or abandon any collateral except in the
      ordinary course of business or consolidate or merge with another entity; enter
      into affiliate transactions other than in the ordinary course of business on
      fair terms or permitted inter-company transactions; create or participate in
      any
      partnership or joint venture; engage in a new line of business; pay principal
      or
      interest on subordinate debt except as authorized by the credit facility; or
      make capital expenditures in excess of $100,000 per fiscal year.</div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>POST-COMBINATION
      EMPLOYMENT AGREEMENTS</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The DGSE
      board of directors has approved amended and restated employment agreements
      for
      Dr. L.S. Smith, the chairman and chief executive officer of DGSE, and William
      H.
      Oyster, a director and the president and chief operating officer of DGSE and
      a
      director and the interim chief executive officer of Superior, and a new
      employment agreement for John Benson, the chief financial officer of DGSE and
      a
      director and the vice president, finance and interim chief financial officer
      of
      Superior, in each case contingent upon the closing of the combination.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">75</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><strong>Smith
      Employment Agreement</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      revised employment agreement for Dr. Smith amends and restates his existing
      employment agreement with DGSE and sets forth the terms of his employment with
      DGSE as chairman and chief executive officer. The&#160;agreement has an initial
      3-year term, and will be automatically renewed thereafter for successive
      one-year terms unless either party provides at least 120 days notice not to
      renew. It provides for a signing bonus of $100,000 upon execution of the
      agreement and a base annual salary of at least $425,000. In addition, it
      provides for an annual bonus in an amount not less than one-half of his annual
      salary, payable on each January 31 in respect of the prior calendar year, with
      half of the payment being contingent upon the DGSE stock price having increased
      at least 10% during that calendar year. For purposes of the 2007 calendar year,
      the first day will be deemed to be the date of the closing of the combination
      and the 10% increase requirement will be prorated accordingly. In addition,
      Dr.&#160;Smith will be entitled to life insurance of $2,000,000, disability
      insurance equal to half of his base salary, medical insurance and other
      benefits.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Oyster Employment
      Agreement</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      revised employment agreement for Mr. Oyster amends and restates his existing
      employment agreement with DGSE and sets forth the terms of his employment with
      DGSE as president and chief operating officer. The agreement has an initial
      5-year term, and will be automatically renewed thereafter for successive
      one-year terms unless either party provides at least 120 days notice not to
      renew. It provides for a signing bonus of $50,000 upon execution of the
      agreement and a base annual salary of at least $250,000. In addition, it
      provides for an annual bonus in an amount not less than one-half of his annual
      salary, payable on each April 30 in respect of the prior calendar year, with
      half of the payment being contingent upon the DGSE EBIT (earnings before
      interest and taxes) having increased at least 6% during that calendar year.
      In
      addition, Mr. Oyster will be entitled to life insurance of $1,000,000,
      disability insurance equal to half of his base salary, medical insurance and
      other benefits.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Benson Employment
      Agreement</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      employment agreement for Mr. Benson sets forth the terms of his employment
      with
      DGSE as chief financial officer. The agreement has an initial 2-year term.
      It
      provides for a base annual salary of $175,000 and an annual bonus to be
      determined by the DGSE board of directors. Upon the termination of his
      employment, Mr.&#160;Benson will be entitled to, among other things, (1) in case
      of termination by DGSE during the initial term other than for cause, base salary
      for the remainder of the initial term plus six months; and (2) in case of
      termination by DGSE after the initial term other than for cause, three months
      of
      annual base salary.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Potential Payments
      Upon Termination Or Change-In-Control</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under
      the
      revised employment agreements of Dr. Smith and Mr. Oyster, if the executive
      is
      terminated due to an illness, injury or other incapacity which prevents him
      from
      carrying out or performing fully the essential functions of his duties for
      a
      period of 180 consecutive days, or due to his death, the executive (or his
      legal
      representative) will be entitled to receive his salary for a period of one
      year
      following the date of termination and the pro rata portion of this bonus for
      the
      prior calendar year. If Dr. Smith would have been terminated for either reason
      on January 1, 2007 and his revised employment agreement had then been in effect,
      DGSE would have been obligated to pay him $425,000 in 26 bi-weekly installments
      of $16,346 each. If Mr. Oyster would have been terminated for either reason
      on
      January 1, 2007 and his revised employment agreement had then been in effect,
      DGSE would have been obligated to pay him $250,000 in 26 bi-weekly installments
      of $9,615 each.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      event either executive is terminated for &#8220;cause&#8221;, he would be entitled to the
      pro rata share of the bonus paid to him for the calendar year immediately
      preceding his termination. If either executive would have been terminated for
      &#8220;cause&#8221; on January 1, 2007 and his revised employment agreement had then been in
      effect, DGSE would not have been obligated to pay him any additional severance
      pay.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      event either executive is terminated other than for &#8220;cause&#8221;, or if either
      executive resigns for &#8220;good reason&#8221;, he would be entitled to receive a lump sum
      payment of (i) his base salary for the remainder of the current year, plus
      (ii)
      the maximum bonus he would have been entitled to receive for the current year,
      plus (iii) three years salary based on the salary then in effect. If Dr. Smith
      would have been terminated other than for &#8220;cause&#8221; or resigned for &#8220;good reason&#8221;
on January 1, 2007 and his revised employment agreement had then been in effect,
      DGSE would have been obligated to pay him a lump sum payment of $1.91 million.
      If Mr. Oyster would have been terminated </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">76</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">other
      than for &#8220;cause&#8221; or resigned for &#8220;good reason&#8221; on January 1, 2007 and his
      revised employment agreement had then been in effect, DGSE would have been
      obligated to pay him a lump sum payment of $1.13 million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      event either executive resigns other than for &#8220;good reason&#8221;, he would be
      entitled to receive a lump sum payment of (i) his base salary for the remainder
      of the current year, plus (ii) a <i>pro rata</i> share of the maximum bonus he
      would have been entitled to receive for the current year, plus (iii) one year
      salary based on the salary then in effect. If Dr. Smith would have been resigned
      other than for &#8220;good reason&#8221; on January 1, 2007 and his revised employment
      agreement had then been in effect, DGSE would have been obligated to pay him
      a
      lump sum payment of $850,000. If Mr. Oyster would have been resigned other
      than
      for &#8220;good reason&#8221; on January 1, 2007 and his revised employment agreement had
      then been in effect, DGSE would have been obligated to pay him a lump sum
      payment of $500,000.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, in the event of the termination of Dr. Smith&#8217;s employment, DGSE would
      be required to maintain medical health benefits for Dr. Smith and his wife
      until
      both are covered by a comparable health insurance plan provided by a subsequent
      employer or their earlier death. This obligation has an estimated present cost
      to DGSE of $32,100 (assuming payment for a 36-month period). In the event of
      the
      termination of Mr. Oyster&#8217;s employment, DGSE would be required to maintain
      medical health benefits for Mr. Oyster and his wife for a period of 18 months
      or, if earlier, until both are covered by a comparable health insurance plan
      provided by a subsequent employer. This obligation has an estimated cost to
      DGSE
      of $17,200.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      event of the termination of either executive&#8217;s employment, other than for
      termination by the executive for &#8220;good reason&#8221;, the executive may not for a
      period of two years compete with DGSE in the state in which DGSE conducts
      business during the employment term.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For
      purposes of the two executive&#8217;s revised employment agreements:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">&#8220;cause&#8221; is defined as (i)
      conviction of the executive for a felony involving dishonest acts during the
      term of the agreement, (ii) any &#8220;willful&#8221; and material misapplication by the
      executive of DGSE funds, or any other material act of dishonesty committed
      by
      him, or (iii) the executive&#8217;s &#8220;willful&#8221; and material breach of the agreement or
&#8220;willful&#8221; and material failure to substantially perform his duties thereunder
      (other than a failure resulting from mental or physical illness) after written
      demand for substantial performance is delivered by the DGSE board of directors
      which specifically identifies the manner in which the board believes the
      executive has not substantially performed his duties and the executive fails
      to
      cure his nonperformance. DGSE is obligated to provide the executive 30 days
      written notice setting forth the specific reasons for its intention to terminate
      the executive for cause and an opportunity for the executive to be heard before
      the DGSE board of directors, and to deliver to the executive a notice of
      termination from the board of directors stating that a majority of the board
      found, in good faith, that the executive had engaged in the &#8220;willful&#8221; and
      material conduct referred to in the notice;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">an act or failure to act is
&#8220;willful&#8221; if done, or omitted to be done,
      by the executive in bad faith and
      without reasonable belief that his action or omission was in the best interest
      of DGSE;</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">&#8220;good reason&#8221; is defined as (i) a
      change in the executive&#8217;s status or positions with DGSE that, in his reasonable
      judgment, represents a demotion, (ii) the assignment to the executive of any
      duties or responsibilities that, in the executive&#8217;s reasonable judgment, are
      inconsistent with his existing status or position, (iii) layoff or involuntary
      termination of the executive&#8217;s employment, except in connection with the
      termination of the executive&#8217;s employment for &#8220;cause&#8221; or as a result of his
      retirement, disability or death, (iv) a reduction by DGSE in the executive&#8217;s
      base salary, (v) any &#8220;change in control&#8221; occurring more than one year after the
      effective date of the agreement, (vi) the failure by DGSE to continue in effect
      any employee benefit plan in which the executive is participating at the
      effective date of the agreement, other than as a result of the normal expiration
      of the plan in accordance with its terms, except to the extent that DGSE
      provides the executive without substantially equivalent benefits, (vii) the
      imposition of any requirement that the executive be based outside the
      Dallas-Fort Worth metropolitan area, (viii) DGSE&#8217;s failure to obtain the express
      assumption of the agreement by any successor to DGSE, or (ix) any violation
      by
      DGSE of any agreement (including the revised employment agreement) between
      it
      and the executive; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">&#8220;change in control&#8221; is defined as
      (A) any person or group becomes the beneficial owner of shares representing
      20%
      or more of the combined outstanding voting power of DGSE, (B) in any 12-month
      </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">77</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">period,
      the DGSE directors at the beginning of that period cease to constitute a
      majority of the DGSE board of directors and a majority of the initial directors
      still in office neither elected all of the new directors nor nominated them
      all
      for election by the DGSE stockholders, or (C) a person or group acquires in
      any
      12-month period gross assets of DGSE constituting at least 50% of the fair
      market value of all DGSE gross assets.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under
      the
      revised employment agreement of Mr. Benson, if DGSE terminates Mr. Benson&#8217;s
      employment during the initial 2-year term, he would be entitled to receive
      a
      lump sum payment of (i) his base salary for the remainder of the initial term,
      plus (ii) six months salary based on the salary then in effect. If Mr. Benson
      would have been terminated by DGSE on January 1, 2007 and his revised employment
      agreement had then been in effect, DGSE would have been obligated to pay him
      a
      lump sum payment of $437,500. If DGSE terminates Mr. Benson&#8217;s employment after
      the initial 2-year term, he would be entitled to receive a lump sum payment
      three months salary based on the salary then in effect.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      event Mr. Benson resigns upon not less than 30 days notice to DGSE, and DGSE
      immediately relieves Mr. Benson of his duties, he would be entitled to receive
      a
      lump sum payment of his salary until the date his resignation was to be
      effective. If Mr. Benson would have delivered a resignation notice to DGSE
      on
      January&#160;1, 2007 indicating his decision to resign on March 1, 2007, his
      revised employment agreement had then been in effect and DGSE immediately
      relieved him of his duties and terminated the employment agreement, DGSE would
      have been obligated to pay him a lump sum payment of $29,000.</div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTE
      EXCHANGE AGREEMENT, WARRANTS<br>AND REGISTRATION RIGHTS AGREEMENT</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>The
      following summary describes the material provisions of the note exchange
      agreement (referred to in this joint proxy statement/prospectus as the note
      exchange agreement), the &#8220;A&#8221; and &#8220;B&#8221; warrants and the registration rights
      agreement which pertain to the shares issuable upon exercise of the &#8220;A&#8221; and &#8220;B&#8221;
warrants and the shares being issued by DGSE as merger consideration. This
      summary may not contain all of the information about these documents that is
      important to you. The following summary is qualified in its entirety by
      reference to the complete text of the note exchange agreement, which is attached
      to this joint proxy statement/prospectus as Annex D; the form of warrant, which
      is attached to this joint proxy statement/prospectus as Annex H; and the
      registration rights agreement, which is attached to this joint proxy
      statement/prospectus as Annex F. Each of the foregoing agreements and warrants
      is incorporated by reference into this joint proxy statement/prospectus. We
      encourage you to read them carefully in their entirety for a more complete
      understanding of the conversion and exchange agreement, the warrants and the
      registration rights agreement.</i></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note Exchange
      Agreement</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a
      condition to the closing of the merger, Superior and SIBL, which is Superior&#8217;s
      largest stockholder and primary lender, are required to execute and deliver
      the
      note exchange agreement. The note exchange agreement provides for the exchange
      by SIBL of approximately $8.4 million of outstanding Superior debt for
      approximately 5&#160;million shares of Superior common stock, at an exchange
      rate of $1.70 per share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, the merger agreement provides for the issuance of &#8220;A&#8221; and &#8220;B&#8221;
warrants. For more information about these warrants, see the section entitled
&#8220;&#8212;
A and B Warrants&#8221; below.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>A and B
      Warrants</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      consideration of SIBL exchanging outstanding Superior debt for shares of
      Superior common stock, as described above, increasing the credit facility to
      $11.5 million (after giving effect to the exchange of debt), and making a
      substantial portion of the credit facility available to DGSE and its
      subsidiaries (other than Superior), the merger agreement provides that at the
      closing of the merger or as soon thereafter as practicable, DGSE will issue
      to
      SIBL and its designees warrants, in the form attached to this joint proxy
      statement/prospectus as Annex H,</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">to purchase 845,634 shares of DGSE
      common stock at an exercise price of $1.89 per share for a period of seven
      years
      after the combination date, which we refer to as the &#8220;A&#8221; warrants; and</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">to purchase 863,000 shares of DGSE
      common stock at an exercise price of $0.01 per share for a period of seven
      years
      after the combination date, which we refer to as the &#8220;B&#8221; warrants.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">78</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">Both
      the &#8220;A&#8221; warrants and &#8220;B&#8221; warrants contain anti-dilution provisions which would
      adjust the exercise price and number of shares subject to the warrant in the
      event DGSE takes the following actions (except with respect to the first 100,000
      shares of common stock issued or issuable upon the exercise of options or
      warrants or the conversion or exchange of convertible securities issued during
      any fiscal year of the issuer, which are exempt from these adjustment
      provisions):</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">If DGSE pays or effects stock
      dividends on its common stock or splits its common stock, or issues by
      reclassification of common stock any shares of capital stock, then the exercise
      price will be multiplied by a fraction equal to the number of shares of common
      stock outstanding prior to the event divided by the number of shares of common
      stock outstanding after the event, and the number of shares to which the warrant
      is subject will be proportionately adjusted by the inverse of that
      fraction.</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">If DGSE declares a dividend payable
      in rights, options, warrants or other securities (except for excluded
      securities) to acquire shares of common stock for less than the effective
      exercise price of the warrant then the exercise price will be multiplied by
      a
      fraction equal to the number of shares of common stock outstanding immediately
      prior to the event plus the number of shares of common stock which the aggregate
      consideration received by the issuer (including the exercise price paid for
      convertible securities) would purchase at the warrant&#8217;s exercise price, divided
      by the number of shares of common stock outstanding immediately prior to the
      issuance date plus the number of additional shares of common stock subject
      to
      the rights, options, warrants or other securities to acquire shares of common
      stock.</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">If DGSE distributes to its common
      stock holders evidence of its indebtedness or assets or rights, options,
      warrants or other security to acquire any other security, then the exercise
      price will be multiplied by a fraction equal to the per-share market price
      of
      the common stock on the record date for the action less the fair market value
      at
      the record date of the portion of the assets or evidence of indebtedness so
      distributed applicable to one outstanding share of common stock., as determined
      by the issuer&#8217;s board of directors in good faith, divided by the per-share
      market price of the common stock.</div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">&#8226;</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">If DGSE sells shares of its common
      stock at a purchase price, or options or warrants to purchase shares of its
      common stock having an exercise price, less than the exercise price of the
      applicable warrant (with the adjustment in this case being based on the weighted
      average dilution), except in either case for excluded securities, then the
      exercise price will be multiplied by a fraction equal to the sum of the number
      of shares of common stock outstanding immediately prior to the event, plus
      the
      number of shares of common stock which the aggregate consideration received
      by
      the issuer for the common stock, options or warrants, together, in the case
      of
      options or warrants, with any consideration receivable upon their exercise
      or
      conversion, would purchase at the exercise price, divided by the sum of the
      number of shares of common stock outstanding immediately after the event plus
      the number of shares of common stock then issued or issuable upon the exercise
      of any options or warrants then issued.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Some
      of
      the above adjustments do not apply to the following &#8220;excluded securities&#8221;: (i)
      options granted pursuant to a stock option plan approved by the stockholders
      of
      the issuer or by SIBL, (ii) warrants, options or other securities which are
      or
      become outstanding on the date of issuance of the warrants, (iii) shares of
      common stock or securities issued or deemed issued in connection with a
      strategic acquisition by the issuer, provided the acquisition has been approved
      by the stockholders of the issuer or SIBL, (iv) issuances of rights in
      connection with the adoption of a stockholder rights plan, or (v) any other
      issuance of securities for which an adjustment to the exercise price is made
      pursuant to the first three paragraphs in the list above.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In case
      of any merger or consolidation of DGSE in which the holders of its securities
      do
      not hold at least 50% of the outstanding securities after the transaction,
      or
      the sale, lease or other transfer of all or substantially all of the assets
      of
      DGSE, all of which we refer to as a change of control transaction, or any
      compulsory share exchange for the DGSE&#8217;s common stock, provisions must be made
      so the holder of a warrant will have the right to exercise the warrant for
      the
      shares of stock and other securities, cash and property receivable by holders
      of
      common stock following the event, subject to reasonably necessary adjustments
      to
      account for the applicable transaction.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      warrants also feature a net exercise provision, which enables the holder to
      choose to exercise the warrant without paying cash by receiving a number of
      shares having a market value equal to the excess of the aggregate market value
      of the shares for which the warrant is being exercised over the aggregate
      exercise price due under the warrant. This right is available only if the shares
      are being publicly traded. In addition, the warrants feature an &#8220;easy sale&#8221;
exercise provision, which enables the holder to pay the exercise price from
      the
      proceeds of the &#8220;same day&#8221; sale of the shares of common stock issued upon the
      exercise of the warrant. This right is available only if permitted by applicable
      law and applicable trading market regulations.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">79</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">The
      warrants must be exercised for at least 10,000 shares (or, if less, the total
      number of shares subject to the warrant).</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Registration Rights
      Agreement</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a
      condition to the closing of the combination, DGSE must enter into a registration
      rights agreement, attached to this joint proxy statement/prospectus as Annex
      F.
      The registration rights agreement obligates DGSE to register for resale under
      the Securities Act the shares of DGSE common stock which may be issued upon
      the
      exercise of the &#8220;A&#8221; warrants or the &#8220;B&#8221; warrants, as liquidated damages upon a
      default under the registration rights agreement or as a distribution on any
      of
      the foregoing shares, which we refer to collectively as the registrable shares.
      DGSE must, at its own expense, file the registration statement not later than
      five days after the closing of the combination and use its commercially
      reasonable efforts to have the registration statement declared effective not
      later than 90 days after the combination. DGSE must maintain the effectiveness
      of the registration statement at its expense for a period of up to three
      years.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If DGSE
      fails to do any of the foregoing within or for the specified periods, DGSE
      will
      be obligated to pay liquidated damages to each holder of an &#8220;A&#8221; warrant as of
      the first day of the failure and for every consecutive quarter in which the
      failure is occurring warrants to purchase 5% of the number of shares of common
      stock issuable upon the exercise in full of the holder&#8217;s &#8220;A&#8221; warrant.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, for so long as SIBL or its designees hold any registrable shares
      and
      DGSE is eligible to register the registrable shares for resale on a Form S-3,
      DGSE must maintain the effectiveness of a registration statement covering the
      resale of the registrable shares at the expense of SIBL and its designees.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      warrant holders also have limited piggyback registration rights. These rights
      are triggered with respect to the registrable shares if DGSE registers shares
      of
      its common stock under the Securities Act at a time when registrable shares
      are
      not covered by an effective registration statement. These rights are triggered
      with respect to the registrable shares or shares of DGSE common stock acquired
      by SIBL or its designees in the merger if DGSE registers for resale any shares
      of DGSE common stock held by Dr. L.S. Smith, other than shares acquired upon
      the
      exercise of stock options, at a time when registrable shares or any such merger
      shares are not covered by an effective registration statement.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      registration rights agreement also provides the warrant holders with customary
      indemnification rights.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">80</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>DGSE
      PROPOSAL NO. 2 &#8212; AMENDMENT TO ARTICLES OF INCORPORATION</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In July
      2006, DGSE&#8217;s board of directors approved an amendment to DGSE&#8217;s articles of
      incorporation to increase the number of authorized shares of common stock from
      10,000,000 to 30,000,000. The form of articles of amendment is attached to
      this
      joint proxy statement/prospectus as Annex J.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      additional shares of common stock to be authorized by adoption of the amendment
      would have rights identical to the currently outstanding shares of common stock.
      Adoption of the amendment would not affect the rights of the holders of
      currently outstanding common stock, except to the extent additional shares
      are
      actually issued, which may have certain effects, including dilution of the
      earnings per share and voting rights of current holders of common stock. If
      the
      amendment is adopted, it will become effective upon filing of the articles
      of
      amendment with the Secretary of State of the State of Nevada. If the amendment
      is adopted, the articles of amendment giving effect to the amendment will be
      filed as soon as practicable. At [&#9679;], 2007, 4,913,290 shares of DGSE common
      stock were outstanding, and 1,433,134 shares were reserved for options, employee
      equity plans and other purposes (not including shares issuable as merger
      consideration in the combination described in proposal no.&#160;1). Upon the
      approval of this proposal no. 2, approximately 22,653,576 authorized and
      unreserved shares would be available for issuance by DGSE, including for the
      purposes described in proposal no.&#160;1.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      affirmative vote of a majority of the outstanding shares of DGSE common stock
      is
      required to approve this proposal. Accordingly, abstentions and broker non-votes
      will have the same effect as voting AGAINST this proposal.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong>Purpose and Effect
      of the Amendment</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      principal purposes of this amendment are to provide DGSE with sufficient
      authorized shares to effect the combination and related transactions, and with
      the flexibility to issue shares of common stock for proper corporate purposes,
      which may be identified in the future, such as to raise equity capital, make
      acquisitions through the use of stock (including the reorganization described
      in
      proposal no. 1), reserve additional shares for issuance under equity incentive
      plans, or adopt a stockholder rights plan. DGSE intends to use a portion of
      the
      newly authorized shares of common stock to perform its obligations under the
      merger agreement described in proposal no. 1. Except as discussed above, DGSE
      does not have any plans, proposals or arrangements, written or otherwise, to
      issue any of the additional authorized shares of common stock at this
      time.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      increased reserve of shares available for issuance may be used to facilitate
      public or private financings. If required operating funds cannot be generated
      by
      operations or by use of credit facilities, DGSE may need to, among other things,
      issue and sell unregistered common stock, or securities convertible into common
      stock, in private transactions. Such transactions might not be available on
      terms favorable to DGSE, or at all. DGSE may sell common stock at prices less
      than the public trading price of the common stock at the time, and may grant
      additional contractual rights to purchase shares of common stock not available
      to other holders of common stock, such as warrants to purchase additional shares
      of common stock or anti-dilution protections.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      increased reserve of shares available for issuance also may be used in
      connection with potential acquisitions. The ability to use its stock as
      consideration provides DGSE with negotiation benefits and increases its ability
      to execute its growth strategy which may include the acquisition of other
      businesses or technologies.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, the increased reserve of shares available for issuance may be used
      for
      DGSE&#8217;s future equity incentive plans for grants to its employees, consultants
      and directors. Such equity incentive plans could also be used to attract and
      retain employees of acquired companies in connection with potential
      acquisitions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      flexibility of the board of directors to issue additional shares of common
      stock
      could also enhance the ability of DGSE&#8217;s board of directors to negotiate on
      behalf of the stockholders in a takeover situation. The authorized, but unissued
      shares of common stock could be used by the board of directors to discourage,
      delay or make more difficult a change in the control of DGSE. For example,
      such
      shares could be privately placed with purchasers who might align themselves
      with
      the board of directors in opposing a hostile takeover bid. The issuance of
      additional shares could dilute the stock ownership of persons seeking to obtain
      control and increase the cost of acquiring a given percentage of the outstanding
      stock. DGSE could also use the additional shares to adopt a stockholder rights
      plan. A stockholder rights plan may be used to protect DGSE&#8217;s stockholders
      against abusive or coercive takeover tactics and other takeover tactics not
      in
      the best interests of DGSE and its stockholders. Stockholders should therefore
      be aware that approval of the amendment could facilitate future efforts by
      DGSE
      to </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">81</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">deter
      or prevent changes in control of DGSE, including transactions in which the
      stockholders might otherwise receive a premium for their shares over then
      current market prices.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      availability of additional shares of common stock is particularly important
      in
      the event that the board of directors needs to undertake any of the foregoing
      actions on an expedited basis and therefore needs to avoid the time (and
      expense) of seeking stockholder approval in connection with the contemplated
      action. If this proposal is approved by the stockholders, the board of directors
      does not intend to solicit further stockholder approval prior to the issuance
      of
      any additional shares of common stock, except as may be required by applicable
      law or rules. For example, under the rules and policies of the Nasdaq Capital
      Market, stockholder approval is required for any issuance of 20% or more of
      our
      outstanding shares in connection with acquisitions or discounted private
      placements. DGSE reserves the right to seek a further increase in the authorized
      number of shares from time to time as considered appropriate by the board of
      directors.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Existing Anti-Takeover
      Mechanisms</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      articles of incorporation and bylaws contain provisions that may make it less
      likely that our management would be changed, or someone would acquire voting
      control of us, without the consent of our board of directors. These provisions
      include the ability of our board of directors to increase the number of
      directors up to seven and to fill the vacancies created by that action.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Other
      than as described above, there are no anti-takeover mechanisms present in DGSE&#8217;s
      governing documents, and DGSE has no present plans or proposals to adopt other
      provisions or enter into other arrangements that may have material anti-takeover
      consequences.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt" align="center"><strong>The
      DGSE board of directors unanimously recommends a vote FOR Proposal No. 2 to
      approve the<br>amendment to DGSE&#8217;s articles of incorporation to increase the
      authorized number of shares of<br>common stock from 10,000,000 to 30,000,000
      shares.</strong></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">82</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>DGSE
      PROPOSAL NO. 3 &#8212; POSSIBLE ADJOURNMENT OF THE SPECIAL MEETING</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If DGSE
      fails to receive a sufficient number of votes in person or by proxy to approve
      any of the proposals presented at the special meeting of its stockholders,
      DGSE
      may propose to adjourn the special meeting, whether or not a quorum is present,
      for a period of not more than 45 days for the purpose of soliciting additional
      proxies to approve any proposal that fails to receive a sufficient number of
      votes. DGSE currently does not intend to propose adjournment at the special
      meeting if there are sufficient votes to approve the proposals presented at
      the
      special meeting. If approval of the proposal to adjourn the DGSE special meeting
      for the purpose of soliciting additional proxies is submitted to stockholders
      for approval, such approval requires the affirmative vote of holders of a
      majority of the shares of DGSE common stock present in person or represented
      by
      proxy at the special meeting and entitled to vote.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt" align="center"><strong>The
      DGSE board of directors unanimously recommends a vote FOR Proposal No. 3 to
      adjourn the<br>special meeting, if necessary, to establish a quorum or to
      solicit additional proxies if there are<br>not sufficient votes in favor of the
      proposals.</strong></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">83</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SUPERIOR
      PROPOSAL NO. 2 &#8212; APPOINTMENT AND CONSTITUTION OF
      STANFORD<br>INTERNATIONAL BANK LTD. AS STOCKHOLDER AGENT UNDER<br>THE MERGER
      AGREEMENT AND ESCROW AGREEMENT</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stockholders
      are being asked to appoint and constitute Stanford International Bank Ltd.,
      which we refer to as SIBL, as the stockholders&#8217; exclusive agent,
      attorney-in-fact and representative of the pre-combination Superior stockholders
      in relation to the merger agreement, the escrow agreement and the transactions
      contemplated thereby, including the combination. We refer to the person acting
      in that capacity as the stockholder agent. SIBL is the largest stockholder
      of
      Superior and as of the date of this joint proxy statement/prospectus
      beneficially owned approximately 50.5% of the common stock of Superior, and
      is
      the primary lender to Superior. For more information about this credit facility,
      see the section entitled &#8220;Post-Combination Stanford Credit Facility&#8221; beginning
      on page 75.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under
      the
      merger agreement and related escrow agreement, the stockholder agent serves
      as
      the exclusive agent, attorney-in-fact and representative of all Superior
      stockholders to do, among other things, the following:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">provide
      and receive notices and other
      communications;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">agree
      to, negotiate, enter into settlements
      and compromises of, make claims and demand arbitration and comply with orders
      of
      courts and awards of arbitrators with respect to claims made or any other action
      to be taken by or on behalf of any Superior stockholders, or on its own behalf
      in its capacity as stockholder agent, under the merger agreement or the related
      escrow agreement, and to take all actions necessary or appropriate in the
      judgment of the stockholder agent for accomplishing the foregoing;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">to
      use the shares of DGSE common stock,
      cash, investments and other assets held from time to time in the escrow account,
      which we refer to collectively as the escrow assets, as collateral to secure
      the
      rights, and to demand and withdraw escrow assets to satisfy the claims, of
      the
      DGSE indemnified parties under the merger agreement or the related escrow
      agreement;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">to
      demand the reimbursement by Superior in
      cash of the reasonable out-of-pocket fees and expenses of the stockholder agent
      as expressly permitted by the merger agreement or the related escrow agreement,
      for which Superior may seek reimbursement from the escrow assets;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">to
      take all actions necessary or
      appropriate in the judgment of the stockholder agent for the accomplishment
      of
      any of the foregoing; and</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">to
      agree to amendments and waivers of the
      merger agreement and related escrow agreement, and time extensions under the
      merger agreement, on behalf of the stockholders, as described in the section
      entitled &#8220;The Merger Agreement &#8212; Amendment, Extension and Waiver of the Merger
      Agreement&#8221; beginning on page&#160;74.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">A
      decision, act, omission, agreement, settlement, claim, consent or instruction
      of
      the stockholder agent in relation to any matter referred to in the merger
      agreement or related escrow agreement will constitute a decision, etc. for,
      and
      will be final, binding and conclusive upon, all pre-combination Superior
      stockholders, and DGSE and the escrow agent may, without further inquiry,
      conclusively rely thereupon.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      stockholder agent will not receive compensation for its services and is not
      required to post a bond. <strong>THE STOCKHOLDER AGENT WILL NOT BE LIABLE FOR
      ANY ACT DONE OR OMITTED UNDER THE MERGER AGREEMENT OR RELATED ESCROW AGREEMENT
      AS STOCKHOLDER AGENT WHILE ACTING IN GOOD FAITH, AND ANY ACT TAKEN OR OMITTED
      PURSUANT TO THE ADVICE OF COUNSEL WILL BE CONCLUSIVE EVIDENCE THAT THE
      STOCKHOLDER AGENT HAS ACTED IN GOOD FAITH. IN PERFORMING ANY DUTIES UNDER THE
      MERGER AGREEMENT OR ESCROW AGREEMENT, TO THE MAXIMUM EXTENT PERMITTED BY
      APPLICABLE LAW, THE STOCKHOLDER AGENT WILL NOT BE DIRECTLY OR INDIRECTLY LIABLE
      TO ANY PARTY, OR ANY AFFILIATES OF ANY PARTY, FOR DAMAGES, LOSSES, EXPENSES
      OR
      OTHER LIABILITIES, WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE, ARISING
      FROM
      ITS ACTS OR OMISSIONS, INCLUDING FOR THE ACTIVE NEGLIGENCE OR OTHER WRONGFUL
      ACT
      OF THE STOCKHOLDER AGENT, EXCEPT FOR ACTS OF GROSS NEGLIGENCE OR WILLFUL
      MISCONDUCT OF THE STOCKHOLDER AGENT</strong>.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For more
      information concerning the stockholder agent, see the section entitled &#8220;The
      Merger Agreement &#8212; Stockholder Agent&#8221; beginning on page 71.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">84</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt">Approval
      of this proposal constitutes, without any further action on the part of any
      Superior stockholders, the appointment by each of the stockholders of SIBL
      to
      act as stockholder agent under the merger agreement and related escrow
      agreement, for and on each of their behalf.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Approval
      of this proposal requires that the number of votes present in person or
      represented by proxy cast in favor of the proposal must exceed the number of
      votes present in person or represented by proxy cast in opposition to it.
      Accordingly, abstentions and broker non-votes will not be counted for any
      purpose in determining whether proposal no. 2 has been approved.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt" align="center"><strong>The
      Superior board of directors unanimously recommends a vote FOR Proposal No.
      2 to
      approve<br>the irrevocable appointment and constitution of Stanford
      International Bank Ltd. as the<br>stockholder agent under the merger agreement
      and the related escrow agreement.</strong></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">85</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>SUPERIOR
      PROPOSAL NO. 3 &#8212; POSSIBLE ADJOURNMENT OF THE
      SPECIAL MEETING </strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If
      Superior fails to receive a sufficient number of votes in person or by proxy
      to
      approve any of the proposals presented at the special meeting of its
      stockholders, Superior may propose to adjourn the special meeting, whether
      or
      not a quorum is present, for a period of not more than 45 days for the purpose
      of soliciting additional proxies to approve any proposal that fails to receive
      a
      sufficient number of votes. Superior currently does not intend to propose
      adjournment at the special meeting if there are sufficient votes to approve
      the
      proposals presented at the special meeting. If approval of the proposal to
      adjourn the Superior special meeting for the purpose of soliciting additional
      proxies is submitted to stockholders for approval, such approval requires the
      affirmative vote of holders of a majority of the shares of Superior common
      stock
      present in person or represented by proxy at the special meeting and entitled
      to
      vote.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt" align="center"><strong>The
      Superior board of directors unanimously recommends a vote FOR Proposal No.
      3 to
      adjourn<br>the special meeting, if necessary, to establish a quorum or to
      solicit additional proxies if there<br>are not sufficient votes in favor of the
      proposals.</strong></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">86</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>UNAUDITED
<i>PRO
      FORMA</i> CONDENSED COMBINED FINANCIAL
      INFORMATION</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following unaudited <i>pro forma</i> combined financial information and
      explanatory notes present how the combined financial statements of DGSE and
      Superior may have appeared had the business actually been combined as of
      September 30, 2006 (with respect to the balance sheet information using
      currently available fair value information) or as of January 1, 2005 (with
      respect to the statements of operations information). The unaudited <i>pro
      forma</i> condensed financial information shows the impact of the combination of
      DGSE and Superior on the historical financial position and results of operations
      under the purchase method of accounting with DGSE treated as the acquirer.
      Under
      this method of accounting, the assets and liabilities of Superior are recorded
      by DGSE at their estimated fair values as of the date the combination is
      completed. The unaudited <i>pro forma</i> condensed combined financial
      information combines the historical financial information of DGSE on a <i>pro
      forma</i> basis, taking into account DGSE&#8217;s acquisition of Superior as of and
      for the nine months ended September 30, 2006. The unaudited <i>pro forma</i>
      condensed combined balance sheet as of September 30, 2006 assumes the
      combination was completed on that date. The unaudited <i>pro forma</i> condensed
      combined statements of operations gives effect to the combination with Superior,
      as if it had been completed on January 1, 2005.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to the combination, Superior will merge with a wholly-owned subsidiary of DGSE,
      and DGSE will acquire all of the outstanding shares of Superior. Superior
      stockholders will be entitled to receive 0.2731 shares of DGSE common stock
      for
      every share of Superior common stock they own at the effective time of the
      combination.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      unaudited <i>pro forma</i> condensed combined financial information is presented
      for illustrative purposes only and does not indicate the financial results
      of
      the combined companies had the companies actually been combined and had the
      impact of possible revenue enhancements and expense efficiencies, among other
      factors, been considered. In addition, as explained in more detail in the
      accompanying notes to the unaudited <i>pro forma</i> condensed combined
      financial information, the allocation of the purchase price reflected in the
      <i>pro forma</i> condensed combined financial information is subject to
      adjustment and may vary from the actual purchase price allocation that will
      be
      recorded upon the effective time of the combination.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">87</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>DGSE
      COMPANIES INC.</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 6.65pt" align="center"><strong><i>PRO
      FORMA</i> CONDENSED COMBINED BALANCE
      SHEET<br>(Unaudited)<br>As of September 30, 2006</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="232">
            </td>
            <td width="12">
            </td>
            <td width="6">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="6">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="8">
            </td>
            <td width="38">
            </td>
            <td width="19">
            </td>
            <td width="6">
            </td>
            <td width="37">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>DGSE<br>Historical</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior<br>Historical</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Combination<br>Adjustments</strong></div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td colspan="2" valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong><i>Pro
                Forma<br></i>Combined</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="11" valign="bottom" width="297">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(in
                thousands)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="center"><strong>ASSETS</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                Assets</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Cash
                and cash
                equivalents&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">217</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,673</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,890</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Accounts
                receivable</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">948</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,878</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">6,826</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Inventories</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">8,451</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">4,833</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">13,284</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Prepaid
                expenses and other</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">208</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">164</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">372</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Current Assets</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">9,824</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">12,548</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">22,372</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Marketable
                securities</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">75</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">75</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Property
                and equipment, net</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,027</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">394</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,421</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Deferred
                income taxes</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Goodwill</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">837</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">5,816</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">(C)&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">6,653</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Other
                assets</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">633</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">633</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Assets</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">12,396</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">12,942</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">5,816</div>
            </td>
            <td valign="bottom" width="25" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">31,154</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">88</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>DGSE
      COMPANIES INC.</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 6.65pt" align="center"><strong><i>PRO
      FORMA</i> CONDENSED COMBINED BALANCE
      SHEET<br>(Unaudited)<br>As of September 30, 2006</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="217">
            </td>
            <td width="10">
            </td>
            <td width="6">
            </td>
            <td width="34">
            </td>
            <td width="10">
            </td>
            <td width="6">
            </td>
            <td width="38">
            </td>
            <td width="10">
            </td>
            <td width="6">
            </td>
            <td width="38">
            </td>
            <td width="3">
            </td>
            <td width="29">
            </td>
            <td width="7">
            </td>
            <td width="7">
            </td>
            <td width="39">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="290">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>DGSE
                Historical</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior
                Historical</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Combination<br>Adjustments</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td colspan="2" valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong><i>Pro
                Forma</i> Combined </strong></div>
            </td>
            <td valign="bottom" width="4">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="290">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="13" valign="bottom" width="316">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(in
                thousands)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="center"><strong>LIABILITIES&#160;AND&#160;STOCKHOLDERS&#8217;&#160;EQUITY</strong></div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="62">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                Liabilities</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td colspan="2" valign="bottom" width="62">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Notes
                payable</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">194</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">10,850</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(10,850</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt">(A)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">194</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Current
                maturities of long-term debt</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">259</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">200</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">459</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Accounts
                payable and accrued expenses</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">1,129</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">3,297</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">4,426</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Federal
                income taxes payable</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">211</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="51" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">211</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Current Liabilities</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">1,793</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">14,347</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(10,850</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">5,290</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Long-term
                Debt</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">3,998</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">300</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">3,407</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt">(A),(C)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">7,705</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Deferred
                income taxes</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="51" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Liabilities</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">5,791</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">14,647</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(7,443</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">12,995</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Stockholders&#8217;
                Equity:</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Preferred
                Stock</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">7,386</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(7,386</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt">(B)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Common
                Stock</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">49</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">5</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(98</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt">(D)</div>
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            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">86</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
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          <tr>
            <td valign="top" width="290">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="45">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="50">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="51">
              <div style="MARGIN: 0pt" align="right">37</div>
              <div style="MARGIN: 0pt" align="right">38</div>
              <div style="MARGIN: 0pt" align="right">55</div>
            </td>
            <td valign="top" width="4">&#160;</td>
            <td valign="top" width="39">
              <div style="MARGIN: 0pt">(C)<br>(B)<br>(A)</div>
            </td>
            <td valign="top" width="10">&#160;</td>
            <td valign="top" width="9">&#160;</td>
            <td valign="top" width="52">&#160;</td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Additional
                Paid-in Capital</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">5,709</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">8,846</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(26,494</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt">(D)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">17,226</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="290">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="45">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="50">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="51">
              <div style="MARGIN: 0pt" align="right">13,473</div>
              <div style="MARGIN: 0pt" align="right">7,348</div>
              <div style="MARGIN: 0pt" align="right">8,344</div>
            </td>
            <td valign="top" width="4">&#160;</td>
            <td valign="top" width="39">
              <div style="MARGIN: 0pt">(C)<br>(B)<br>(A)</div>
            </td>
            <td valign="top" width="10">&#160;</td>
            <td valign="top" width="9">&#160;</td>
            <td valign="top" width="52">&#160;</td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Accumulated
                Other Comprehensive (loss)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(121</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">(121</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Retained
                Earnings (Deficit)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">968</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(17,492</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="51" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">17,942</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">968</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Stockholders&#8217; Equity</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,605</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(1,705</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">13,259</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">18,159</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="290">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                Liabilities and Stockholders&#8217; equity</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">12,396</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">12,942</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">5,816</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="52" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">31,154</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 5pt" align="center"><i>The
      accompanying notes are an integral part of these consolidated pro forma
      financial statements.</i></div>
    <div style="MARGIN: 0pt" align="center">89</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>DGSE
      COMPANIES INC.</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 6.65pt" align="center"><strong><i>PRO
      FORMA</i> CONDENSED COMBINED STATEMENT OF
      OPERATIONS<br>(Unaudited)</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="220">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="38">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="40">
            </td>
            <td width="12">
            </td>
            <td width="8">
            </td>
            <td width="36">
            </td>
            <td width="3">
            </td>
            <td width="1">
            </td>
            <td width="13">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="36">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="294">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="14" valign="bottom" width="308" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Nine
                Months Ended September 30,
                2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>DGSE
                Historical</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior<br>Historical</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Combination</strong></div>
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Adjustments</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td colspan="2" valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="55" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong><i>Pro
                Forma </i>Combined</strong></div>
            </td>
            <td valign="bottom" width="4">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="294">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="14" valign="bottom" width="308">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(in
                thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenue</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">31,876</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;30,422</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">62,298</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of sales</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">27,014</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">25,078</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">52,092</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">4,862</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">5,344</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">10,206</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,&#160;general&#160;and&#160;administrative&#160;expenses&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">3,834</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">6,473</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(804</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">(E)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">9,503</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">1,028</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">(1,129</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(804</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">703</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                expense</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Interest
                expense</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(229</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">(421</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">300</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">(F)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">(350</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                before income taxes</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">799</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">(1,550</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,104</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">353</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax expense</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="51" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">272</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(152</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">(G)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">120</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">527</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">(1,550</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,256</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">233</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Earnings
                per common share:</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Basic</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">0.11</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">0.00</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Diluted</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">0.11</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">0.00</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">0.02</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Weighted
                average number of common shares outstanding:</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Basic</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">4,808</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">8,613</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="294">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Diluted</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">4,989</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">4,808</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">9,822</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 5pt" align="center"><i>The
      accompanying notes are an integral part of these consolidated pro forma
      financial statements.</i></div>
    <div style="MARGIN: 0pt" align="center">90</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>DGSE
      COMPANIES INC.</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 6.65pt" align="center"><strong><i>PRO
      FORMA</i> CONDENSED COMBINED STATEMENT OF
      OPERATIONS<br>(Unaudited)</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="241">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="29">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="29">
            </td>
            <td width="12">
            </td>
            <td width="7">
            </td>
            <td width="38">
            </td>
            <td width="3">
            </td>
            <td width="1">
            </td>
            <td width="14">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="31">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="14" valign="bottom" width="280" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended December 31, 2005</strong></div>
            </td>
            <td valign="bottom" width="4">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>DGSE<br>Historical</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior<br>Historical</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Combination<br>Adjustments</strong></div>
            </td>
            <td valign="bottom" width="4">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="20">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong><i>Pro
                Forma<br></i>Combined</strong></div>
            </td>
            <td valign="bottom" width="4">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="322">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="14" valign="bottom" width="280">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(in
                thousands, except per share data)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenue</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">35,640</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">43,141</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">78,781</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of Sales</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">29,118</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">35,806</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">64,924</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">6,522</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">7,335</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">13,857</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and Administrative expenses</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">5,494</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">8,679</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(1,072</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">(E)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">13,101</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">1,028</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(1,344</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">1,072</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">756</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                expense</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Interest
                expense</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(274</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(489</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">400</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">(F)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">(363</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                before income taxes</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">754</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(1,833</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">1,472</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">393</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax expense</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">269</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="51" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(129</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">(G)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="42" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">141</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">485</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(1,834</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">1,601</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">252</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Earnings
                per common share:</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Basic</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">0.10</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(0.38</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Diluted</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">0.10</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">(0.38</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">0.03</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Weighted
                average number of Common shares outstanding:</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Basic</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,913</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,808</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">8,613</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="322">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Diluted</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">5,037</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4,808</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">9,822</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 5pt" align="center"><i>The
      accompanying notes are an integral part of these consolidated pro forma
      financial statements.</i></div>
    <div style="MARGIN: 0pt" align="center">91</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><strong>NOTES
      TO UNAUDITED <i>PRO FORMA</i> CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      unaudited DGSE <i>pro forma</i> financial data has been prepared to give effect
      to DGSE&#8217;s acquisition of Superior in 2006. Information under the heading
&#8220;Combination Adjustments&#8221; gives effect to the adjustments related to the
      acquisition of Superior. The unaudited <i>pro forma</i> consolidated statements
      are not necessarily indicative of the results of DGSE&#8217;s future operations.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(A)</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">To reflect the conversion of $8.4
      million of Superior&#8217;s short-term notes payable into Superior common stock and
      the reclassification of $3,407,000 of Superior&#8217;s short-term notes payable to
      long-term debt.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(B)</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">To reflect the conversion of
      $7,386,000 of Superior&#8217;s preferred stock into Superior common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(C)</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">To record the preliminary purchase
      price allocation to evaluated property, deferred income tax asset and goodwill
      and to record the retirement and issuance of debt and equity instruments, and
      related costs, in connection with the combination.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(D)</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">To eliminate the Superior equity
      accounts.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(E)</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">To reflect anticipated cash cost
      reductions that DGSE expects to realize as a result of its integration plans
      that will result in a positive annualized effect on <i>pro forma</i> earnings
      when compared to recent operating history of the separate companies.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(F)</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">To record the expected interest
      expense savings resulting from the conversion of $8.4 million of Superior debt
      into Superior common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(G)</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">To adjust income tax expense of
      the
      unaudited <i>pro forma</i> combined statements of operations.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">92</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>COMPARISON
      OF RIGHTS OF DGSE
      STOCKHOLDERS AND SUPERIOR STOCKHOLDERS</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Superior
      is
      a Delaware corporation, subject to Delaware law, and DGSE is a Nevada
      corporation, subject to Nevada law. Upon the closing of the combination, the
      Superior stockholders will become stockholders of DGSE and the rights of
      Superior stockholders will no longer be defined and governed by the Superior
      certificate of incorporation and bylaws or Delaware law. Instead, each Superior
      stockholder&#8217;s rights as a stockholder of DGSE will be defined by the DGSE
      articles of incorporation and bylaws and Nevada law. The following is a summary
      of the material differences between the rights of Superior stockholders and
      the
      rights DGSE stockholders. This section does not include a complete description
      of all differences among the rights of these stockholders, nor does it include
      a
      complete description of the specific rights of these stockholders. In addition,
      the identification of some differences in the rights of these stockholders
      as
      material is not intended to indicate that other differences that are equally
      important or that you deem important do not exist. This summary, therefore,
      is
      qualified by reference to Nevada law, Delaware law, Superior&#8217;s certificate of
      incorporation and bylaws, and DGSE&#8217;s articles of incorporation and bylaws. You
      should carefully read this entire joint proxy statement/prospectus and any
      other
      documents to which we refer for a more complete understanding of the differences
      between being a stockholder of Superior and being a stockholder of DGSE.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>DGSE</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Authorized
                Capital Stock</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">DGSE&#8217;s Articles of
                Incorporation authorizes:</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">10,000,000 shares
                of
                common stock, $0.01 par value per share.</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">DGSE proposal
                no. 2 in
                this joint proxy statement/ prospectus would increase the number
                of
                authorized shares of common stock to 30,000,000 shares.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Superior&#8217;s Certificate
                of Incorporation authorizes:</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">20,000,000 shares
                of
                common stock, $0.001 par value per share; and</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">10,000,000 shares
                of
                preferred stock, $0.001 par value per share.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Number
                of Directors</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The DGSE Bylaws
                provide that the board of directors shall consist of not less than
                four
                nor more than seven members, the exact number to be determined from
                time
                to time by resolution of the board of directors. Currently, DGSE&#8217;s board
                of directors consists of five members. The number of directors may
                be
                changed by an amendment to the Articles of Incorporation or by an
                amendment to the Bylaws, duly adopted by the vote or written consent
                of
                holders of a majority of the outstanding shares entitled to vote;
                provided, however, that an amendment reducing the fixed number or
                the
                minimum number of directors to a number less than five cannot be
                adopted
                if the votes cast against its adoption at a meeting, or the shares
                not
                consenting in the case of an action by written consent, are equal
                to more
                than 16&#160;2/3% of the outstanding shares entitled to vote thereon. No
                reduction of the authorized number of directors shall have the effect
                of
                removing any director before the expiration of his term of office.
                The
                Articles of Incorporation provide that in no event shall the corporation
                have less than three directors.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The Superior
                Certificate provides that the authorized number of directors of Superior
                shall be fixed from time to time by, or in the manner provided in,
                the
                Bylaws.</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The Superior Bylaws
                provide that the board of directors shall consist of not less than
                five
                nor more than nine members. The exact number of directors which constitute
                the whole board of directors shall be fixed from time to time by
                resolution of the board of directors or by the written consent of
                a
                majority of the stockholders. Currently, Superior&#8217;s board of directors
                consists of 6 directors.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">93</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>DGSE</strong></font></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 2.65pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Cumulative
                Voting</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The DGSE Bylaws
                provide for cumulative voting for the election of directors at meetings
                of
                stockholders. Accordingly, DGSE stockholders have cumulative voting
                rights
                in connection with the election of directors; provided that no stockholder
                can cumulate votes for any nominee unless the nominee has been nominated
                as a candidate for director prior to voting and the stockholder has
                given
                notice prior to voting of his intention to cumulate his votes. If
                any one
                stockholder has given such notice, all stockholders may cumulate
                their
                votes.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The Superior
                Certificate of Incorporation and Bylaws do not provide for cumulative
                voting. Accordingly, Superior stockholders do not have cumulative
                voting
                rights in connection with the election of directors.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 2.65pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Classification
                of Board of
                Directors</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The DGSE Articles
                of
                Incorporation and Bylaws do not classify the DGSE board of directors
                into
                separate classes with staggered terms.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The Superior
                Certificate of Incorporation and Bylaws do not classify the Superior
                board
                of directors into separate classes with staggered terms.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 2.65pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Removal
                of Directors</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">DGSE&#8217;s Bylaws provide
                that any director of DGSE or its entire board of directors may be
                removed
                by the affirmative vote of not less than 66 2/3% of the shares then
                entitled to vote at an election of directors; provided that no director
                may be removed (unless the entire board is removed) when the votes
                cast
                against removal (or, if such action is taken by written consent,
                the
                shares held by persons not consenting in writing to such removal)
                or not
                consenting in writing to such removal would be sufficient to elect
                such
                director if voted cumulatively at an election at which the same total
                number of votes were cast (or, if such action is take by written
                consent,
                all shares entitled to vote were voted) and the entire number of
                directors
                authorized at the time of the directors&#8217; most recent election were then
                being elected.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Superior&#8217;s Bylaws
                provide that any director of Superior or its entire board of directors
                may
                be removed by the holders of a majority of the shares then entitled
                to
                vote at an election of directors; provided that no director may be
                removed
                (unless the entire board is removed) when the votes cast against
                removal
                or not consenting in writing to such removal would be sufficient
                to elect
                such director if voted cumulatively at an election at which the same
                total
                number of votes were cast (or, if such action is taken by written
                consent,
                all shares entitled to vote, were voted) and the entire number of
                directors authorized at the time of the directors&#8217; most recent election
                were then being elected.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 2.65pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Filing
                of Vacancies on the Board of
                Directors</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                any
                vacancy on the board of directors, including those caused by an increase
                in the number of directors, may be filled by a majority of the remaining
                directors, even though less than a quorum, unless otherwise provided
                in
                the Articles of Incorporation. Under DGSE&#8217;s Bylaws, vacancies, except a
                vacancy created by the removal of a director, may be filled by a
                majority
                of the remaining directors, or by a sole remaining director. In addition,
                a vacancy may be filled by the stockholders by a written consent
                of a
                majority of the outstanding shares entitled to vote. The stockholder
                may
                also elect a director to fill any vacancy not filled by the directors,
                or
                which occurs by reason of the removal of a director.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law,
                unless otherwise provided in the Certificate of Incorporation or
                the
                Bylaws, (i) vacancies on a board of directors; and (ii) newly created
                directorships resulting from an increase in the number of directors,
                may
                be filled by a majority of the directors then in office, though less
                than
                a quorum. The Bylaws of Superior provide that any vacancies on its
                board
                of directors may be filled by the affirmative vote of a majority
                of the
                remaining directors in office, even if less than a quorum, or by
                a sole
                remaining director, except that a vacancy created by the removal
                of a
                director by the vote or written consent of the stockholders, or by
                a court
                order, may be filled only by vote of a majority of the shares entitled
                to
                vote. The stockholder may also elect a director to fill any vacancy
                not
                filled by the directors, but any such election by written consent
                shall
                require the consent of a majority of the outstanding shares entitled
                to
                vote.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">94</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><br><br><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>DGSE</strong></font></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Special
                Meetings of the
                Stockholders</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The DGSE Bylaws
                provide that a special meeting of stockholders may be convened at
                any time
                by the president, the chairman of the board of directors, the board
                of
                directors, or by the stockholders holding not less than 10% of the
                voting
                shares of DGSE.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The Superior Bylaws
                provide that a special meeting of stockholders may be convened at
                any time
                by the president, the chairman of the board of directors, the board
                of
                directors, or by the stockholders holding not less than 10% of the
                voting
                stock of Superior.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Advance
                Notice Provisions for Meetings of
                Stockholders</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The DGSE Bylaws
                provide that written notice of all meetings of stockholders not less
                than
                10 nor more than 60 days before the date of the meeting to each
                stockholder entitled to vote at the meeting. The notice shall state
                the
                place, date and hour of the meeting and the general nature of the
                business
                to be transacted. If it is annual meeting, the notice shall also
                include
                those matters which the board of directors intend to present for
                action by
                the stockholders.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The Superior Bylaws
                provide that written notice of a stockholder meeting must state the
                place,
                if any, date and hour of the meeting, the means of remote communications,
                if any, by which stockholders and proxy holders may be deemed to
                be
                present in person and vote at such meeting, and, in case of a special
                meeting, the general nature of the business to be transacted and
                that no
                other business may be transacted, or, in the case of an annual meeting,
                those matters which the board, at the date of mailing of notice,
                intends
                to present for action by the stockholders. The notice must be given
                to
                each stockholder entitled to vote at the meeting not less than 10
                nor more
                than 60 days before the meeting. </div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Action
                by Written Consent of the
                Stockholders</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The DGSE Bylaws
                provide that any action which may be taken at any annual or special
                meeting of stockholders may be taken without a meeting and without
                prior
                notice, except election of directors, if a consent in writing, setting
                forth the action so taken, is signed by the holders of outstanding
                shares
                having not less than the minimum number of votes that would be necessary
                to authorize or take that action at a meeting at which all shares
                entitled
                to vote on that action were present and voted. </div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law,
                unless otherwise provided i the Certificate of Incorporation, any
                action
                which may be taken at any annual or special meeting of stockholders
                may be
                taken without a meeting and without prior notice, if a consent in
                writing,
                setting forth the action so taken, is signed by the holders of outstanding
                stock having not less than the minimum number of votes that would
                be
                necessary to authorize or take such action at a meeting at which
                all share
                entitled to vote thereon were present and voted. The Superior Certificate
                of Incorporation does not contain a prohibition against written
                consents.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Proxies</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law
                and
                the DGSE Bylaws, at any meeting of the stockholders of a corporation,
                a
                stockholder may designate another person to act as proxy. A proxy
                is
                effective only for a period of six months, unless otherwise provided
                in
                the proxy. No proxy shall be valid for more than seven years.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law, at
                any meeting of the stockholders of a corporation, a stockholder may
                designate another person to act for such stockholder by proxy, but
                no such
                proxy shall be voted or acted upon after three years from its date,
                unless
                the proxy provides for a longer period.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">95</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>DGSE</strong></font></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Charter
                Amendment</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                unless the Articles of Incorporation require a greater vote, a proposed
                amendment to the Articles of Incorporation requires a resolution
                adoption
                by the board of directors and the affirmative vote of the stockholders
                holding shares in the corporation entitling them to exercise at least
                a
                majority of the voting power, or such greater proportion of the voting
                power as may be required in the case of a vote by classes or
                series.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law,
                unless the Certificate of Incorporation requires a greater vote,
                an
                amendment to the Certificate of Incorporation requires (i) the approval
                and recommendation of the board of directors; (ii) the affirmative
                vote of
                a majority of the outstanding stock entitled to vote on the amendment;
                and
                (iii) the affirmative vote of a majority of the outstanding stock
                of each
                class entitled to vote on the amendment as a class. The affirmative
                vote
                of a majority of each of the Superior Series B, D, and E Preferred
                stockholders, voting as a separate class, is required in order to
                amend
                the Certificate of Incorporation.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amendment
                of Bylaws</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The DGSE Bylaws
                provide that the Bylaws may be adopted, amended or repealed either
                by the
                board of directors or a majority of the outstanding shares entitled
                to
                vote, except that only the stockholders may amend the Bylaws to change
                the
                authorized number of directors.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The Superior Bylaws
                provide that the Bylaws may be adopted, amended or repealed either
                by the
                board of directors or a majority of the outstanding shares entitled
                to
                vote, except that only the stockholders may amend the Bylaws to change
                the
                authorized number of directors. The affirmative vote of a majority
                of each
                of the Superior Series B, D, and E Preferred stockholders, voting
                as a
                separate class, is required in order to amend the Bylaws.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Dividends
                and Repurchases of
                Shares</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                the
                board of directors may make distributions to stockholders, unless
                otherwise provided in the Articles of Incorporation. However, no
                distribution may be made if it would cause: (a) the corporation to
                be
                unable to pay its debts as they become due; or (b) except as otherwise
                specifically allowed by the Articles of Incorporation, the corporation&#8217;s
                assets to be less than the sum of its liabilities plus the amount
                that
                would be needed, if the corporation were to be dissolved at the time
                of
                the distribution, to satisfy the preferential stockholders whose
                rights
                are superior to those receiving the distribution.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law,
                the board of directors of a corporation may, subject to any restrictions
                contained in its Certificate of Incorporation, declare and pay dividends
                upon the shares of its capital stock either<br>(i) out of its surplus; or
                (ii) if there is not surplus, out of net profits for the fiscal year
                in
                which the dividend is declared or the preceding fiscal year, provided
                that
                if the capital of the corporation is less than the aggregate amount
                of
                capital represented by the issued and outstanding stock of all classes
                having a preference upon the distributions of the assets of the
                corporation, then the board of directors may not declare and pay
                dividends
                out of net profits. Delaware law generally provides that a corporation
                may
                redeem or purchase its shares only if such redemption or repurchase
                would
                not impair the capital of the corporation. The affirmative vote of
                a
                majority of each of the Superior Series B, D, and E Preferred
                stockholders, voting as a separate class, is required in order to
                make any
                distributions on, or redemption of, any capital stock, except pursuant
                to
                the certificates of designation of the Series B Preferred
                stock.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">96</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>DGSE</strong></font></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Appraisal
                and Dissenters&#8217; Rights</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                except as otherwise provided by the Nevada law, stockholders have
                the
                right to demand and receive payment in cash of the fair value of
                their
                stock in the event of a merger or exchange in lieu of the consideration
                such stockholder would otherwise receive in such transaction. However,
                stockholders do not have such appraisal rights if they hold shares
                that
                are listed on a national securities exchange or designated as a national
                market system security on an interdealer quotation system by the
                National
                Association of Securities Dealers, Inc. or held of record by more
                than
                2,000 stockholders unless the articles of incorporation provide otherwise;
                the holders of the class or series are required under the plan of
                merger
                or exchange to accept for the shares anything except cash, owners
                interests or owner&#8217;s interests and cash in lieu of fractional owner&#8217;s
                interests of (i) the surviving or acquiring entity; (ii) any other
                entity
                which, at the effective date of the plan of merger or exchange, were
                either listed on a national securities exchange, included in the
                national
                market system by the National Association of Securities Dealers,
                Inc., or
                held of record by at least 2,000 holders of owner&#8217;s interests of record;
                or (iii) a combination of cash and owner&#8217;s interests of the kind described
                in (i) or (ii). In addition, no right of dissent exists for any holders
                of
                the surviving domestic corporation if the plan of merger does not
                require
                action of the stockholders of the surviving domestic corporation
                under
                Nevada law.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law,
                stockholders of a corporation that is a constituent corporation in
                a
                merger generally have the right to demand and receive payment of
                the fair
                value of their stock in lieu of receiving the merger consideration.
                However, appraisal rights are not available to holders of shares:
                (i)
                listed on a national securities exchange; (ii) designated as a national
                market system security on an interdealer quotation system operated
                by the
                National Association of Securities Dealers, Inc.; or (iii) held of
                record
                by more than 2,000 stockholders; unless holders of stock are required
                to
                accept in the merger anything other than any combination of:
                (a)&#160;shares of stock or depositary receipts of the surviving
                corporation in the merger; <br>(b) shares of stock or depositary receipts
                of another corporation that, at the effective date of the merger,
                will be
                either: (1)&#160;listed on a national securities exchange;
                (2)&#160;designated as a national market system security on an interdealer
                quotation system operated by the National Association of Securities
                Dealers, Inc.; or<br>(3) held of record by more than 2,000 stockholders;
                (c)&#160;cash in lieu of fractional shares of the stock or depositary
                receipts received; or (d)&#160;any combination thereof.</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">In addition, appraisal
                rights are not available to the holders of shares of the surviving
                corporation in the merger, if the merger does not require the approval
                of
                the stockholders of that corporation.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Liability
                and Indemnity</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The DGSE Articles
                of
                Incorporation eliminate the personal liability of DGSE directors
                and
                officers to the fullest extent permitted by Nevada law. The DGSE
                Bylaws
                grants DGSE the power to indemnify its directors, officers, employees
                and
                agents to the fullest extent permitted by Nevada law.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The Superior
                Certificate of Incorporation provides that a director of the corporation
                shall not be personally liable to the corporation or its stockholders
                for
                monetary damages for breach of fiduciary duty as a director, except
                for
                liability (i) for any breach of the director&#8217;s duty of loyalty to the
                corporation or its stockholders, (ii) for acts or omissions not in
                good
                faith or which involve intentional misconduct or a knowing violation
                of
                law, (iii) under Section 174 of the General Corporation Law of the
                State
                of Delaware, or (iv) for any transaction from which the director
                derived
                any improper personal benefit. The Bylaws do not provide for
                indemnification for directors or officers; however, the corporation
                has
                entered into separate indemnification agreements with each officer
                and
                director of the corporation.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">97</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>DGSE</strong></font></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Indemnity
                Insurance</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Neither the Articles
                of Incorporation nor the DGSE Bylaws provide for the purchase of
                indemnity
                insurance for the benefit of any director, officer, employee or other
                agent of DGSE; nevertheless, DGSE has purchased indemnity insurance.
                </div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Neither the Superior
                Certificate of Incorporation or Bylaws provide for the purchase of
                indemnity insurance for the benefit of any person; nevertheless,
                Superior
                has purchased directors&#8217; and officers&#8217; insurance.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Preemptive
                Rights</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                absent an express provision in a corporation&#8217;s Articles of Incorporation,
                a stockholder does not, by operation of law, possess preemptive rights
                to
                subscribe to additional issuances of its stock. The DGSE Articles
                of
                Incorporation provide that no stockholder shall be entitled as a
                matter of
                right to subscribe for any additional stock or other securities.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law, a
                stockholder is not entitled to preemptive rights to subscribe for
                additional issuances of stock, or any security convertible into stock,
                unless the rights are specifically granted in the Certificate of
                Incorporation. The Superior Certificate of Incorporation do not provide
                for any such preemptive rights.</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Certain
                Business Combination
                Restrictions</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Nevada law prohibits
                certain business combinations between a corporation and an &#8220;interested
                stockholder&#8221; (one beneficially holding, directly or indirectly, at least
                10% of the outstanding voting stock) for three years after such person
                became an interested stockholder unless such interested stockholder,
                prior
                to becoming an interested stockholder, obtained the approval of the
                board
                of directors of either the business combination or the transaction
                that
                resulted in such person becoming an interested stockholder.</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Nevada law will
                permit, however, business combinations that meet all requirements
                of the
                corporation&#8217;s articles of incorporation and either: (i) are approved by
                the board of directors before the interested stockholder became an
                interested stockholder (or as to which the purchase of shares made
                by the
                interested stockholder had been approved by the board of directors
                before
                the date of purchase), (ii) are approved by the affirmative vote
                of the
                holders of stock representing a majority of the voting stock (excluding
                voting stock of the interested stockholder and its affiliates and
                associates) at a meeting called for such purpose no earlier than
                three
                years after the interested stockholder became an interested stockholder,
                or (iii) the form and amount of consideration to be received by
                stockholders (excluding the interested stockholder) of the corporation
                satisfies certain tests and, with limited exceptions, the interested
                stockholder has not become the beneficial owner of additional voting
                shares of the corporation after becoming an interested stockholder
                and
                before the business combination is consummated.</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">A corporation
                may
                expressly exclude itself from application of the foregoing business
                combination provisions of Nevada law, but DGSE has not done so.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Section 203 of
                the
                Delaware General Corporation Law prohibits &#8220;business combinations,&#8221;
                including mergers, consolidations, sales and leases of assets, issuances
                of securities and similar transactions, by a corporation or a subsidiary
                with an &#8220;interested stockholder&#8221; who beneficially owns 15% or more of a
                corporation&#8217;s voting stock, for three years after the person or entity
                becomes an interested stockholder, unless (i) prior to the time that
                the
                stockholder became an interested stockholder, the board of directors
                approved either the business combination or the transaction that
                resulted
                the stockholder becoming an interested stockholder;<br>(ii) after
                completion of the transaction in which the stockholder became an
                interested stockholder, the interested stockholder holds at least
                85% of
                the voting stock of the corporation not including: (a) shares held
                by
                directors who are also officers and (b) shares granted under certain
                employee benefit plans; or (iii) after the stockholder becomes an
                interested stockholder, the business combination is approved by the
                board
                of directors and the holders of at least 66&#160;2/3% of the outstanding
                voting stock, excluding shares held by the interested stockholder.
                A
                Delaware corporation may elect in its Certificate of Incorporation
                not to
                be governed by Section 203. The Superior Certificate of Incorporation,
                however, does not contain such an opt-out
                provision.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">98</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>DGSE</strong></font></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Vote
                on Extraordinary Corporate
                Transactions</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Nevada law limits
                the
                acquisition of a &#8220;controlling interest&#8221; in a Nevada corporation. An
                acquiring person who acquires a controlling interest in an issuing
                corporation may not exercise voting rights on any control shares
                unless
                such voting rights are conferred by a majority vote of the disinterested
                stockholders of the issuing corporation at a special or annual meeting
                of
                the stockholders. In the event that the control shares are accorded
                full
                voting rights and the acquiring person acquires control shares with
                a
                majority or more of all the voting power, any stockholder, other
                than the
                acquiring person, who does not vote in favor of authorizing voting
                rights
                for the control shares is entitled to demand payment for the fair
                value of
                such person&#8217;s shares.</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                a
                &#8220;controlling interest&#8221; means the ownership of outstanding voting shares of
                an issuing corporation sufficient to enable the acquiring person,
                individually or in association with others, directly or indirectly,
                to
                exercise (1) one-fifth (1/5) or more but less than one-third (1/3),
                (2)
                one-third (1/3) or more but less than a majority, or (3) a majority
                or
                more of the voting power of the issuing corporation in the election
                of
                directors. &#8220;Control shares&#8221; are those outstanding voting shares of an
                issuing corporation that an acquiring person acquires or offers to
                acquire
                in an acquisition and acquires within 90 days immediately preceding
                the
                date when the acquiring person became an acquiring person. </div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">The control share
                provisions do not apply if the corporation opts out of such provisions
                in
                the Articles of Incorporation or Bylaws of the corporation in effect
                on
                the tenth day following the acquisition of a controlling interest
                by an
                acquiring person. DGSE has not opted out of the control share acquisition
                statute.</div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                unless the Articles of Incorporation or the board of directors require
                a
                greater vote, Nevada law generally requires the affirmative vote
                of the
                holders of a majority of the outstanding shares in each class entitled
                to
                vote to approve a merger. The DGSE Articles and Bylaws do not contain
                any
                specific provisions relating to stockholders approval of mergers.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law,
                unless otherwise provided in the Certificate of Incorporation, a
                sale or
                other disposition of all or substantially all of the corporation&#8217;s assets,
                a merger or a consolidation of the corporation with another corporation
                requires the affirmative vote of a majority of the board of directors
                (except in certain limited circumstances) and, with certain exceptions,
                the affirmative vote of a majority of the outstanding shares entitled
                to
                vote on the matter. </div>
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Furthermore, under
                Delaware law, unless otherwise provided in the corporation&#8217;s Certificate
                of Incorporation, approval of the stockholders of a surviving corporation
                in a merger is not required if: <br>(i) the agreement of merger does not
                amend in any respect the Certificate of Incorporation of the surviving
                corporation; (ii) the shares outstanding immediately before the
                effectiveness of the merger are not changed by the merger; and (iii)
                either no shares of common stock of the surviving corporation and
                no
                shares, securities or obligations convertible into this stock are
                to be
                issued or delivered under the plan of merger, or the authorized unissued
                shares or the treasury shares of common stock of the surviving corporation
                to be issued or delivered under the plan of merger, plus those initially
                issuable upon conversion of any other shares, securities or obligations
                to
                be issued or delivered under the plan do not exceed 20% of the shares
                of
                common stock of the surviving corporation outstanding immediately
                prior to
                the merger. </div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">99</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>DGSE</strong></font></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Interested
                Party Transactions</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                a
                contract or transaction between a corporation and one or more of
                its
                directors or officers, or between a corporation and any other corporation,
                partnership, association, or other organization in which one or more
                of
                its directors or officers are directors or officers, or have a financial
                interest, is not void or voidable solely for that reason, or solely
                because the interested director or officer was present, participates
                or
                votes at the board or board committee meeting that authorizes the
                contract
                or transaction, if the director&#8217;s or officer&#8217;s interest in the contract or
                transaction is known to the board of directors or stockholders, and
                the
                contract or transaction is fair to the corporation at the time it
                is
                authorized or approved.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law, no
                contract or transaction that is between a corporation and one or
                more of
                its directors or officers, between a corporation and another corporation
                in which one or more of the corporation&#8217;s directors or officers are
                directors or officers, or between a corporation and another corporation
                in
                which one or more of the corporation&#8217;s directors or officers has a
                financial interest is void or voidable solely because of such relationship
                or interest, or solely because the director or officer is present
                at or
                participates in the meeting of the board of directors or committee
                that
                authorizes the contract or transaction, or solely because the director&#8217;s
                or officer&#8217;s vote was counted for this purpose, if one or more of the
                following is true: (i)&#160;the material facts of the contract or
                transaction and the director&#8217;s or officer&#8217;s relationship or interest are
                disclosed to or known by the board of directors or a committee of
                the
                board of directors, and the board of directors or the committee in
                good
                faith authorizes the contract or transaction by an affirmative vote
                of the
                majority of the disinterested directors (even though these directors
                are
                less than a quorum); (ii) the material facts of the contract or
                transaction and the director&#8217;s or officer&#8217;s relationship or interest are
                disclosed to or known by the stockholders entitled to vote on the
                matter
                and they specifically approve in good faith the contract or transaction;
                or (iii) the contract or transaction is fair to the corporation as
                of the
                time it was authorized, approved or
                ratified.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">100</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><br></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="230">
            </td>
            <td width="12">
            </td>
            <td width="225">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>DGSE</strong></font></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="300" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="307">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="300">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="3" valign="top" width="624" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 5.35pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Inspection
                of Books and Records</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="307">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Nevada law,
                any
                person who has been a stockholder of record of a Nevada corporation
                for at
                least six months immediately preceding a demand, or any person holding
                or
                authorized in writing by the holders of, at least five percent of
                all of
                its outstanding shares, upon at least five days&#8217; written demand is
                entitled to inspect the copy certified by the secretary of state
                of its
                articles of incorporation, and all amendments thereto; a copy certified
                by
                an officer of the corporation of its bylaws and all amendments thereto;
                and a stock ledger, revised annually, containing the names of all
                persons
                who are stockholders, places of residence, and number of shares held
                by
                them respectively. The inspection rights authorized by this provision
                of
                the Nevada Revised Statutes may be denied to a stockholder upon the
                stockholder&#8217;s refusal to furnish to the corporation an affidavit that the
                inspection is not desired for any other purpose other than the business
                of
                the corporation. In addition, any stockholder of a Nevada corporation
                owning not less than 15 percent of all issued and outstanding shares,
                or
                who has been authorized in writing by the holders of at least 15
                percent
                of all its issued and outstanding shares, upon at least five days
                written
                demand, is entitled to inspect the books of account and all financial
                records of the corporation, to make extracts therefrom, and to conduct
                an
                audit of such records. This right may not be limited in the articles
                or
                bylaws of any corporation but may be denied to any stockholder upon
                the
                stockholder&#8217;s refusal to furnish the corporation an affidavit that such
                inspection, extracts or audit is not desired for any purpose not
                related
                to the stockholder&#8217;s interest in the corporation as a stockholder.
                However, the right to inspect and audit financial records does not
                apply
                to any corporation listed and traded on any recognized stock exchange
                or
                to any corporation that furnishes to its stockholders a detailed,
                annual
                financial statement.</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="top" width="300">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">Under Delaware
                law,
                any stockholder is entitled to inspect and copy books and records,
                including the corporation&#8217;s stock ledger and a list of its stockholders,
                as long as the inspection is for a proper purpose and during the
                usual
                hours of business, and the demand is made in writing and under
                oath.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">101</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>INFORMATION
      REGARDING DGSE
      COMPANIES, INC.</strong></font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>DESCRIPTION OF DGSE
      CAPITAL STOCK</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following is a summary of the rights of DGSE common stock and related provisions
      of DGSE&#8217;s articles of incorporation and bylaws. This summary is not complete.
      For more detailed information, please see DGSE&#8217;s articles of incorporation and
      bylaws, which are filed as exhibits to the registration statement of which
      this
      joint proxy statement/prospectus forms a part.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to DGSE&#8217;s articles of incorporation, DGSE&#8217;s authorized capital stock consists of
      10,000,000 shares of common stock, par value $0.01 per share. DGSE&#8217;s proposal
      no. 2 in this joint proxy statement/prospectus would increase the number of
      authorized shares of capital stock to 30,000,000 shares of common stock, par
      value $0.01 per share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      [&#9679;], 2007, 4,913,290 shares of DGSE common stock were issued and
      outstanding.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Dividend
      Rights</i>. The holders of outstanding shares of DGSE common stock are entitled
      to receive dividends out of assets legally available at the time and in the
      amounts as DGSE&#8217;s board of directors may from time to time determine. To date,
      DGSE has not paid any cash dividends.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Voting
      Rights</i>. Each holder of shares of DGSE common stock is entitled to one vote
      for each share held on all matters submitted to a vote of DGSE stockholders.
      Pursuant to the requirements of the Nevada Private Corporations Law and DGSE&#8217;s
      bylaws, the holders of DGSE common stock may cumulate their votes for the
      election of directors of DGSE if any stockholder gives notice, at the annual
      meeting prior to voting, of his or her intention to cumulate his or her
      votes.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>No
      Preemptive or Similar Rights</i>. The common stock is not entitled to preemptive
      rights and is not subject to conversion or redemption.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Right
      to Receive Liquidation Distributions</i>. Upon a liquidation, dissolution or
      winding-up of DGSE, the assets legally available for distribution to
      stockholders are distributable ratably among the holders of the DGSE common
      stock outstanding at that time.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Amendment
      of Bylaws</i>. The DGSE stockholders have the right to adopt, amend or repeal
      the DGSE bylaws. Subject to this right of the DGSE stockholders, the DGSE board
      of directors may adopt, amend or repeal the bylaws, other than to change the
      authorized number of directors.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Anti-Takeover
      Provisions</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">See the
      section entitled &#8220;Comparison of Rights of DGSE Stockholders and Superior
      Stockholders&#8221; beginning on page 93 for a discussion of provisions contained in
      DGSE&#8217;s articles of incorporation, bylaws and Nevada law that may delay, defer or
      discourage another party from acquiring control of DGSE.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Transfer
      Agent</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      transfer agent for DGSE common stock is Registrar &amp; Transfer Company.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Listing</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      common stock is quoted on the Nasdaq Capital Market under the symbol
&#8220;DGSE&#8221;.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>INFORMATION REGARDING
      DGSE&#8217;S BUSINESS</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      sells jewelry, bullion products and rare coins to both retail and wholesale
      customers throughout the United States and makes uncollateralized and
      collateralized loans to individuals. DGSE&#8217;s products are marketed through its
      facilities in Dallas and Carrollton, Texas; Albuquerque, New Mexico; and Mt.
      Pleasant South Carolina and through its internet web sites.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      operates three internet sites on the World Wide Web. Through DGSE.com, DGSE
      operates a virtual store and a real-time auction of its jewelry products.
      Customers and DGSE buy and sell items of jewelry and are free </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">102</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">to
      set their own prices in an interactive
      market. DGSE also offers customers the key unlimited trading power to buy and
      sell precious metal assets. Customers have access to DGSE&#8217;s competitive two-way
      markets in all of the most popularly traded precious metal products as well
      as
      current quotations for precious metals prices on its internet site
      USBullionExchange.com. FairchildWatches.com provides wholesale customers a
      virtual catalog of DGSE&#8217;s fine watch inventory. Over 7,500 items are available
      for sale on DGSE&#8217;s internet sites, including $10,000,000 in
      diamonds.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      wholly-owned subsidiary National Jewelry Exchange, Inc., which we refer to
      as
      NJE, operates a pawn shop in Carrollton, Texas. DGSE has focused the operations
      of NJE on sales and pawn loans of jewelry products.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      January 2005 DGSE began offering unsecured payday loans through its wholly
      owned
      subsidiary American Pay Day Centers, Inc. which operates three locations in
      New
      Mexico.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In July
      2004 DGSE sold the goodwill and trade name of Silverman Consultants, Inc.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Products and
      Services</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      jewelry operations include sales to both wholesale and retail customers. DGSE
      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, DGSE purchases inventory
      from pawn shops and individuals.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      bullion and rare coin 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.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Bullion
      and rare coin 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 30.0%
      of
      total revenues for 2005, 26.4% in 2004 and 25.4% in 2003 (for further details,
      see the section entitled &#8220;Summary Selected Historical Consolidated Financial
      Data of DGSE&#8221; beginning on page 13).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      December 2000 DGSE 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., which we refer to as CGDE. CGDE operates in
      a
      leased facility located in Mt. Pleasant, South Carolina.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      makes pawn loans through its headquarter facility and through its National
      Jewelry Exchange, Inc. subsidiary. Pawn loans are made on the pledge of tangible
      personal property, primarily jewelry, for one month with an automatic sixty-day
      extension period, which we refer to as the 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 DGSE&#8217;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.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      January 2005 DGSE began offering unsecured payday loans through its wholly-owned
      subsidiary, American Pay Day Centers, Inc. Payday loans are made based on a
      limited review of several factors, including a customer&#8217;s employment and
      check-writing history, and generally are made for periods of less than 30 days,
      averaging about 14&#160;days. The services charge for these loans is $25 per
      $100 loaned. DGSE currently operates three Mono-line payday loan stores in
      New
      Mexico.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;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 DGSE sells its
      products and an auction site for jewelry and other products. The internet store
      functions as a CyberCash&#8482; authorized site which allows customers to purchase
      products automatically and securely online. Auctions close at least five times
      per week.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;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.
      In
      March 2005 this web site was significantly expanded to allow customers to enter
      immediate real-time buy and sell orders in dozens of precious metal products.
      This newly redesigned functionality allows our customers to fix prices in real
      time and to manage their precious metals portfolios in a comprehensive
      way.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">103</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">DGSE
      also offers wholesale customers a
      virtual catalog of its fine watch inventory through its web site
      Fairchildwatches.com.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      did
      not have any customer or supplier that accounted for more than 10% of total
      sales or purchases during 2005, 2004 or 2003.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      2003 DGSE discontinued the operations of its internet software company eye
      media, inc. and its financial consulting company DLS Financial Services, Inc.
      These two companies had not solicited or received any new clients during the
      past two years and do not anticipate doing so in the future. Silverman
      Consultants, Inc., which offered consulting liquidation services, was sold
      in
      July 2004.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Sales and
      Marketing</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">All DGSE
      activities rely heavily on local television, radio and print media advertising.
      Marketing activities emphasize DGSE&#8217;s broad and unusual array of products and
      services and the attractiveness of its pricing and service.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      markets its bullion and rare coin 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 &#8220;cash on confirmation&#8221; 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 or rare coin trades are customarily
      delivered within three days of the order or upon clearance of funds depending
      on
      the customer&#8217;s credit standing. Consequently, there was no significant backlog
      for bullion orders as of December 31, 2005, 2004 or 2003. Company backlogs
      for
      fabricated jewelry products were also not significant as of December 31, 2005,
      2004 and 2003.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Seasonality</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      retail and wholesale jewelry business is seasonal. DGSE realized 42.5%, 32.5%
      and 36.4% of its annual sales in the fourth quarters of 2005, 2004 and 2003,
      respectively.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">While
      DGSE&#8217;s bullion and rare coin 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.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Competition</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      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 DGSE compete with numerous other retail jewelers and consumer
      lenders in Dallas, Texas and Mt. Pleasant, South Carolina and the surrounding
      areas.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      bullion and rare coin industry in which DGSE competes is dominated by
      substantially larger enterprises which wholesale bullion, rare coin and other
      precious metal products.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      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.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Employees</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      October 31, 2006, DGSE employed 51 individuals, all of whom were full time
      employees.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Available
      Information</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      website is located at www.dgse.com. Through this website, DGSE makes available
      free of charge all of its Securities and Exchange Commission filings. In
      addition, a complete copy of DGSE&#8217;s Code of Ethics is available through this
      website.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">104</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>Properties</strong></font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE owns
      a
      6,000 square foot building in Dallas, Texas which houses retail and wholesale
      jewelry, consumer lending, bullion and rare coin 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 $427,756
      as of December 31, 2005. DGSE also leases 2,000 square feet of space in an
      office complex next door to its headquarters in Dallas, Texas. The lease expires
      on November 30, 2008 and requires monthly lease payments in the amount of
      $2,707.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE leases
      a 3,600 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 $3,290.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">CGDE
      operates in a leased 2,678 square foot facility in Mt. Pleasant, South Carolina.
      The lease expires in June 2010 and requires monthly lease payments in the amount
      of $4,575.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">American
      Pay
      Day Centers operates in three leased facilities averaging 800 square feet in
      Albuquerque, New Mexico. The leases expire on February 28, 2007, September
      28,
      2008 and October 31, 2007 and requires monthly lease payments in the amount
      of
      $1,300, $1,400 and $1,000, respectively.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE 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.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Legal
      Proceedings</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE is
      not
      a party to any material pending legal proceedings which are expected to have
      a
      material adverse effect on DGSE and none of its property is the subject of
      any
      material pending legal proceedings.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Financial Information
      About Segments</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Financial
      information about DGSE&#8217;s business segments can be found under the caption
&#8220;Management&#8217;s Discussion and Analysis of Financial Condition and Results of
      Operations of DGSE &#8212; General&#8221; beginning on page&#160;106.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Financial Information
      About Geographic Areas</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Primarily
      all of DGSE&#8217;s revenues from external customers currently are attributed to
      DGSE&#8217;s domestic operations, and primarily all of DGSE&#8217;s long-lived tangible
      assets currently are maintained in the United States.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>MARKET PRICE OF AND
      DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS &#8212; DGSE</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Market
      Information</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      29,
      1999 DGSE&#8217;s Common Stock began trading on the NASDAQ SmallCap Market (now the
      Nasdaq Capital Market) under the symbol &#8220;DGSE&#8221;. Previously, DGSE&#8217;s Common Stock
      was traded on the American Stock Exchange (&#8220;ASE&#8221;) pursuant to its &#8220;Emerging
      Companies&#8221; listing program under the symbol &#8220;DLS.EC&#8221;. 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.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">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 and interim quarterly periods were:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="87">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="25">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="24">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="26">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="26">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="26">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="26">
            </td>
            <td width="1">
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          <tr>
            <td valign="bottom" width="116">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="90" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
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            <td valign="bottom" width="16">&#160;</td>
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              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
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            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="90" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
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            <td valign="bottom" width="1">&#160;</td>
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          <tr>
            <td valign="bottom" width="116" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Quarter</strong></div>
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            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="36">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>High</strong></div>
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            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="36">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Low</strong></div>
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            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="36">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>High</strong></div>
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            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="36">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Low</strong></div>
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            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="36">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>High</strong></div>
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            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Low</strong></div>
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            <td valign="bottom" width="1">&#160;</td>
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          <tr>
            <td valign="bottom" width="116">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
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            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="36" style="border-top: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="36" style="border-top: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="36" style="border-top: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="36" style="border-top: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="36" style="border-top: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="36">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="116">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">First</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.49</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">1.50</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">3.05</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.21</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="116">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Second</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.85</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.09</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">3.15</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.08</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="116">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Third</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">3.34</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">1.95</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.78</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.18</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="116">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Fourth</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="33">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">4.48</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">2.10</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">3.38</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="34">
              <div style="MARGIN: 0pt" align="right">1.85</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On [&#9679;],
      2007, the closing sales price for DGSE&#8217;s common stock was $[&#9679;] per share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">105</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>Holders</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On [&#9679;],
      2007, DGSE had [&#9679;] stockholders of record. Within the holders of record of
      Superior&#8217;s common stock are depositories such as Cede &amp; Co. that hold shares
      of stock for brokerage firms which, in turn, hold shares of stock for beneficial
      owners.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      combination is expected to result in the issuance of approximately 3.7 million
      shares of DGSE&#8217;s common stock to the Superior stockholders. This corresponds to
      approximately 73% of DGSE&#8217;s currently outstanding shares of common stock. In
      addition, the combination is expected to result in the issuance of options
      to
      acquire 98,112&#160;shares of DGSE&#8217;s common stock to the Superior option holders
      and warrants to acquire 1,708,634 shares of DGSE&#8217;s common stock to SIBL and its
      designees. The table in the section entitled &#8220;Ownership Of DGSE Capital Stock&#8221;
beginning on page 114 indicates the potential effect of the combination on
      the
      stockholdings in the combined company of DGSE&#8217;s officers, directors and
      nominees.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Dividends</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      the past two years, DGSE has not declared any dividends with respect to its
      common stock. DGSE 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. DGSE&#8217;s primary credit facility
      prohibits DGSE from declaring or paying any dividends on its common stock so
      long as the credit facility is in place or any amounts are owed to the
      lender.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Securities Authorized
      for Issuance Under Equity Compensation Plans</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      has
      granted options to certain of its officers, directors and key employees to
      purchase shares of DGSE&#8217;s common stock. Each option vests according to a
      schedule designed by the board of directors of DGSE, 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
      DGSE&#8217;s common stock on the date of grant. These option plans have been approved
      by DGSE&#8217;s stockholders.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table summarizes options outstanding as of December 31, 2006:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="163">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="90">
            </td>
            <td width="12">
            </td>
            <td width="22">
            </td>
            <td width="77">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="70">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="218" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Plan
                Category</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="123" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Number
                of Securities to Be<br>Issued Upon Exercise
                of<br>Outstanding Options,<br>Warrants and Rights</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="132" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Weighted
                Average Exercise<br>Price of
                Outstanding<br>Options, Warrants and Rights</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="96" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Number
                of Securities<br>Available for
                Future<br>Issuance</strong></div>
            </td>
            <td valign="bottom" width="2">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="218">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="123">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="132">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="96">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="218">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Equity
                compensation plan approved by stockholders</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="120">
              <div style="MARGIN: 0pt" align="right">1,433,134</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="29">&#160;</td>
            <td valign="bottom" width="103">
              <div style="MARGIN: 0pt" align="right">$2.05&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">266,833</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="218">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="120">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="29">&#160;</td>
            <td valign="bottom" width="103">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="93">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="218">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Equity
                compensation plan not approved by stockholders</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="120">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="29">&#160;</td>
            <td valign="bottom" width="103">
              <div style="MARGIN: 0pt" align="right">&#8212;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="218">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="120">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="29">&#160;</td>
            <td valign="bottom" width="103">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="93">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="218">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt"><strong>Total</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="120">
              <div style="MARGIN: 0pt" align="right">1,433,134</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="29">&#160;</td>
            <td valign="bottom" width="103">
              <div style="MARGIN: 0pt" align="right">$2.05&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">266,833</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE OF
      DGSE</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">None.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>MANAGEMENT&#8217;S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
      DGSE</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>General</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      bullion trading operation has the ability to significantly increase or decrease
      sales by adjusting the &#8220;spread&#8221; 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, DGSE 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.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">106</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">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&#8217; 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 investments 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.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      2004, DGSE sold the operations of Silverman Consultants, Inc. and, during 2003,
      DGSE 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, 2004 and 2003, there were no operating
      assets to be disposed of or liabilities to be paid in completing the disposition
      of these operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Management
      identifies reportable segments by product or service offered. Each segment
      is
      managed separately. Corporate and other includes certain general and
      administrative expenses not allocated to segments, pay day lending and pawn
      operations. DGSE&#8217;s operations by segment were as follows:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="93">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="12">
            </td>
            <td width="7">
            </td>
            <td width="34">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="22">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="51">
            </td>
            <td width="12">
            </td>
            <td width="9">
            </td>
            <td width="35">
            </td>
            <td width="12">
            </td>
            <td width="6">
            </td>
            <td width="38">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="125">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Retail<br>Jewelry</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Wholesale<br>Jewelry</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Bullion</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Rare<br>Coins</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="73" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Discontinued<br>Operations</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Corporate<br>and
                Other</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Consolidated</strong></div>
            </td>
            <td valign="bottom" width="4">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="125">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="8" valign="bottom" width="186">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(amounts
                in thousands)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="4">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="73">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2005</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">14,917</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">4,781</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">10,688</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">4,575</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">679</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">35,640</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2004</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">14,601</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">4,451</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">7,482</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">1,574</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">534</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">28,642</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2003</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">13,179</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">4,218</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">6,648</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">1,014</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">367</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">25,426</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income (loss)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2005</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">195</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">250</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">79</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">267</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(306</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">485</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2004</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">267</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">266</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">63</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">92</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">(249</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(88</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">351</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2003</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">162</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">200</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">46</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">34</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">(117</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(849</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">(524</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Identifiable&#160;Assets</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2005</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">9,015</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">1,733</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">209</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">203</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">670</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">11,830</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2004</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">7,519</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">1,679</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">117</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">158</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">802</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">10,282</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2003</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">7,988</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">1,737</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">129</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">588</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">530</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">11,072</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Capital&#160;Expenditures</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2005</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">202</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">83</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">285</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2004</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">85</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">92</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2003</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">33</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">34</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Depreciation
                and Amortization</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2005</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">107</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">25</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">142</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2004</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">92</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">22</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">25</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">9</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">148</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="125">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">2003</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="41">
              <div style="MARGIN: 0pt" align="right">130</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">22</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">27</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">8</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">187</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Recent
      Events</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      credit facility was amended in August 2006 to increase the available line of
      credit to $4,000,000. If the proposed acquisition of Superior Galleries, Inc.
      is
      consummated, DGSE will have available an additional line of credit in the amount
      of up to $6,500,000 through Superior&#8217;s credit facility with Stanford Financial
      Group Company.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On July
      17, 2006, DGSE announced that it had executed a definitive agreement to acquire
      all of the issued and outstanding stock of Superior Galleries, Inc. On January
      9, 2007, DGSE announced that it had executed a revised definitive agreement
      to
      acquire all of the issued and outstanding stock of Superior Galleries, Inc.
      As
      of December 31, 2006, DGSE had incurred $265,000 in legal and other cost related
      to this acquisition. This cost is included in the balance sheet caption &#8220;Other
      assets&#8221;. In the event this transaction does not close, this and any additional
      cost incurred related to this transaction will be expensed and charged against
      operating results during the period in which the transaction is
      terminated.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">107</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>Results
      of
      Operations</strong></font></div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><i>Nine Months Ended
      September 30, 2006 Compared to Nine Months Ended September 30, 2005</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Sales
      increased by $11,094,848, or 54.2%, during the nine months ended September
      30,
      2006 as compared to 2005. This increase was primarily the result of a
      $7,581,000, or 136.9%, increase in bullion sales, a $1,095,000, or 11.2%,
      increase in retail jewelry sales, a $813,000, or 27.4%, increase in wholesale
      jewelry sales and a $1,764,000, or 93.1%, increase in the sale of rare coin
      products. The increase in both retail and wholesale jewelry sales were due
      to
      higher gold prices and improved activity from our customers. The increase in
      rare coin and bullion sales were the result of an increase in gold prices,
      increased volatility in the bullion market and DGSE&#8217;s increased focus on these
      segments of our business. Consumer loan service fees increased $48,073, or
      18.7%, in 2006 due to an increase in pay day loans outstanding during the
      period. Cost of goods as a percentage of sales increased from 81.1% in 2005
      to
      85.6 % in 2006. This increase was due to the increase in rare coin and bullion
      revenue as a percentage of total sales.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Selling,
      general and administrative expenses increased by $436,111, or 13.3%, during
      the
      nine months ended September 30, 2006 as compared to 2005. This increase was
      primarily due to an increase in staff and payroll related cost of $256,000,
      higher advertising cost of $105,000 and $75,000 in cost related to the new
      pay
      day loan stores. The increase in staff was necessary to maintain a high level
      of
      customer service as sales increased and the opening of three pay day loan
      stores. The increase in advertising was necessary in order to attract new
      customers in our local markets. Depreciation and amortization decreased by
      $29,527, or 21.4%, during 2006 due to certain assets becoming fully
      depreciated.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Income taxes
      are provided at the corporate rate of 34% for both 2006 and 2005.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><i>Three Months Ended
      September 30, 2006 Compared to Three Months Ended September 30, 2005</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; FONT-FAMILY: Times New (W1)"><font style="FONT-FAMILY: Times New (W1)">Sales
      increased by $2,368,207, or 33.2%,
      during the three months ended September 30, 2006 as compared to 2005. This
      increase was primarily the result of a $1,563,000, or 79.5%, increase in bullion
      sales, a $457,000, or 45.0%, increase in wholesale jewelry sales and a $409,000,
      or 55.9%, increase in the sale of rare coin products during the three months
      ended September 30, 2006 as compared to 2005. The overall increase in jewelry
      sales was due to higher gold prices and improved activity from our customers.
      The increase in rare coin and bullion sales were the result of an increase
      in
      gold prices, increased volatility in the bullion market and DGSE&#8217;s increased
      focus on these segments of our business. Consumer loan service fees increased
      $25,886, or 30.3%, in 2006 due to an increase in pay day loans outstanding
      during the period. Cost of goods as a percentage of sales increased from 81.9%
      in 2005 to 85.1% in 2006. This increase was due to the increase in rare coin
      and
      bullion revenue as a percentage of total sales.</font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">Selling,
      general and administrative
      expenses increased by $126,673, or 11.3%, during the three months ended
      September 30, 2006 as compared to 2005. This increase was primarily due to
      an
      increase in staff and payroll related cost of $42,000, higher advertising cost
      of $42,000 and $13,000 in cost related to the new pay day loan stores. The
      increase in staff was necessary to maintain a high level of customer service
      as
      sales increased and the opening of three pay day loan stores. The increase
      in
      advertising was necessary in order to attract new customers in our local
      markets. Depreciation and amortization decreased by $16,671, or 36.1%, during
      the three months ended September 30, 2006 as compared to 2005, due to certain
      assets becoming fully depreciated.</font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Income taxes
      are provided at the corporate rate of 34% for both 2006 and 2005.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Historically,
      changes in the market prices of precious metals have had a significant impact
      on
      both revenues and cost of sales in the rare coin and precious metals segments
      in
      which we operate. It is expected that due to the commodity nature of these
      products, future price changes for precious metals will continue to be
      indicative of our performance in these business segments. Changes in sales
      and
      cost of sales in the retail and wholesale jewelry segments are primarily
      influenced by the national economic environment. It is expected that this trend
      will continue in the future due to the nature of these products.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><i>Fiscal Year Ended 2005
      vs. 2004</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Revenues
      increased by $6,998,000 (24.4%) in 2005. This increase was primarily the result
      of a $3,206,000 (42.8%) increase in the sale of precious metals products, a
      $316,000 (2.1%) increase in retail jewelry sales, a $330,000 (7.4%) increase
      in
      wholesale jewelry sales and a $3,001,000 (190.6%) increase in the sale of rare
      coin products. These increases were the result of a nation-wide improvement
      in
      the retail environment, a 20.0% price increase in gold products and a 5% price
      increase in diamonds and other jewelry products. Pawn and pay day loan service
      fees increased by $64,000 in 2005 due to the opening of three pay day loan
      stores during the year. Cost of </div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">108</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">goods
      as a percentage of sales increased
      from 80.1% in 2004 to 82.4% in 2005 and gross margins decreased from 19.9%
      in
      2004 to 17.6% in 2005. These changes were due to the increase in the precious
      metals sales volume as a percentage of total sales and the increase in the
      cost
      of gold products.</font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Selling,
      general and administrative expenses increased by $652,000 or 13.9%. This
      increase was primarily due to an increase in staff ($373,000), higher
      advertising cost ($85,000) and the opening of three pay day loan stores
      ($194,000). The increase in staff was necessary to maintain a high level of
      customer service as sales increased. The increase in advertising was necessary
      in order to attract new customers in our local markets. Interest expense
      increased $43,000 due to an increase in debt outstanding during the year and
      higher interest rates.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Historically,
      changes in the market prices of precious metals have had a significant impact
      on
      both revenues and cost of sales in the rare coin and precious metals segments
      in
      which DGSE operates. It is expected that due to the commodity nature of these
      products, future price changes for precious metals will continue to be
      indicative of DGSE&#8217;s performance in these business segments. Changes in sales
      and cost of sales in the retail and wholesale jewelry segments are primarily
      influenced by the national economic environment. It is expected that this trend
      will continue in the future due to the nature of these product.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Marketable
      equity securities are comprised of investments in three small companies with
      thinly traded securities and low market prices. These investments 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&#8217; 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 of its
      investments in these securities was other than temporary, and as a result these
      investments 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 tax benefits.
      This determination was based on the length of time during which the trading
      range of these securities was below their cost. During 2005 these securities
      traded at prices which were both higher and lower than the closing market prices
      at December 31, 2005. As a result, management determined that the decline in
      value as of December 31, 2005 was temporary. This determination was based on
      the
      conclusion that the quoted market prices for these investments provide the
      most
      reliable measure of their respective values.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During 2004
      DGSE sold the goodwill ($314,003), and trade name of Silverman Consultants,
      Inc.
      The sale of this goodwill resulted in a gain on the disposal of this reporting
      unit in the amount of $39,098. This gain is included in the caption (Other
      income) in the consolidated statements of operations for the year ended December
      31, 2004.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Loss from
      discontinued operations during 2004, and 2003 in the amounts of $248,890 and
      $117,097 net of income taxes is the combined results of operations of three
      subsidiaries of DGSE. DLS Financial Services, Inc. which offered financial
      consulting services, and eye media, inc. which offered internet software have
      not solicited or received any new clients during the past two years and do
      not
      anticipate doing so in the future. Silverman Consultants, Inc., which offered
      consulting liquidation services, was sold in July 2004.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><i>Fiscal year ended 2004
      vs. 2003</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Revenues
      increased by $3,216,670 (12.7%) in 2004. This increase was primarily the result
      of a $834,293 (12.6%) increase in the sale of precious metals products, a
      $1,422,537 (10.8%) increase in retail jewelry sales, a $233,410 (5.5%) increase
      in wholesale jewelry sales and a $559,268 (55.1%) increase in the sale of rare
      coin products. These increases were the result of a nation-wide improvement
      in
      the retail environment, a 4.8% price increase in gold products and a 5% price
      increase in diamonds and other jewelry products. Pawn service fees increased
      by
      $74,619 in 2004 due to an increase in pawn loans outstanding during the year.
      Cost of goods as a percentage of sales increased from 79.4% in 2003 to 80.1%
      in
      2004 and gross margins decreased from 20.6% in 2003 to 19.9% in 2004. These
      changes were due to the increase in the precious metals sales volume as a
      percentage of total sales and the increase in the cost of gold products.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Selling,
      general and administrative expenses increased by $671,000 or 15.9%. This
      increase was primarily due to an increase in staff ($301,000), higher
      advertising cost ($97,000), higher property taxes ($50,000) and higher legal
      and
      professional costs ($24,000). The increase in staff was necessary to maintain
      a
      high level of customer service as sales increased. The increase in advertising
      was necessary in order to attract new customers in our local markets. The
      property tax increase was due to higher local tax rates and an increase in
      taxable assets. The increase in legal and professional costs was due to new
      regulatory requirements. Depreciation and amortization decreased by $37,000
      during 2004 due to certain assets becoming fully depreciated. Interest expense
      declined $21,000 due to a reduction in debt outstanding during the year.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">109</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">Historically,
      changes in the market prices
      of precious metals have had a significant impact on both revenues and cost
      of
      sales in the rare coin and precious metals segments in which DGSE operates.
      It
      is expected that due to the commodity nature of these products, future price
      changes for precious metals will continue to be indicative of DGSE&#8217;s performance
      in these business segments. Changes in sales and cost of sales in the retail
      and
      wholesale jewelry segments are primarily influenced by the national economic
      environment. It is expected that this trend will continue in the future due
      to
      the nature of these product.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Marketable
      equity securities are comprised of investments in three small companies with
      thinly traded securities and low market prices. These investments 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&#8217; 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 of its
      investments in these securities was other than temporary, and as a result these
      investments 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 tax benefits.
      This determination was based on the length of time during which the trading
      range of these securities was below their cost. During 2004 these securities
      traded at prices which were both higher and lower than the closing market prices
      at December 31, 2004. As a result, management determined that the decline in
      value as of December 31, 2004 was temporary. This determination was based on
      the
      conclusion that the quoted market prices for these investments provide the
      most
      reliable measure of their respective values.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      2004 DGSE sold the goodwill ($314,003), and trade name of Silverman Consultants,
      Inc. The sale of this goodwill resulted in a gain on the disposal of this
      reporting unit in the amount of $39,098. This gain is included in the caption
      (Other income) in the consolidated statements of operations for the year ended
      December 31, 2004.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Loss
      from
      discontinued operations during 2004, and 2003 in the amounts of $248,890 and
      $117,097 net of income taxes is the combined results of operations of three
      subsidiaries of DGSE. DLS Financial Services, Inc. which offered financial
      consulting services, and eye media, inc. which offered internet software have
      not solicited or received any new clients during the past two years and do
      not
      anticipate doing so in the future. Silverman Consultants, Inc., which offered
      consulting liquidation services, was sold in July 2004.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Liquidity and Capital
      Resources</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      expects capital expenditures to total approximately $100,000 during the next
      twelve months. It is anticipated that these expenditures will be funded from
      working capital and DGSE&#8217;s credit facility. As of September 30, 2006 DGSE had no
      commitments outstanding for capital expenditures.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      event of significant growth in retail and or wholesale jewelry sales, the demand
      for additional working capital will expand due to a related need to stock
      additional jewelry inventory and increases in wholesale accounts receivable.
      Historically, vendors have offered DGSE extended payment terms to finance the
      need for jewelry inventory growth and management believes that DGSE will
      continue to do so in the future. Any significant increase in wholesale accounts
      receivable will be financed under DGSE&#8217;s bank credit facility.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      ability to finance its operations and working capital needs are dependent upon
      management&#8217;s ability to negotiate extended terms or refinance its debt. DGSE has
      historically renewed, extended or replaced short-term debt as it matures and
      management believes that DGSE will be able to continue to do so in the near
      future.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">From
      time
      to time, DGSE has adjusted its 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 DGSE&#8217;s investments in marketable securities may be
      liquidated in order to meet unforeseen working capital requirements.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On July
      17, 2006 DGSE announced that it had executed a definitive agreement to acquire
      all of the issued and outstanding stock of Superior Galleries, Inc. in a
      transaction valued at $14,000,000. As of September 30, 2006 DGSE had incurred
      $265,000 in legal and other costs related to this acquisition. DGSE expects
      to
      incur an additional $150,000 in legal and other costs related to this
      transaction before closing.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">110</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>Critical
      Accounting
      Policies</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">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:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt">Goodwill
      was accounted for in accordance with APB 16 &#8220;Business Combinations&#8221; (ABP 16) for
      acquisitions and SFAS No. 121 &#8220;Accounting for the Impairment of Long-Lived
      Assets and for Long Lived Assets to be Disposed Of&#8221; (SFAS 121) for the periodic
      evaluation of goodwill impairment. Purchase accounting required by APB&#160;16
      involved judgment with respect to the valuation of the acquired assets and
      liabilities in order to determine the final amount of goodwill. Management
      believes that the estimates that it has used to record prior acquisitions were
      reasonable and in accordance with APB 16.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Effective
      January 1, 2002, DGSE adopted Statement of Financial Accounting Standards (SFAS)
      No.&#160;141, Business Combinations, SFAS No. 142, Goodwill and Intangible
      Assets, and SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived
      Assets.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>SFAS No. 141, SFAS
      No.
      142 and SFAS No. 144</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Major
      provisions of theses statements and their effective dates are as follows:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">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;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">effective
      January 1, 2002, all previously
      recognized goodwill and intangible assets with indefinite lives will no longer
      be subject to amortization;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">effective
      January 1, 2002, goodwill and
      intangible assets with indefinite lives will be tested for impairment annually
      or whenever there is an impairment indicator; and</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">all
      acquired goodwill must be assigned to
      reporting units for purposes of impairment testing and segment
      reporting</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      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. DGSE 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
      DGSE
      are not impaired.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      assesses the impairment of investments and long-lived assets, which includes
      goodwill and property, plant and equipment, whenever events or changes in
      circumstances indicate that the carrying value may not be recoverable. Factors
      considered important which could trigger an impairment review include:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">(i)
      underperformance relative to expected historical or projected future operating
      results (ii) changes in the manner of use of the assets or the strategy for
      our
      overall business and (iii) negative industry or economic trends.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">When
      DGSE
      determines that the carrying value of goodwill and long-lived assets may not
      be
      recoverable, an impairment charge is recorded. Impairment is generally measured
      based on a projected discounted cash flow method using a discount rate
      determined by our management to be commensurate with the risk inherent in our
      current business model or prevailing market rates of investment securities,
      if
      available.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      performs a goodwill impairment test at the reporting unit level annually or
      more
      frequently if events occur which indicate a potential reduction in the fair
      value of a reporting unit&#8217;s net assets below its carrying value. To perform the
      impairment test DGSE estimated the fair value of the reporting unit using the
      expected present value of corresponding future cash flows. Impairment is deemed
      to exist if the net book value of a reporting unit exceeds its estimated fair
      value. As of December 31, 2005, DGSE performed its annual review for impairment
      of goodwill </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">111</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">related
      to its Fairchild acquisition. DGSE
      concluded that there was no evidence of impairment related to the Goodwill
      for
      this reporting unit.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Goodwill
      consists of the following:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="177">
            </td>
            <td width="12">
            </td>
            <td width="6">
            </td>
            <td width="38">
            </td>
          </tr>
          <tr>
            <td valign="top" width="236">&#160;</td>
            <td valign="top" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 1.65pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Wholesale<br>Segment</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="236">&#160;</td>
            <td valign="top" width="16">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="236">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Goodwill&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">$</div>
            </td>
            <td valign="bottom" width="51" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt" align="right">837,117</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Stock-based
      Compensation</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Prior to
      January 1, 2006, DGSE elected to follow Accounting Principles Board Opinion
      (APB) No.&#160;25, Accounting for Stock Issued to Employees, and related
      interpretations to account for its employee and director stock options, as
      permitted by Statement of Financial Accounting Standards (SFAS) No. 123,
      Accounting for Stock-Based Compensation. Effective January 1, 2006, DGSE adopted
      the fair value recognition provision of SFAS No.&#160;123 (revised 2004),
      Share-Based Payments, (SFAS No. 123(R)) for all share-based payment awards
      to
      employees and directors including employee stock options. In addition, DGSE
      has
      applied the provisions of Staff Accounting Bulletin No. 107 (SAB No. 107),
      issued by the Securities and Exchange Commission, in its adoption of SFAS
      No.&#160;123(R).</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE adopted
      SFAS No. 123(R) using the modified-prospective-transition method. Under this
      transition method, stock-based compensation expense recognized after the
      effective date includes: (1) compensation cost for all share-based payments
      granted prior to, but not yet vested as of January 1, 2006, based on the grant
      date fair value estimate in accordance with the original provisions of SFAS
      No.
      123, and (2) compensation cost for all share-based payments granted subsequent
      to January 1, 2006, based on the grant-date fair value estimate in accordance
      with the provision of SFAS No. 123. Results from prior periods have not been
      restated and do not include the impact of SFAS No. 123(R). Stock-based
      compensation expense under SFAS No. 123(R) for the first nine months of 2006
      was
      $0, relating to employee and director stock options and DGSE&#8217;s employee stock
      purchase plan. Stock-based compensation expense under the provision of APB
      No.
      25 for the first nine months of 2006 was insignificant.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stock-based
      compensation expense recognized each period is based on the value of the portion
      of share-based payment awards that is ultimately expected to vest during the
      period. SFAS No. 123(R) requires forfeitures to be estimated at the time of
      grant and revised, if necessary, in subsequent periods if actual forfeitures
      differ from those estimates. In DGSE&#8217;s <i>pro forma</i> disclosures required
      under SFAS No. 123 for periods prior to 2006, DGSE accounted for forfeitures
      as
      they occurred.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Upon
      adoption of SFAS No. 123(R), DGSE elected to use the Black-Scholes-Merton
      option-pricing formula to value share-based payments granted to employees
      subsequent to January 1, 2006 and elected to attribute the value of stock-based
      compensation to expense using the straight-line single option method. These
      methods were previously used for DGSE&#8217;s <i>pro forma</i> information required
      under SFAS No. 123.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On November
      10, 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff
      Position No. FAS 123(R)-3, &#8220;Transition Election Related to Accounting for Tax
      Effects of Share-Based Payment Awards&#8221;, which detailed an alternative transition
      method for calculating the tax effects of stock-based compensation pursuant
      to
      SFAS No. 123(R). This alternative transition method included simplified methods
      to establish the beginning balance of the additional paid-in capital pool (APIC
      pool) related to the tax effects of employee stock-based compensation and to
      determine the subsequent impact on the APIC pool and Consolidated Statement
      of
      Cash Flows of the tax effects of employee stock-based compensation awards that
      are outstanding upon adoption of SFAS No. 123(R). As all options outstanding
      vested prior to December 31, 2005, DGSE has not recorded the tax effects of
      employee stock-based compensation and has made no adjustments to the APIC
      pool.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Prior to
      the
      adoption of SFAS No. 123(R) tax benefits of deductions resulting from the
      exercise of stock options were required to be presented as operating cash flows
      in the Consolidated Statement of Cash Flows. SFAS No. 123(R) requires the cash
      flows resulting from the tax benefits resulting from tax deductions in excess
      of
      the compensation cost recognized for those options (excess tax benefits) to be
      classified as financing cash flows. As there have been no stock options
      exercised, DGSE has not reported these excess tax benefits as of September
      30,
      2006.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">112</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">Effective
      January 1, 2006, DGSE adopted the
      fair value recognition provisions of SFAS No. 123(R) for all share based payment
      awards to employees and directors including employee stock options granted
      under
      its employee stock option plan. All options outstanding vested prior to December
      31, 2005.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table presents the effect on net income and net income per share
      compared with <i>pro forma</i> information as if DGSE had adopted SFAS No. 123
      for the periods ended December 31:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="264">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="49">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="49">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="49">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="8" valign="bottom" width="250" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended December 31,</strong></div>
            </td>
            <td valign="bottom" width="4">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="72" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="72" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2004</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="72" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2003</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="352">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="72">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="72">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="72">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                income (loss), as reported</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">485,192</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">350,829</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">(524,140</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Deduct:
                Total stock-based employee compensation expense determined under
                fair
                value based method for all awards, net of related tax effects</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(4,554</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt"><i>Pro
                forma</i> net income (loss)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">480,638</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">350,829</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(524,140</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Earnings
                per share:</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Basic
                &#8212; as reported</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">.10</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">.07</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">(.11</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Basic
                &#8212; <i>pro forma</i></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">.10</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">.07</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">(.11</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Diluted
                &#8212; as reported</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">.10</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">.07</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">(.11</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Diluted
                &#8212; <i>pro forma</i></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">.10</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">.07</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">(.11</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt"><strong>Contractual Cash
      Obligations</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="165">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="43">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="35">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="43">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="40">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="39">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="220">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="65">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="11" valign="bottom" width="298" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Payments
                Due by Year End</strong></div>
            </td>
            <td valign="bottom" width="3">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="220">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="65">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Total</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="54">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="65">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007-2008</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="63">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2009-2010</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Thereafter</strong></div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="220">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="65" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="65" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="63" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="220">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Notes&#160;payable&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">194,183</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">194,183</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="220">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Long-term
                debt and capital lease</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">4,255,401</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">74,037</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">3,845,922</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">145,257</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">190,185</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="220">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Federal
                income taxes</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">210,584</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">210,584</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="220">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                leases</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">354,259</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">42,648</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">238,412</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">73,199</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="220">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">5,014,427</div>
            </td>
            <td valign="bottom" width="18" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">521,452</div>
            </td>
            <td valign="bottom" width="18" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">4,084,334</div>
            </td>
            <td valign="bottom" width="18" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">218,456</div>
            </td>
            <td valign="bottom" width="18" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="52" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">190,185</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, DGSE estimates that it will pay approximately $320,000 in interest
      during the next twelve months.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK OF DGSE</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following discussion about DGSE&#8217;s market risk disclosures involves
      forward-looking statements. Actual results could differ materially from those
      projected in the forward-looking statements. DGSE is exposed to market risk
      related to changes in interest rates and gold values. DGSE also is exposed
      to
      regulatory risk in relation to its payday loans. DGSE does not use derivative
      financial instruments.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE&#8217;s
      earnings and financial position may be affected by changes in gold values and
      the resulting impact on pawn lending and jewelry sales. The proceeds of scrap
      sales and DGSE&#8217;s ability to liquidate excess jewelry inventory at an acceptable
      margin are dependent upon gold values. The impact on DGSE&#8217;s financial position
      and results of operations of a hypothetical change in gold values cannot be
      reasonably estimated.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">113</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman"><strong>OWNERSHIP
      OF DGSE CAPITAL
      STOCK</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following sets forth information as of January 31, 2007 with respect to DGSE&#8217;s
      common stock owned beneficially by DGSE directors, the individuals expected
      to
      join DGSE&#8217;s board of directors effective upon the consummation of the
      combination, the named executive officer in DGSE&#8217;s most recent Annual Report on
      Form 10-K (as amended), and by directors and officers as a group. The
      information contained herein has been obtained from DGSE&#8217;s records, from various
      filings made by the named individuals with the SEC, or from information
      furnished directly by the individual to DGSE:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="226">
            </td>
            <td width="13">
            </td>
            <td width="4">
            </td>
            <td width="70">
            </td>
            <td width="2">
            </td>
            <td width="33">
            </td>
            <td width="13">
            </td>
            <td width="3">
            </td>
            <td width="35">
            </td>
            <td width="13">
            </td>
            <td width="3">
            </td>
            <td width="35">
            </td>
            <td width="8">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="302" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name
                and Address of Beneficial Owner</strong></div>
            </td>
            <td valign="bottom" width="18">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="99" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amount
                and Nature<br>of
                Beneficial<br>Ownership(1)</strong></div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="18">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Percent<br>of
                Class(1)</strong></div>
            </td>
            <td valign="bottom" width="18">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong><i>Pro
                Forma<br></i>Percent
                of<br>Class(2)</strong></div>
            </td>
            <td valign="bottom" width="11">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="302">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="99">&#160;</td>
            <td colspan="2" valign="bottom" width="48">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="52">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="52">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Dr.
                L. S. Smith, Ph.D.</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Director,
                chairman and chief executive officer<br>519 Interstate 30,
                #243<br>Rockwall, Texas 75087</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">3,164,665</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(3),(9)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">54.95</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">33.45</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">William
                H. Oyster</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Director
                and president(4)</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">290,115</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(5)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">5.62</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">3.27</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">John
                Benson</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Chief
                financial officer(4)</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">161,500</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(6)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">3.19</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">1.84</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">S.
                Scott Williamson</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Executive
                vice president(4)</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">20,000</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(7)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">William
                P. Cordeiro</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Director<br>1340
                E. Alosta #200<br>Glendora, CA 91740</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">27,500</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(8)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Craig
                Alan-Lee</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Director<br>11230
                Dilling Street<br>North Hollywood, California 91602</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">325,000</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(9),(10)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">6.61</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">3.77</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Paul
                Hagen</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Director<br>5719
                Lorinwoods Dr.<br>Houston, Texas 77066</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">5,500</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(10)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">David
                Rector</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Director
                nominee(11)</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(12)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Mitchell
                T. Stoltz</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Director
                nominee(11)</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(13)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Richard
                Matthew Gozia</div>
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Director
                nominee<br>123 22nd Street S.<br>La Crosse, Wisconsin 54601</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">&#160;</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">&#160;</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="302">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">All
                directors and officers as a group (10 individuals)</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="93">
              <div style="MARGIN: 0pt" align="right">3,993,280</div>
            </td>
            <td colspan="2" valign="bottom" width="48">
              <div style="MARGIN: 0pt">(14)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">64.29</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">40.29</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Based
      upon information furnished to DGSE by the directors and executive officers
      or
      obtained from DGSE&#8217;s stock transfer books showing 4,913,290 shares of common
      stock outstanding as of February 5, 2007. DGSE is informed that these persons
      hold the sole voting and dispositive power with respect to the common stock
      except as otherwise stated in the footnotes below. For purposes of computing
      &#8220;beneficial ownership&#8221; and the percentage of outstanding common stock held by
      each person or group of persons named above as of January 31, 2007, any security
      which such person or group of persons has the right to acquire within 60 days
      after such date is deemed to be outstanding for the purpose of computing
      beneficial ownership and the percentage ownership of such person or persons,
      but
      is not deemed to be outstanding for the purpose of computing the percentage
      ownership of any other person. A &#8220;*&#8221; indicates less than one percent.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(2)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Giving
      <i>pro forma</i> effect to the combination. The combination is expected to
      result in the issuance to Superior stockholders of approximately 3.7 million
      shares of DGSE common stock. A &#8220;*&#8221; indicates less than one percent.</div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 2.5pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">114</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt"><font style="FONT-FAMILY: Times New Roman">(3)</font></div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Includes
      577,777 and 267,857 shares currently exercisable under stock options with
      exercise prices of $2.25 and $1.12 per share, respectively, and 493,282 shares
      subject to proxies pursuant to which Dr. L.S. Smith holds sole voting
      power.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(4)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">The
      address for Messrs. Oyster, Benson and Williamson is 2817 Forest Lane, Dallas,
      Texas &#160;75234.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(5)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Includes
      250,000 shares currently exercisable under stock options with an average
      exercise price of $2.23 per share. In addition, W.H. Oyster has granted Dr.
      L.S.
      Smith a proxy to vote 38,615 of his currently outstanding shares.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(6)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Includes
      150,000 shares currently exercisable under stock options with an average
      exercise price of $2.02 per share. In addition, John Benson has granted Dr.
      L.S.
      Smith a proxy to vote his 11,500 shares currently outstanding.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(7)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Includes
      20,000 shares currently exercisable under stock options with an exercise price
      of $2.43 per share.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(8)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Includes
      22,500 shares currently exercisable under stock options with an exercise price
      of $2.47 per share and 5,000 shares owned by Bartik, Cordeiro &amp; Associates,
      as to which Mr. Cordeiro has shared voting and investment powers.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(9)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Craig
      Alan-Lee has granted Dr. L.S. Smith a proxy to vote his 320,000 shares currently
      outstanding.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(10)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Includes
      5,000 shares currently exercisable under a stock option with an exercise price
      of $2.82 per share.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(11)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">The
      address for Messrs. Rector and Stoltz is 9478 West Olympic Blvd., Beverly Hills,
      California &#160;90212.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(12)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Mr.
      Rector holds stock options to acquire 30,000 shares of Superior common stock,
      which would be converted into stock options to acquire 8,193 shares of DGSE
      common stock upon completion of the combination.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(13)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Mr.
      Stoltz holds stock options to acquire 10,000 shares of Superior common stock,
      which would be converted into stock options to acquire 2,371 shares of DGSE
      common stock upon completion of the combination.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(14)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Includes
      577,777, 267,857, 250,000, 150,000, 45,000, 10,000 and 20,000 shares currently
      exercisable under stock options with an exercise price or average price, as
      the
      case may be, of $2.25, $1.12, $2.23, $2.02, $2.47, $2.82 and $2.43,
      respectively, and 493,282 shares subject to proxies granting Dr. L.S. Smith
      sole
      voting powers.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>MANAGEMENT OF DGSE
      AFTER THE COMBINATION</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Information Regarding
      DGSE&#8217;s Directors and Executive Officers</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following are the current executive officers and directors of DGSE and their
      background and ages as of December 31, 2006.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="102">
            </td>
            <td width="12">
            </td>
            <td width="22">
            </td>
            <td width="12">
            </td>
            <td width="210">
            </td>
            <td width="12">
            </td>
            <td width="95">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="136" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="30" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Age</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="280" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Position</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="126" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                First Elected Director<br>or Appointed
                Officer</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="136">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="280">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="126">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="136" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Dr.
                L.S. Smith, Ph.D.(1)</div>
            </td>
            <td valign="top" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="30" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">60</div>
            </td>
            <td valign="top" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="280" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">Chairman of the board of directors, chief
                executive officer and secretary</div>
            </td>
            <td valign="top" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="126" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">1980</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="136">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">William
                H. Oyster(2)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="center">54</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="280">
              <div style="MARGIN: 0pt">Director, president and chief operating
                officer</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="126">
              <div style="MARGIN: 0pt" align="center">1990</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="136" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">John
                Benson(3)</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="30" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">60</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="280" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">Chief financial officer</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="126" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">1992</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="136">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">S.
                Scott Williamson(4)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="center">48</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="280">
              <div style="MARGIN: 0pt">Executive vice president &#8212; consumer
                finance</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="126">
              <div style="MARGIN: 0pt" align="center">2004</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="136" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">William
                P. Cordeiro(5)</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="30" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">62</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="280" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">Director</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="126" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">1999</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="136">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Paul
                Hagen(6)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="30">
              <div style="MARGIN: 0pt" align="center">52</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="280">
              <div style="MARGIN: 0pt">Director</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="126">
              <div style="MARGIN: 0pt" align="center">2004</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="136" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Craig
                Alan-Lee(7)</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="30" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">49</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="280" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">Director</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="126" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">2004</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 3.35pt"><i>Business Experience
      During Last Five Years</i></div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Director,
      chairman, chief executive officer and secretary of DGSE since 1980.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(2)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Director,
      president and chief operating officer of DGSE since January 1990 and interim
      chief executive officer of Superior since January 6, 2007. Member of the board
      of directors of Superior since January&#160;6,&#160;2007.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(3)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Chief
      financial officer of DGSE since December 1992 and interim chief financial
      officer and interim vice president-finance of Superior since January 6, 2007.
      Member of the board of directors of Superior since January&#160;6, 2007.</div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 2.5pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">115</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: -18pt"><font style="FONT-FAMILY: Times New Roman">(4)</font></div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Executive
      vice president &#8212; consumer finance of DGSE and president of American Pay Day
      Centers, Inc., a DGSE subsidiary, since May 2004. Between 2002 and 2004, Mr.
      Williamson was president of Texas State Credit Co., a finance company with
      63
      locations. From 2001 to 2002, Mr. Williamson was the chief financial officer
      for
      Westgate Fabrics, LLC, a distributor of decorative fabrics. Before that, Mr.
      Williamson was an executive vice president of operations for First Cash
      Financial Services, Inc., a national markets finance company. Member of the
      board of directors of Superior Galleries, Inc. since January 6, 2007.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(5)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Director
      and independent member and financial expert of the DGSE audit committee since
      June 1999. Director, Smith School of Business and Economics, California State
      University &#8212; Channel Islands since June 1990. Partner, Bartik, Cordeiro &amp;
Associates, Inc., a management consulting firm, since January 1990.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(6)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Director
      of DGSE since December 2004 and member of the Audit Committee of DGSE from
      December 2004 to December 2006. President of Premier Marketing House,
&#160;Inc., a retail consulting firm. President and chief executive officer of
      Silverman Consultants, &#160;Inc., a wholly-owned subsidiary of DGSE, from April
      2002 through November 2004. From October 1996 through April 2002, general
      manager and vice president of Wilkerson &amp; Associates, a retail consulting
      company.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(7)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Director
      and independent member of the DGSE audit committee since December 2004. Senior
      loan consultant with Castle Funding, Inc., a mortgage loan company, since
      November 1994.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following information is also provided for Lawrence Fairbanks Abbott, Jr.,
      who
      is expected to become an executive officer of the combined business, and
      Mitchell T. Stoltz, Richard Matthew Gozia and David Rector, each of whom is
      expected to join DGSE&#8217;s board of directors effective upon the consummation of
      the combination. In accordance with the merger agreement, Messrs. Stoltz, Gozia
      and Rector are being nominated to the board by SIBL. Mr. Abbot is expected
      to
      continue his current employment with Superior under the employment agreement
      now
      in effect.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="147">
            </td>
            <td width="13">
            </td>
            <td width="23">
            </td>
            <td width="13">
            </td>
            <td width="150">
            </td>
            <td width="13">
            </td>
            <td width="107">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="197" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="31" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Age</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="200" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Position</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="142" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                First Elected Director or<br>Appointed Officer
                of Superior</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="197">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="200">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="142">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="197" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Mitchell
                T. Stoltz(1)</div>
            </td>
            <td valign="bottom" width="17" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="31" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">53</div>
            </td>
            <td valign="bottom" width="17" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="200" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">Director of Superior</div>
            </td>
            <td valign="bottom" width="17" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="142" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">2005</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="197">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Richard
                Matthew Gozia(2)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt" align="center">61</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="200">
              <div style="MARGIN: 0pt">N.A.</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="142">
              <div style="MARGIN: 0pt" align="center">N.A.</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="197" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">David
                Rector(3)</div>
            </td>
            <td valign="bottom" width="17" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="31" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">60</div>
            </td>
            <td valign="bottom" width="17" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="200" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">Director of Superior</div>
            </td>
            <td valign="bottom" width="17" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="142" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">2003</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="197">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Lawrence
                Fairbanks Abbott, Jr.(4)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="31">
              <div style="MARGIN: 0pt" align="center">43</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="200">
              <div style="MARGIN: 0pt">Executive vice president, Superior</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="142">
              <div style="MARGIN: 0pt" align="center">2005</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 3.35pt"><i>Business Experience
      During Last Five Years</i></div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Director
      of Superior since December 2005 and director of NWS Illinois d/b/a Union
      Beverage/Hamburg Distribution since 1999. Independent consultant to the beverage
      distribution industry as well as other industries since January 2001.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(2)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Chief
      executive officer of Fenix Companies, a subsidiary of Union Pacific Corporation
      responsible for transportation-related software development and data management,
      since 2001. Director of ForeFront Holdings, Inc. (f/k/a Datrek Miller
      International, Inc.) since June 2005.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(3)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Principal
      of David Stephen Group, which provides enterprise consulting services to
      emerging and developing companies in a variety of industries, since 1985.
      President, chief executive officer and chief operating officer of Nanoscience
      Technologies, Inc., a development stage company engaged in the development
      and
      commercialization of DNA nanotechnology, from June 2004 to December 2006.
      Director of Senesco Technologies, Inc. since 2002.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(4)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Executive
      vice president of Superior since June 2005 and chief operating officer of
      Superior from January 2006 until January 2007. Executive vice president of
      Heritage Rare Coin Galleries, a privately-held rare coin dealer and auctioneers,
      from May 1999 to May 2005. Consultant to Divine Imaging Commodities, an MAS
      contractor reselling an array of office products and equipment to the Federal
      Government, since October 15, 2006.</div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">116</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>Director
      Compensation</strong></font></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="266">
            </td>
            <td width="19">
            </td>
            <td width="8">
            </td>
            <td width="60">
            </td>
            <td width="19">
            </td>
            <td width="8">
            </td>
            <td width="27">
            </td>
            <td width="19">
            </td>
            <td width="3">
            </td>
            <td width="29">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="355" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name</strong></div>
            </td>
            <td width="26">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="91" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Fees
                Earned or <br>Paid in
                Cash<br>($)</strong></div>
            </td>
            <td valign="bottom" width="26">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Option<br>Awards<br>($)</strong></div>
            </td>
            <td valign="bottom" width="26">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Total<br>($)</strong></div>
            </td>
            <td valign="bottom" width="5">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="355">&#160;</td>
            <td width="26">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="91">&#160;</td>
            <td valign="bottom" width="26">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="47">&#160;</td>
            <td valign="bottom" width="26">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="355" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">William P.
                Cordeiro&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td width="26" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="81" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">1,000</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="36" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">&#8212; </div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">(1)</div>
            </td>
            <td valign="bottom" width="5" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="39" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">1,000</div>
            </td>
            <td valign="bottom" width="5" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="355">
              <div style="MARGIN: 0pt">Paul Hagen</div>
            </td>
            <td width="26">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="81">
              <div style="MARGIN: 0pt" align="right">1,000</div>
            </td>
            <td valign="bottom" width="26">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">&#8212; </div>
            </td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt">(2)</div>
            </td>
            <td valign="bottom" width="5">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">1,000</div>
            </td>
            <td valign="bottom" width="5">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="355" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">Craig Alan-Lee</div>
            </td>
            <td width="26" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="81" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">1,000</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="36" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">&#8212; </div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">(2)</div>
            </td>
            <td valign="bottom" width="5" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="39" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">1,000</div>
            </td>
            <td valign="bottom" width="5" bgcolor="#ccffcc">
              <div style="FONT-SIZE: 12pt; MARGIN: 0pt">&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Mr.
      Cordeiro has been granted options to purchase 22,500 shares of DGSE&#8217;s common
      stock at an exercise price equal to the then fair market value of DGSE&#8217;s common
      stock.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(2)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Each
      of
      Messrs. Hagen and Alan-Lee has been granted an option to purchase 5,000 shares
      of DGSE&#8217;s common stock at an exercise price equal to the then fair market value
      of DGSE&#8217;s common stock.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Directors
      who are also employees of DGSE do not receive any compensation for serving
      as a
      director or as a member of a committee of the board of directors. Directors
      who
      are not employees of DGSE receive a fee in the amount of $500 for each meeting
      of the board of directors and each committee meeting of the board of directors
      attended.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Director
      Independence</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The rules
      of the Nasdaq Capital Market generally require listed companies to have a
      majority of on their board of directors qualify as &#8220;independent&#8221; under the
      Nasdaq Marketplace Rules. However, because our chairman and chief executive
      officer, Dr. L.S. Smith, has voting power over 2,539,031 shares of the Company&#8217;s
      common stock, or 51.7 percent of the voting power currently outstanding, we
      have
      elected to be treated as a &#8220;Controlled Company&#8221; under Rule 4350 of the Nasdaq
      Marketplace Rules. As a consequence, we are not required under the Nasdaq
      Marketplace Rules to have a majority of &#8220;independent&#8221; directors, nor to have a
      nominating or compensation committee of our board.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">After
      review of all relevant transactions or relationships between each director,
      or
      any of his or her family members, and our company, its senior management and
      its
      independent auditors, our board of directors has affirmatively determined that
      two of our five directors &#8212; Messrs. Cordeiro and Alan-Lee &#8212; are &#8220;independent&#8221;
within the meaning of the applicable listing standards of the Nasdaq Capital
      Market.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Compensation
      Discussion and Analysis &#8212; DGSE</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Overview</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Because
      DGSE is a &#8220;controlled company&#8221; for purposes of the Nasdaq listing rules, we are
      not required to have, and do not have, a compensation committee. Instead, our
      board of directors has the overall responsibility for evaluating, approving,
      administering and interpreting our compensation and benefit policies affecting
      our executive officers, including:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">the
      corporate goals and objectives relating
      to the overall compensation of executive officers,</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">the
      actual compensation of executive
      officers, including their annual base salaries and their annual incentive
      opportunities (which includes cash-based and equity-based
      compensation),</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">any
      employment agreements, severance
      arrangements and change in control agreements that affect elements of the
      executive officers&#8217; compensation and benefits,</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">the
      supplemental compensation and benefits
      of executive officers, and</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">perquisites
      provided to executive officers
      both during and after employment with us.</font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Compensation
      Philosophy</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Though
      our compensation philosophy is informal, we believe compensation should include
      a mixture of a competitive base salary, bonus incentives to encourage retention
      and reward individual responsibility and </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">117</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">productivity,
      equity grants to align the
      interests of officers with those of our stockholders, and case-specific
      compensation plans to accommodate individual circumstances or non-recurring
      situations. Generally, we believe that overall executive compensation should
      be
      targeted near the mean of salaries for executives in similar positions with
      similar responsibilities at comparable companies. Our board of directors uses
      its judgment and experience and works closely with our executive officers to
      determine the appropriate mix of compensation for each individual.</font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Benchmarking</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">While
      we
      do not believe it is appropriate to establish compensation levels primarily
      based on benchmarking, we do believe that compensation practices at comparable
      companies serve as a useful metric for us to remain competitive in the
      marketplace. Therefore, we informally consider competitor market practices
      with
      respect to the salaries, bonuses, benefits and total compensation paid to our
      executive officers.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Elements of
      Compensation</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Currently,
      our
      named executive officers&#8217; compensation has three primary components &#8211; base
      compensation or salary, discretionary annual cash bonuses, and equity awards.
      In
      addition, we provide our executive officers with a variety of benefits that
      are
      generally available to all salaried employees.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We view
      the various components of compensation as related but distinct. Although our
      board of directors reviews each executive officers&#8217; total compensation, we do
      not believe that significant compensation derived from one component of
      compensation should negate or reduce compensation from other components. We
      determine the appropriate level for each compensation component based in part,
      but not exclusively, on our view of internal equity and consistency, and other
      considerations we deem relevant, such as to reward extraordinary performance
      and
      increased responsibility and commitment. Our board of directors has not adopted
      any formal or informal policies or guidelines for allocating compensation
      between long-term and short-term compensation, between cash and non-cash
      compensation or among different forms of non-cash compensation.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our
      annual process of determining overall compensation begins with recommendations
      made by Dr. Smith, our chairman, chief executive officer, and largest
      stockholder. In making his recommendation, Dr. Smith considers a number of
      factors, including the seniority of the individual, the functional role of
      the
      position, the level of the individual&#8217;s responsibility, the individual&#8217;s
      long-term commitment to our company, and the scarcity of individuals with
      similar skills. Acting with the recommendation from Dr. Smith, our board of
      directors makes the final determination of compensation for our executive
      officers, including for Dr. Smith. In making compensation decisions, our
      management and board look at various metrics of our company&#8217;s performance,
      including gross revenues, the fair market value of our common stock, and
      operating earnings (such as EBIT, EBITDA and net earnings).</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Base
      Salary</i>. Base salary is used to recognize the experience, skills, knowledge
      and responsibilities required of executive officers, taking into account
      competitive market compensation paid by other companies for similar positions.
      Generally, we believe that executive base salaries should be targeted near
      the
      mean of salaries for executives in similar positions with similar
      responsibilities at comparable companies, in line with our compensation
      philosophy. Base salaries are reviewed annually, with the Board of Directors
      examining detailed compensation surveys in all markets in which we operate,
      and
      adjusted from time to time to realign salaries with market levels after taking
      into account individual responsibilities, performance and experience.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      connection with the proposed acquisition by our company of Superior, our board
      of directors re-evaluated the appropriate base salaries of our executive
      officers in light of the increased size of the combined business and the
      increased responsibilities of our executive officers. Based on this analysis,
      the board of directors has agreed to increase the base salaries of our executive
      officers effective upon the completion of the acquisition, as more fully
      discussed in the section entitled &#8220;Post-Combination Employment Agreements&#8221;
beginning on page 75.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Discretionary
      Annual Cash Bonus</i>. Our board of directors has the authority to award
      discretionary annual cash bonuses to our executive officers. The annual
      incentive bonuses are intended to compensate our executive officers for
      achieving financial and operational goals and for achieving individual annual
      performance objectives. These objectives vary depending on the individual
      executive, but relate generally to financial factors such as revenue growth,
      improving our results of operations and increasing the price per share of our
      capital stock, and individual performance factors such as responsibilities,
      improvement and diligence.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">118</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">The
      discretionary bonus is normally paid in
      a single installment in the first quarter following the completion of our fiscal
      year. The actual amount of a discretionary bonus will be determined following
      a
      review of each executive&#8217;s individual performance and contribution to our
      strategic goals conducted during the first quarter in 2007. The board of
      directors has not fixed a maximum payout for any annual discretionary cash
      bonus.</font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      connection with the proposed acquisition by our company of Superior, our board
      of directors re-evaluated the bonus structure of our executive officers in
      light
      of the increased size of the combined business and increased responsibilities
      of
      our executive officers. Based on this analysis, our board of directors has
      made
      the annual bonus for certain of our executive officers upon the completion
      of
      the acquisition mandatory, based in part on the executive serving as an officer
      throughout the year and in part on a specified increase in either the market
      value of our common stock or in our earnings before interest and taxes (EBIT),
      as more fully discussed in the section entitled &#8220;Post-Combination Employment
      Agreements&#8221; beginning on page 75.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our board
      of
      directors has not considered whether it would attempt to recover bonuses paid
      based on our financial performance where our financial statements are restated
      in a downward direction sufficient to reduce the amount of bonus that should
      have been paid under any applicable bonus criteria.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Equity
      Compensation</i>. We believe that long-term performance is achieved through an
      ownership culture that encourages such performance by our executive officers
      through the use of stock and stock-based awards. Our stock compensation plans
      have been established to provide certain of our employees, including our
      executive officers, with incentives to help align those employees&#8217; interests
      with the interests of our stockholders. Our board of directors believes that
      the
      use of stock and stock-based awards offers the best approach to achieving this
      goal. We have not adopted stock ownership requirements or guidelines. Aside
      from
      Dr. Smith, our stock compensation plans have provided the principal method
      for
      our executive officers and directors to acquire equity or equity-linked
      interests in our company.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our 2006
      equity incentive plan authorizes us to grant options to purchase shares of
      common stock and stock awards to our employees (including executives), directors
      and consultants. Our board has appointed our chairman of the board, Dr. Smith,
      as the administrator of the plan. In the case of awards intended to qualify
      as
&#8220;performance-based-compensation&#8221; excludable from the deduction limitation under
      Section 162(m) of the Internal Revenue Code, the administrator will consist
      of
      two or more &#8220;outside directors&#8221; within the meaning of Section 162(m). The
      administrator has the authority, among other things, to:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">select
      the individuals to whom awards will
      be granted and to determine the type of award to grant;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">determine
      the terms of the awards,
      including the exercise price, the number of shares subject to each award, the
      exercisability of the awards, and the form of consideration payable upon
      exercise;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">provide
      for a right to dividends or
      dividend equivalents; and</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">interpret
      the plan and adopt rules and
      procedures relating to administration of the plan.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt">Except to the extent
      prohibited by any applicable law, the administrator may delegate to one or
      more
      individuals the day-to-day administration of the plan.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Stock option
      grants are made at the commencement of employment and, occasionally, following
      a
      significant change in job responsibilities or to meet other special retention
      or
      performance objectives. Stock options have an exercise price equal to the fair
      market value of our common stock on the day of grant. The plan permits payment
      in the form of cash, check or wire transfer, other shares of our common stock,
      cashless exercises, any other form of consideration and method of payment
      permitted by applicable laws, or any combination thereof.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">An option
      granted under the plan generally cannot be exercised until it vests. The
      administrator establishes the vesting schedule of each option at the time of
      grant and the option will expire at the times established by the administrator.
      After termination of the optionee&#8217;s service, he or she may exercise his or her
      option for the period stated in the option agreement, to the extent the option
      is vested on the date of termination. If termination is due to death or
      disability, the option generally will remain exercisable for twelve months
      following such termination. In all other cases, the option generally will remain
      exercisable for three months. Nevertheless, an option may never be exercised
      later than the expiration of its term. The term of any stock option may not
      exceed ten years, except that with respect to any participant who owns 10%
      or
      more of the voting power of all classes of our outstanding capital stock, the
      term for incentive stock options must not exceed five years.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">119</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman"><i>Severance
      Payments</i></font>. Dr. Smith
      has a current severance arrangement in his current employment agreement. In
      addition, in connection with the proposed acquisition by our company of
      Superior, our board of directors has agreed to make severance payments to Dr.
      Smith and Messrs. Oyster and Benson in new employment agreements conditioned
      upon the completion of the acquisition, as more fully discussed in the section
      entitled &#8220;Post-Combination Employment Agreements&#8221; beginning on page 75. Our
      board has agreed to these severance provisions in recognition of the longevity
      of service by these executive officers to our company, and to protect these
      executive officers should our company acquire Superior. We believe that most
      of
      the severance provisions are customary and in accordance with market practice.
      The single trigger for the payment of severance in the event of a &#8220;change in
      control&#8221; of our company to some executives was to protect our senior executives
      and in consideration of the agreement by Dr. Smith to relinquish his majority
      voting power in our company.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Impact
      on
      Compensation of Proposed Acquisition by Our Company of Superior</i>. Our board
      of directors has the discretion to revise, amend or add to the benefits and
      perquisites of our executive officers. Based on the review of other executive
      compensation arrangements in the equivalent industries and markets and in
      connection with the proposed acquisition by our company of Superior, our board
      of directors re-evaluated the appropriate compensation structure of our
      executive officers in light of the increased size of the combined business
      and
      the increased responsibilities and commitment required of our executive
      officers. Based on this evaluation, our board of directors has agreed to add
      additional benefits, including but not limited to increases in salary, increases
      in bonuses, and life and disability insurance, to certain of our executive
      officers upon the consummation of the combination, as more fully discussed
      in
      the section entitled &#8220;Post-Combination Employment Agreements&#8221; beginning on page
      75.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Tax and Accounting
      Implications</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Deductibility
      of Executive Compensation</i>. As part of its role, our board of directors
      reviews and considers the deductibility of executive compensation under Section
      162(m) of the Internal Revenue Code, which provides that we may not deduct
      compensation of more than $1,000,000 that is paid to certain individuals. Our
      board of directors believes that compensation paid to our executive officers
      are
      generally fully deductible for federal income tax purposes. However, in certain
      situations, certain of the independent members of our board of directors may
      approve compensation that will not meet these requirements in order to ensure
      competitive levels of total compensation of our executive officers.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Nonqualified
      Deferred Compensation</i>. On October 22, 2004, the American Jobs Creation Act
      of 2004 was signed into law, changing the tax rules applicable to nonqualified
      deferred compensation arrangements. While the final regulations have not become
      effective yet, we believe the Company is operating in good faith compliance
      with
      the statutory provisions which became effective January 1, 2005. A more detailed
      discussion of the Company&#8217;s nonqualified deferred compensation arrangements is
      provided in the section entitled &#8220;Nonqualified Deferred Compensation&#8221; beginning
      on page 120.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Accounting
      for
      Stock-Based Compensation</i>. Effective January 1, 2006, we began accounting for
      stock-based payments in accordance with the requirements of FASB Statement
      123(R).</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Conclusion</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our
      compensation practices are designed to retain and motivate our senior executive
      officers and to ultimately reward them for outstanding performance.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Executive Compensation
      &#8212; DGSE</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following information is furnished with respect to each of the most highly
      compensated executive officers of DGSE whose cash compensation from DGSE and
      its
      subsidiaries during DGSE&#8217;s last fiscal year exceeded $100,000.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">120</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>Summary
      Compensation
      Table</strong></font></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="184">
            </td>
            <td width="15">
            </td>
            <td width="24">
            </td>
            <td width="15">
            </td>
            <td width="39">
            </td>
            <td width="15">
            </td>
            <td width="39">
            </td>
            <td width="15">
            </td>
            <td width="59">
            </td>
            <td width="21">
            </td>
            <td width="39">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="245" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name
                and Principal Position</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="32" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Salary<br>($)</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Bonus<br>($)</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="79" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>All
                Other<br>Compensation<br>($)</strong></div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="52" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Total<br>($)</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="245">&#160;</td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="32">&#160;</td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="52">&#160;</td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="52">&#160;</td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="79">&#160;</td>
            <td valign="bottom" width="28">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="52">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="245" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Dr.
                L.S. Smith<br>Chief executive officer</div>
            </td>
            <td valign="bottom" width="20" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="32" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">2006</div>
              <div style="MARGIN: 0pt" align="center">2005</div>
            </td>
            <td valign="bottom" width="20" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">180,000</div>
              <div style="MARGIN: 0pt" align="right">178,739</div>
            </td>
            <td valign="top" width="20" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">100,000</div>
              <div style="MARGIN: 0pt" align="right">67,500</div>
            </td>
            <td valign="top" width="20" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="79" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">30,000</div>
              <div style="MARGIN: 0pt" align="right">30,000</div>
            </td>
            <td valign="top" width="28" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">(1)<br>(1)</div>
            </td>
            <td valign="top" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">310,000</div>
              <div style="MARGIN: 0pt" align="right">276,239</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="245">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">John
                Benson<br>Chief financial officer</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="top" width="32">
              <div style="MARGIN: 0pt" align="center">2006</div>
              <div style="MARGIN: 0pt" align="center">2005</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="top" width="52">
              <div style="MARGIN: 0pt" align="right">102,308</div>
              <div style="MARGIN: 0pt" align="right">98,443</div>
            </td>
            <td valign="top" width="20">&#160;</td>
            <td valign="top" width="52">
              <div style="MARGIN: 0pt" align="right">30,000</div>
              <div style="MARGIN: 0pt" align="right">25,200</div>
            </td>
            <td valign="top" width="20">&#160;</td>
            <td valign="top" width="79">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="28">&#160;</td>
            <td valign="top" width="52">
              <div style="MARGIN: 0pt" align="right">132,308</div>
              <div style="MARGIN: 0pt" align="right">123,443</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="245" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">William
                H. Oyster<br>President and chief operating officer</div>
            </td>
            <td valign="top" width="20" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="32" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="center">2006</div>
              <div style="MARGIN: 0pt" align="center">2005</div>
            </td>
            <td valign="top" width="20" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">165,000</div>
              <div style="MARGIN: 0pt" align="right">163,735</div>
            </td>
            <td valign="top" width="20" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">60,000</div>
              <div style="MARGIN: 0pt" align="right">45,400</div>
            </td>
            <td valign="top" width="20" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="79" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="28" bgcolor="#ccffcc">&#160;</td>
            <td valign="top" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">225,000</div>
              <div style="MARGIN: 0pt" align="right">207,735</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="245">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">S.
                Scott Williamson<br>Executive vice president<br>&#8212; consumer
                finance</div>
            </td>
            <td valign="top" width="20">&#160;</td>
            <td valign="top" width="32">
              <div style="MARGIN: 0pt" align="center">2006</div>
              <div style="MARGIN: 0pt" align="center">2005</div>
            </td>
            <td valign="top" width="20">&#160;</td>
            <td valign="top" width="52">
              <div style="MARGIN: 0pt" align="right">105,000</div>
              <div style="MARGIN: 0pt" align="right">99,933</div>
            </td>
            <td valign="top" width="20">&#160;</td>
            <td valign="top" width="52">
              <div style="MARGIN: 0pt" align="right">3,500</div>
              <div style="MARGIN: 0pt" align="right">2,500</div>
            </td>
            <td valign="top" width="20">&#160;</td>
            <td valign="top" width="79">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="28">&#160;</td>
            <td valign="top" width="52">
              <div style="MARGIN: 0pt" align="right">108,500</div>
              <div style="MARGIN: 0pt" align="right">102,433</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Dr. Smith
      is provided a monthly automobile allowance and a $2,000 per month home office
      allowance.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Grants of Plan-Based
      Awards</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE did
      not
      grant any awards under any plan in fiscal year 2006.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Outstanding Equity Awards
      at Fiscal Year-End</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">The
      following table summarizes unexercised options to purchase shares of DGSE common
      stock and equity plan awards outstanding at December 31, 2006 for each executive
      officer identified in the DGSE Summary Compensation Table above. All options
      were fully vested and exercisable at the time of grant and expire 180 days
      after
      termination of service:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="299">
            </td>
            <td width="13">
            </td>
            <td width="80">
            </td>
            <td width="13">
            </td>
            <td width="60">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="399" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name
                and Principal Position</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="106" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Number
                of Securities<br>Underlying<br>Unexercised
                Options<br>(#) Exercisable</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="81" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Option
                Exercise<br>Price<br>($)</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="399">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="106">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="81">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="399" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Dr.
                L.S. Smith<br>Chief executive officer</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="106" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">577,777</div>
              <div style="MARGIN: 0pt" align="right">267,857</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="81" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">2.25</div>
              <div style="MARGIN: 0pt" align="right">1.12</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="399">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">John
                Benson<br>Chief financial officer</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="106">
              <div style="MARGIN: 0pt" align="right">150,000</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="81">
              <div style="MARGIN: 0pt" align="right">2.02</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="399" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">William
                H. Oyster<br>President and chief operating officer</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="106" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">250,000</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="81" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">2.23</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="399">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">S.
                Scott Williamson<br>Executive vice president &#8212; consumer
                finance&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="106">
              <div style="MARGIN: 0pt" align="right">20,000</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="81">
              <div style="MARGIN: 0pt" align="right">2.43</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Option Exercises and Stock
      Vested</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">No executive
      officer identified in the DGSE Summary Compensation Table above exercised an
      option in fiscal year 2006, and no shares of stock vested with respect to any
      of
      those executive officers.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Pension Benefits</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE does
      not have any plan which provides for payments or other benefits at, following,
      or in connection with retirement.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Nonqualified Deferred
      Compensation</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE does
      not have any defined contribution or other plan which provides for the deferral
      of compensation on a basis that is not tax-qualified.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">121</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><i>Employment
      Agreements</i></font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On July
      1,
      1997, DGSE entered into an Amended and Restated Employment Agreement with Dr.
      Smith pursuant to which Dr. Smith was employed as an executive officer of DGSE.
      The agreement has an initial term of ten years, and may be extended by the
      DGSE
      board of directors for additional five-year renewal terms. Under the agreement,
      Dr. Smith is entitled to (i) a base annual salary of $180,000, or such greater
      amount as the board of directors or the compensation committee approves, (ii)
      a
      discretionary cash bonus or other incentive compensation in an amount determined
      by the board of directors, (iii) participation in DGSE&#8217;s employee benefit
      programs, (iv) a $5,000 annual allowance for professional legal and accounting
      services rendered to Dr. Smith personally, and (v) an allowance for the
      maintenance of a home office and an automobile. The agreement may be terminated
      by DGSE at any time, with or without cause, and by Dr. Smith upon sixty days
      notice.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Mr. Oyster
      is an at-will employee and his current base salary is $165,000 per year. Mr.
      Oyster participates in a DGSE bonus program and benefit and other incentives
      at
      the discretion of the compensation committee of the DGSE board of
      directors.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Mr. Benson
      is an at-will employee and his current base salary is $110,000 per year. Mr.
      Benson participates in a DGSE bonus program and benefit and other incentives
      at
      the discretion of the compensation committee of the DGSE board of
      directors.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Mr.
      Williamson is an at-will employee and his current base salary is $105,000 per
      year. Mr. Williamson participates in a DGSE bonus program and benefit and other
      incentives at the discretion of the compensation committee of the DGSE board
      of
      directors.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The DGSE
      board of directors has approved amended and restated employment agreements
      for
      Dr. Smith, and a new employment agreement for Mr. Oyster and Mr. Benson, in
      each
      case contingent upon the closing of the combination. For more information about
      these contingent employment agreements, see the section entitled
&#8220;Post-Combination Employment Agreements&#8221; beginning on page 75.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Potential Payments Upon
      Termination Or Change-In-Control</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under Dr.
      Smith&#8217;s employment agreement, in the event DGSE terminates Dr. Smith&#8217;s
      employment due to death or incapacity, Dr. Smith (or his legal representative)
      will be entitled to continue receiving his current base salary for one year.
      If
      Dr. Smith would have been terminated for either reason on January 1, 2007,
      DGSE
      would have been obligated to pay him $180,000 in 26 bi-weekly installments
      of
      $6,923 each.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the event
      DGSE (i) does not elect to renew the employment agreement upon the expiration
      of
      the initial term or a renewal term, (ii) terminates Dr. Smith other than for
      &#8220;due cause&#8221; and other than for death or incapacity, (iii)&#160;demotes Dr. Smith
      to a non-executive position, or (iv) decreases Dr. Smith&#8217;s annual salary or
      other benefits below the minimum level specified above, other than for
      amendments to or terminations of employee benefit plans applicable to all
      executives; which the agreement refers to as a constructive termination, Dr.
      Smith will be entitled to receive (i) a lump sum payment of his base salary
      for
      the remainder of the current year, and (ii) subject to Dr. Smith complying
      with
      his non-compete obligations specified in the agreement, his &#8220;salary&#8221; until the
      date ending on the expiration of the initial term or, if later, 36 months from
      his constructive termination, payable monthly in 36 equal installments. If
      Dr.
      Smith would have constructively terminated on January 1, 2007, DGSE would have
      been obligated to pay him $180,000 as a lump sum payment and $6,981 per month
      for a period of 36 months.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the event
      after a &#8220;change in control&#8221; of DGSE occurs and within one year thereafter either
      Dr. Smith voluntarily terminates his employment upon 60 days notice, or DGSE
      either does not elect to renew the employment agreement upon the expiration
      of
      the initial term or a renewal term or terminates Dr. Smith other than for &#8220;due
      cause&#8221;, DGSE would be obligated to pay him his &#8220;salary&#8221; for the remainder of the
      current year plus five additional years (discounted at 8% per annum), payable
      at
      Dr. Smith&#8217;s option in a lump sum or in four equal installments over a three-year
      period at 8% interest. If a &#8220;change in control&#8221; were to have occurred and Dr.
      Smith&#8217;s employment were to have terminated under one of those circumstances on
      January 1, 2007, DGSE would have been obligated to pay him, at his election,
      either $1.25 million as a lump sum payment, or payments of $314,000, $339,000,
      $366,000 and $395,000 on the date 30 days, 12 months, 24 months and 36 months
      after the date of termination of his employment.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">122</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">For
      purposes of Dr. Smith&#8217;s employment
      agreement:</font></div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">&#8220;salary&#8221;
is
      defined as Dr. Smith&#8217;s base
      salary plus his average cash bonus and other cash incentive compensation paid
      over the three most recent years;</font></div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">&#8220;due
      cause&#8221; is defined as (A) an
      intentional and material misapplication by Dr. Smith of DGSE funds, or any
      other
      material act of dishonesty committed by Dr. Smith, (B) Dr. Smith&#8217;s continued
      material breach or nonperformance of his employment agreement 30 days after
      notice of the breach has been provided, or<br>(C) any other act by Dr. Smith
      involving willful and material malfeasance or gross negligence in the
      performance of his duties; and</font></div>
    <div style="MARGIN-TOP: 4.15pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">&#8220;change
      in control&#8221; is defined as (A) any
      person or group becomes the beneficial owner of shares representing 30% or
      more
      of the voting power of DGSE, (B) in any 12-month period, the DGSE directors
      at
      the beginning of that period cease to constitute a majority of the DGSE board
      of
      directors and a majority of the initial directors still in office neither
      elected all of the new directors nor nominated them all for election by the
      DGSE
      stockholders, or (C) a person or group acquires in any 12-month period gross
      assets of DGSE constituting at least 50% of the fair market value of all DGSE
      gross assets.</font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For
      potential payments upon termination or change in control under the proposed
      post-combination employment agreements, see the section entitled
&#8220;Post-Combination Employment Agreements &#8212; Potential Payments Upon Termination Or
      Change-In-Control&#8221; beginning on page 76.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><i>Compensation Committee
      Interlocks and Insider Participation</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Since DGSE
      has elected to be classified as a &#8220;Controlled Company&#8221; under Nasdaq Marketplace
      Rule 4350, DGSE does not have a compensation committee of the board of
      directors, or any committee performing similar functions. During 2006, none
      of
      DGSE&#8217;s directors or executive officers is known by DGSE to have served on the
      board of directors or compensation (or equivalent) committee of any entity
      one
      of whose directors or officers serve on DGSE&#8217;s board of directors. On January 6,
      2007, William H. Oyster, a director and named executive officer of DGSE, became
      a director and named executive officer of Superior.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Dr. Smith
      and Mr. Oyster, who are DGSE named executive officers, served on DGSE&#8217;s board of
      directors in 2006 and participated in deliberations of the board concerning
      executive officer compensation. No other current or past executive officers
      of
      DGSE serve on DGSE&#8217;s board of directors.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Executive Compensation
      &#8212; Superior</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      following information is furnished with respect to each of the most highly
      compensated executive officers of Superior who are expected to remain executive
      officers of DGSE or a DGSE subsidiary following the combination, and who would
      have been included in the DGSE&#8217;s Summary Compensation Table if such officers had
      been serving as executive officers of DGSE (or a subsidiary) as of the end
      of
      DGSE&#8217;s last fiscal year.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 6.65pt"><i>Summary Compensation
      Table</i></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="197">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="37">
            </td>
            <td width="17">
            </td>
            <td width="2">
            </td>
            <td width="37">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="263" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name
                and Principal Position</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Salary<br>($)</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Bonus<br>($)</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Option
                Awards<br>($)</strong></div>
            </td>
            <td valign="bottom" width="23">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Total<br>($)</strong></div>
            </td>
            <td valign="bottom" width="3">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="263">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="53">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="263">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Lawrence
                Fairbanks Abbott, Jr.,<br>Executive vice president(1)</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">2006</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">200,000</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">177,529</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">4,750</div>
            </td>
            <td valign="bottom" width="23">
              <div style="MARGIN: 0pt">(1)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="50">
              <div style="MARGIN: 0pt" align="right">365,683</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">The value
      of this option award has been estimated pursuant to SFAS No. 123(R). Mr. Abbott
      will not realize the estimated value of this award in cash until this award
      is
      vested and exercised or sold.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong><i>Lawrence
      Fairbanks Abbott, Jr.</i></strong> has served as Superior&#8217;s executive vice
      president since June 2005. On January 25, 2006, the Board of Directors of
      Superior appointed Mr. Abbott as the acting secretary of Superior until the
      appointment of his replacement. Mr. Abbott has over twenty years of experience
      in management roles in numismatic sales and marketing, and executive management.
      Prior to joining Superior, Mr. Abbott held various sales and management
      positions including, most recently, executive vice president, at Heritage Rare
      Coin Galleries, a privately-held rare coin dealer and auctioneer from May 1999
      to May 2005.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">123</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><i>Grants
      of Plan-Based
      Awards</i></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table summarizes plan-based awards that Superior granted during the
      fiscal year ended June 30, 2006 to each of the Superior executive officers
      identified in the Superior Summary Compensation Table above.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="232">
            </td>
            <td width="13">
            </td>
            <td width="2">
            </td>
            <td width="50">
            </td>
            <td width="13">
            </td>
            <td width="8">
            </td>
            <td width="73">
            </td>
            <td width="13">
            </td>
            <td width="12">
            </td>
            <td width="45">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name</strong></div>
            </td>
            <td valign="bottom" width="18">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="70" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Grant
                Date</strong></div>
            </td>
            <td valign="bottom" width="18">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="108" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>All
                Other Option<br>Awards: Number of<br>Securities
                Underlying<br>Options (#)</strong></div>
            </td>
            <td valign="bottom" width="18">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="77" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Exercise
                or <br>Base Price of<br>Option
                Awards<br>($/Sh)</strong></div>
            </td>
            <td valign="bottom" width="3">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="309">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="70">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="108">&#160;</td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="77">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="309" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Lawrence
                Fairbanks Abbott,
                Jr.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="66" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">10/24/2005</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="97" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">5,000</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="17" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="60" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">1.20</div>
            </td>
            <td valign="bottom" width="3" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Outstanding Equity Awards
      at Fiscal Year-End</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table summarizes unexercised options to purchase shares of Superior
      common stock and equity plan awards outstanding at June 30, 2006 for each
      executive officer identified in the Superior Summary Compensation Table
      above:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="140">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="83">
            </td>
            <td width="12">
            </td>
            <td width="7">
            </td>
            <td width="83">
            </td>
            <td width="12">
            </td>
            <td width="9">
            </td>
            <td width="33">
            </td>
            <td width="12">
            </td>
            <td width="3">
            </td>
            <td width="51">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="186" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="115" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Number
                of Securities<br>Underlying
                Unexercised<br>Options<br>(#)<br>Exercisable</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="121" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Number
                of Securities<br>Underlying
                Unexercised<br>Options<br>(#)<br>Unexercisable</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Option<br>Exercise<br>Price<br>($)</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="73" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Option<br>Expiration<br>Date</strong></div>
            </td>
            <td valign="bottom" width="3">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="186">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="115">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="121">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="57">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 8pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="73">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="186" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Lawrence
                Fairbanks Abbott, Jr.</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="3" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="111" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">25,000</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="111" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">75,000</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="12" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="44" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">4.00</div>
            </td>
            <td valign="bottom" width="16" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="4" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="68" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">5/31/2014</div>
            </td>
            <td valign="bottom" width="3" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="186">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="111">
              <div style="MARGIN: 0pt" align="right">5,000</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="111">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="12">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="44">
              <div style="MARGIN: 0pt" align="right">1.20</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="68">
              <div style="MARGIN: 0pt" align="right">6/01/2011</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Option Exercises and Stock
      Vested</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">No executive
      officer identified in the Superior Summary Compensation Table above exercised
      an
      option in fiscal year 2006, and no shares of stock vested with respect to any
      of
      those executive officers.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Pension Benefits</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      does not have any plan which provides for payments or other benefits at,
      following, or in connection with retirement.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Nonqualified Deferred
      Compensation</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      does not have any defined contribution or other plan which provides for the
      deferral of compensation on a basis that is not tax-qualified.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Employment
      Agreements</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      1,
      2005 Superior entered into an employment agreement with Mr. Abbott, pursuant
      to
      which Mr. Abbott was employed as its chief sales officer. Under the agreement,
      Superior agreed to pay Mr. Abbott an annual salary of $200,000 and bonus
      arrangements of up to 150% of base salary based on Superior&#8217;s performance. This
      agreement would survive the combination and expires on June 1, 2008.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Potential Payments Upon
      Termination or Change-In-Control</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Under his
      employment agreement, if Mr. Abbott is terminated without cause upon 15 days
      notice, or due to his death or disability, he will be entitled to receive his
      salary and continued medical insurance coverage for a period of 6 months
      following the date of termination. If Mr. Abbott would have been terminated
      for
      any of the foregoing reasons on January 1, 2007, Superior would have been
      obligated to pay him a lump sum payment of $112,886. In addition, Superior&#8217;s
      obligation to maintain medical health benefits for Mr. Abbott and his dependents
      for a period of six months has an estimated present cost to Superior of $3,000.
      For purposes of the employment agreements, &#8220;cause&#8221; is defined as Mr. Abbott&#8217;s
      (i) conviction of a felony or a misdemeanor involving moral turpitude, (ii)
      breach of any confidentiality covenants with Superior, or of any conflict of
      interest or ethics policies from time to time adopted by its board of directors
      and made applicable generally to the officers of Superior, which continues
      unremedied for a period of ten days following written notice or which is not
      susceptible to cure, or (iii)&#160;breach of </div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">124</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">any
      of his material covenants or
      obligations in the employment agreement which continues unremedied for a period
      of thirty days following written notice or which is not susceptible to
      cure.</font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Compensation Committee
      Interlocks and Insider Participation</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">No
      Superior director or executive officer is known by Superior to serve as an
      officer, director or member of the compensation committee of any other entity
      for which an executive officer or director thereof is also a member of
      Superior&#8217;s board of directors.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Changes of
      Control</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Other
      than possibly for the transactions contemplated by the merger agreement, DGSE
      is
      not aware of any arrangements which may result in a change of control of
      DGSE.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>CERTAIN RELATIONSHIPS
      AND RELATED TRANSACTIONS OF DGSE</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">None.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">125</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>INFORMATION
      REGARDING SUPERIOR
      GALLERIES, INC.</strong></font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>INFORMATION REGARDING
      SUPERIOR&#8217;S BUSINESS</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Company
      Overview</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      principal line of business is the sale of rare coins on a retail, wholesale,
      and
      auction basis. Superior&#8217;s retail and wholesale operations are conducted in
      virtually every state in the United States. Superior also provides auction
      services for customers seeking to sell their own coins. Superior markets its
      services nationwide through broadcasting and print media and independent sales
      agents, as well as on the Internet through third party websites such as eBay,
      Overstock.com and Amazon.com and through its own website at SGBH.com. Its
      headquarters are in Beverly Hills, California. Information regarding Superior&#8217;s
      revenues, profit or loss, and total assets is contained in Superior&#8217;s financial
      statements included in this joint proxy statement/prospectus.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      was originally organized as a Nevada corporation in 1995. On June 30, 2003,
      Superior stockholders approved and Superior completed a reincorporation of
      the
      company in the State of Delaware and changed its corporate name from Tangible
      Asset Galleries, Inc. to Superior Galleries, Inc. These changes were effective
      at the close of business on June 30, 2003. Unless the context otherwise
      requires, all references in this joint proxy statement/prospectus to &#8220;Superior&#8221;
refers to Superior Galleries, Inc. and Tangible Asset Galleries, Inc., as
      Superior&#8217;s predecessor.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>History of the
      Company</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Tangible
      Investments of America, Inc., which we refer to as TIA, Superior&#8217;s predecessor,
      was originally founded by Superior&#8217;s former chief executive officer, Silvano
      DiGenova, in 1977 when Mr. DiGenova first exhibited his coins at a national
      coin
      dealer&#8217;s convention. That same year, Mr. DiGenova first became involved in other
      collectibles such as fine arts and antiques. Mr. DiGenova has collected rare
      coins since 1971 (when he was nine years old). While attending the Wharton
      School of Business in the early 1980s, Mr. DiGenova continued to develop TIA,
      and in May 1984, prior to graduating, Mr. DiGenova took a leave of absence
      from
      Wharton and incorporated TIA in Pennsylvania.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In 1991,
      Mr. DiGenova relocated TIA to Laguna Beach, California and continued to develop
      its rare coin, fine art and collectibles retail and wholesale business,
      continuing to expand on a national level. Superior acquired TIA on April 28,
      1999 through a reverse-merger acquisition.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      December 1999, Superior acquired all of the outstanding common shares of
      Gehringer and Kellar, Inc. d.b.a. Keystone Coin &amp; Stamp Exchange, or
      Keystone. Keystone is a wholesaler, retailer and auctioneer of rare coins
      located in Allentown, Pennsylvania. Superior transferred the operations of
      this
      company to certain members of its management in November 2001 and completed
      the
      sale of the assets of this company in February 2002. In June 2001, Superior
      acquired all of the outstanding common shares of HotelInteractive, Inc., or
      HI,
      an Internet-based publisher of news and information. In February 2002, Superior
      sold this company to a corporation controlled by Mr.&#160;Richard Viola, who was
      serving as a director on Superior&#8217;s board at that time.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      November 2002, Superior began to reduce its operations that were focused on
      the
      fine art, jewelry and collectibles, which we refer to collectively as art,
      segment of its business. By March 2003, with the exception of activities
      specifically related to the liquidation of Superior&#8217;s remaining art inventory,
      all art business segment operations had ceased. Superior completed the
      liquidation of its art inventory in October 2003. Superior may, at some future
      date and on a limited basis, re-enter some of the art business segment as a
      consignment auctioneer.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Background of the
      Coin
      and Collectibles Industry</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Throughout
      history, coins have been highly prized and universally regarded as a store
      of
      value, particularly those struck in precious metals. Over the past 300 years,
      coin collecting for enjoyment and profit has gained increasing prominence.
      The
      coin industry has been active in trading since the 17th century. Today, coins
      and collectibles are bought and sold throughout the world in galleries, shops,
      stores, auctions and on the Internet at fixed prices.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">According
      to experts in the field, it is difficult to determine the total annual sales
      volume of the coin and collectibles business. Sotheby&#8217;s, one of the two largest
      auctioneers in the world in the coin and collectibles market, </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">126</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">reported
      annual auction and related revenue
      from the sale of art and collectibles of $502 million for the year ended
      December 31, 2005, which is an increase of 13% over the prior year. With
      specific regard to coins, the U.S. Mint, in its Report to Congress for the
      year
      ending September 30, 2005, reported that Americans continue to collect the
      new
      quarter dollar coins from the 50 State Quarters&#8482; program developed by the Mint.
      This program was designed to increase coin collecting and the number of
      collectors by minting five new designs annually of the quarter dollar with
      each
      design featuring one each of the 50 states over a ten year period from 1998
      through 2008. During the year, the U.S. Mint also released the &#8220;Ocean in View&#8221;
nickel, the &#8220;Return to Monticello&#8221; nickel, the &#8220;Marine Corps 230&#8221; silver dollar,
      the &#8220;Chief Justice John Marshall&#8221; silver dollar, the &#8220;Benjamin Franklin&#8221; silver
      dollar and the &#8220;Jamestown Commemorative&#8221; five dollar gold coin. In addition, the
      U.S. Mint reported non-bullion numismatic revenue of $360 million for 2005,
      which is an increase of 3% over the prior year.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Typically,
      the
      coins that Superior buys and sells were originally manufactured in the late
      1700&#8217;s to the mid-20th century. Many of the items that Superior sells are
      one-of-a-kind, or have very few examples on the market at any time. Superior
      believes that coin buyers generally start with a modest purchase amount and
      increase the size of their transactions and the rarity of the items that they
      purchase as they gain experience as a buyer in the market.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Coin Grading and
      Trading Systems</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Determining
      the market value of a given coin plays a vital role in buying and selling rare
      coins. Rare coins are graded on a numerical scale from 0 to 70. Zero represents
      the basal state (or lowest condition or state of preservation) and 70 represents
      an uncirculated (or mint state) specimen that is perfect in condition or state
      of preservation in every aspect. As a result of this numerical scale relating
      to
      condition or quality, there is a correlation to value in that the higher its
      numerical grade, the more valuable a coin is to collectors or dealers. A one
      point difference, not even discernible to a layman&#8217;s eye, can result in a
      difference in value of thousands of dollars. Therefore, consistent grading
      according to a standard universally accepted by the marketplace is very
      important. In 1986, the first uniform grading system was implemented by the
      Professional Coin Grading Service, or the PCGS. Silvano DiGenova, Superior&#8217;s
      former chief executive officer, was a co-founder of the PCGS and assisted in
      the
      development of the grading system used by the PCGS. Mr. DiGenova sold his
      interest in the PCGS in 1987 and, since that time, has not been affiliated
      with
      the PCGS, except as a customer of its services. A year after the PCGS was
      founded, the Numismatic Guaranty Corporation, or the NGC, was formed. Mr.
      DiGenova is not affiliated with NGC except as a customer of its services.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">These
      two
      firms established a uniform coin-grading standard, which has gained almost
      universal acceptance throughout the world. Once a coin has been graded and
      certified, both firms encapsulate the coin in tamper-proof acrylic holders
      and
      register them by number, grade, date and mintmark. If applicable, they identify
      variety and pedigree as well. Rare coins graded and certified by either one
      of
      these services can then be traded with confidence. The advent of certified
      grading has led to the formation of the Certified Coin Exchange, or the CCE,
      which is a nationwide computerized trading network for rare coins. The CCE
      is
      also the number one source of instantaneous price information. Coins can be
      bought and sold sight unseen because of the certification and confidence
      instilled in the market place by the CCE, the PCGS and the NGC. Mr. DiGenova
      was
      a founder and board member of the CCE, and assisted in the organization of
      the
      association. Mr. DiGenova sold his interests in the CCE in the late 1980s and
      has not been affiliated with that entity since that time except as a user of
      its
      services.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Retail and Wholesale
      Sales</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      sells rare coins on a wholesale and retail basis. On a wholesale basis,
      Superior&#8217;s contacts include approximately 5,000 rare coin dealers across the
      country who Superior contacts through telephone, email, fax, electronic
      exchanges and in person at the approximately 30 shows or expositions annually.
      Wholesale transactions are usually completed with recognized dealers in the
      trade and are often for immediate payment or with approved credit relationships,
      by payment within 30 days from the date of sale. Retail transactions typically
      do not involve the extension of any credit terms and payment is made at the
      time
      of sale.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s CEO
      in consultation with senior management team members approves trade credit .
      In
      wholesale transactions, selling prices for rare coins are determined by the
      marketplace and usually individually negotiated with the buyer. There are
      several printed pricing guides, some published weekly, which provide pricing
      indications as well as the CCE, a real-time exchange with bids and asks on
      many
      of the coins in the market. Often, a wholesale customer is buying rare coins
      from Superior because the wholesale customer has another customer, whether
      wholesale or retail, already identified. Wholesale sales prices for rare coins
      are determined primarily by the grade of </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">127</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">the
      coins and are often influenced by
      non-market factors such as the purchasing or selling dealer&#8217;s liquidity, the
      relative desire or need for the specific rare coin, the length of time the
      selling dealer has held the rare coins and other factors.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">When
      selling rare coins on a retail basis, Superior utilizes direct mail, telephone,
      fax, email and Internet-based retail and auctions, both private and public,
      as
      channels of distribution. Superior maintains a database of over 50,000 potential
      customers for rare coins who are solicited regularly through these channels.
      Superior currently maintains its website www.SGBH.com to offer rare coins both
      at retail and at private auction. Superior also has ongoing campaigns on eBay
      and Overstock.com, third party websites, to sell rare coins at their Internet
      public auction and listing sites. At retail, Superior typically sells for
      immediate payment, holding the rare coins until good funds are received. In
      a
      few instances, on large purchases, Superior will consider financing a sale
      for a
      retail buyer. In these situations, Superior will hold the rare coins as
      collateral. In retail transactions, the market determines sale prices for rare
      coins and there are several pricing guides available to the retail buyer
      including monthly and weekly publications and auction prices realized. The
      price
      to be paid by a retail buyer for a rare coin is primarily based on the coin&#8217;s
      condition and rarity as determined by its grade but is also influenced by the
      buyer&#8217;s desire for the particular rare coin, the time it has taken to find a
      suitable example for the buyer&#8217;s collection, the relative rarity of the coin to
      others held by the buyer and other factors. In retail transactions, Superior
      principally sells rare coins that have been certified for authenticity and
      quality by an independent recognized authority.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Acquisition of
      Inventory</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      acquires inventory of rare coins at wholesale through other dealers in the
      trade, retail customers, trusts or estates desiring to sell their holdings
      or by
      auction. Superior is not dependent on any major suppliers. During the year
      ended
      June 30, 2006, one supplier provided approximately 10.5% of Superior&#8217;s aggregate
      purchases of coins. All other suppliers provided less than 6% of its inventory.
      When purchasing from other dealers in the trade, Superior is typically offered
      15 days to pay the net invoice amount. Purchases from retail customers, trusts
      and estates or at auction by an independent auction company require immediate
      payment upon taking title and possession of the property. On occasion, Superior
      may trade items from its inventory to either a dealer or a retail customer
      in
      exchange for property from the dealer or retail customer. When buying inventory
      from a dealer, the majority of these purchases are completed at shows and
      expositions around the country, although a significant volume is transacted
      over
      the telephone. Purchasing at auction is another major source of inventory in
      rare coins. Purchase prices are negotiated by Superior&#8217;s buyers with dealers in
      the trade and with the retail customers, trusts and estates. When buying at
      auction, Superior&#8217;s buyers compete with other buyers in determining the final
      bid for any given lot of property.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Auction
      Operations</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On July
      6, 2001, Superior acquired substantially all of the assets of Superior
      Galleries, Inc., a California corporation (and not the same legal entity as
      Superior), a company that was an auctioneer of rare coins and collectibles
      located in Beverly Hills, California, which we refer to as SGBH, for cash and
      a
      note. Through June 30, 2003, Superior operated this business as a subsidiary
      under the name Superior Galleries Beverly Hills, Inc., although the seller
      retained certain rights to the &#8220;Superior Galleries&#8221; name in the stamp and space
      memorabilia markets for a period of two years from the date of the acquisition.
      As a result, Superior was restricted until July 6, 2003 from doing business
      in
      either the rare stamp or space memorabilia markets under this name for such
      period. Effective July&#160;1, 2003, the auction operations of SGBH were
      combined with the remainder of Superior&#8217;s operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior,
      as an auctioneer of rare coins and collectibles, has a history dating back
      to
      1929 with sales primarily in the rare coin and rare stamp markets. With its
      long
      time location in Beverly Hills, Superior customers and clients include many
      well-recognized names in the entertainment and sports fields.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      solicits and accepts consignments of rare coins from individuals, dealers and
      trusts and estates and charge a seller&#8217;s commission along with a buyer&#8217;s premium
      on each lot sold. The combination of the seller&#8217;s commission and the buyer&#8217;s
      premium on each lot equals approximately 5%-30% but averages approximately
      11.8%.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      markets its services by advertising in trade journals, direct mail and
      telemarketing and through attendance at major shows and exhibitions and by
      personal visits. Each consignment of goods is evidenced by a contract signed
      by
      both the consignor and Superior. In some instances, Superior may loan the
      consignor funds in an amount up to approximately 70% of the expected prices
      realized from the sale of the property in the consignment. </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">128</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">The
      consignor loan amount maximums are
      determined by a loan-to-value ratio based on Superior&#8217;s estimate of the
      wholesale liquidation value in the event the consigned items do not sell at
      auction. In this event, the consignor also executes a note and security
      agreement evidencing the debt and providing a security interest to Superior
      in
      the consigned items. The proceeds from the sale of the property are used to
      repay the loan amount and the excess funds are paid to the consignor. Upon
      receipt of the consigned goods, Superior records the receipt on its records
      and
      then catalogs and photographs the items, storing the information in digital
      format.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Auction
      sale dates are established approximately one year in advance. As deadlines
      for
      each auction date approaches, Superior organizes all of the digitized
      information into a catalog of goods with photographs and subcontracts the
      printing and mailing of the catalog to be sent to its mailing list of buyers.
      In
      addition, Superior loads the digitized catalog on its web-site and into software
      managed by Internet seller eBay, so that bidders on the Internet worldwide
      may
      also leave absentee bids to be executed by Superior at the live auction. eBay&#8217;s
      software also allows for Internet bidders to bid competitively with the live
      auction in real time in competition with the bidders present at the auction
      site.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Generally,
      the
      purchase price from the sale of rare coins is due upon the completion of the
      auction, although Superior maintains credit relationships with certain dealers
      in the trade and offers payment terms of up to 60 days to those selected
      dealers. A contract with a consignor requires payment to the consignor, less
      any
      loan amounts, accrued interest and commissions, to be made within 45 days of
      the
      sale date.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Competition</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      business of selling rare coins is highly competitive. Methods of competition
      include pricing coins at levels that are lower than the published prices of
      Superior&#8217;s competitors, charging reduced auction commissions to sellers,
      increasing advertising and expanding Internet presence, and providing more
      personalized service. Superior competes with a number of smaller, comparably
      sized, and larger firms throughout the United States. These include: Heritage
      Auction Galleries, a large scale coin dealer and auctioneer; Bowers and Merena
      Auctions; and American Numismatic Rarities, a comparably-sized coin auction
      company. These competitors are generally larger and better capitalized than
      Superior is.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Regulation</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The rare
      coin markets are not currently subject to direct federal, state or local
      regulation. However, the Federal Trade Commission, or FTC, and many state
      attorneys general have shown an interest in regulating the sales of rare coins
      and other tangible assets as investments. The State of New York has determined
      that under certain circumstances, rare coins may be treated as securities under
      state law, thereby requiring rare coin dealers to register as broker-dealers
      and
      permitting investors all legal and equitable remedies otherwise available to
      buyers of securities. Superior relies upon a 1998 U.S. Federal Court ruling
      that
      the ordinary retail sale of rare coins to investors does not constitute the
      sale
      of a security under the federal securities laws, and Superior believes that
      its
      operations are not subject to regulation as involving the sale of securities.
      There is no assurance, however, that at some time in the future, the sale of
      rare coins will not be subject to increased regulation, and that Superior&#8217;s
      business will not be materially adversely affected by such regulation. Any
      increased regulation of Superior&#8217;s business could increase its costs of
      operation or require it to change its business practices, either of which could
      have a material and adverse impact on its business.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Over
      the
      past 15 years, the FTC has filed suits against numerous rare coin dealers
      alleging that the dealers&#8217; representations about coins were false or misleading
      or that the dealers&#8217; retail markups were so high that their representations
      about investment risk and appreciation potential became misleading or untrue.
      These cases have not, however, created any clear rules by which dealers such
      as
      Superior can assure themselves of compliance. On January 1, 1996, the FTC&#8217;s
      Telemarketing Sales Rule, authorized by the 1994 Telemarketing and Consumer
      Fraud and Abuse Prevention Act, took effect. &#8220;Telemarketing&#8221; is defined as any
      plan, program, or campaign that is conducted to induce payment for goods and
      services by use of more than one interstate telephone call. This rule applies
      to
      all sales of &#8220;investment opportunities,&#8221; which are defined by whether the
      seller&#8217;s marketing materials generally promote items on the basis of
      representations about &#8220;income, profit, or appreciation.&#8221; Superior believes that
      all of its retail sales are covered by this rule, even those to
      collectors.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      Telemarketing Sales Rule requires Superior to inform customers of the following
      before accepting payment: the number of items being sold, the purchase price,
      and Superior&#8217;s refund/exchange/buyback policy. The </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">129</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">rule
      also prohibits Superior from
      misrepresenting the &#8220;risk, liquidity, earnings potential, and profitability&#8221; of
      the items that it sells. This in itself did not materially change prior law.
      However, during debates on the Telemarketing Sales Rule in 1995, FTC staff
      attorneys tried to impose additional specific requirements that dealers in
      &#8220;tangible assets&#8221; disclose to retail customers their actual cost for the items
      they sell, and also disclose &#8220;all material facts&#8221; about their goods before
      accepting any money from the customer. This would have required Superior to
      disclose its actual margins to its retail customers, as well as impose on
      Superior the burden of determining what facts were material to the purchase
      of
      coins or other collectibles. Although the FTC ultimately removed these
      additional requirements from the final version of the rule, the behavior of
      the
      FTC staff has demonstrated its particular concern for telemarketing of coins
      as
      investments. Superior cannot provide assurances that the FTC will not amend
      the
      rule in the future to impose these or other additional regulations, or that
      individual states will not impose such regulations. If the FTC or any state
      agency proposed additional regulations relating to the telemarketing of coins,
      Superior could be required to expend additional funds in order to hire staff
      and
      provide training. The expense of complying with these requirements would likely
      reduce Superior&#8217;s profitability.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, many investors favor rare coins because they can be bought, owned
      and
      sold privately, i.e., without registering with or notifying any government
      agency. However, the Internal Revenue Service (&#8220;IRS&#8221;) now requires dealers such
      as Superior to report all sales of coins in which more than $10,000 in cash
      or a
      cash-like instrument is used as payment. The private nature of rare coin
      ownership has occasionally resulted in rare coins being purchased by taxpayers
      for the purpose of concealing unreported income, or used to &#8220;launder&#8221; income
      derived from unlawful activities. As a coin dealer, which falls under the
      definition of a &#8220;dealer,&#8221; Superior is subject to the Bank Secrecy Act and the
      newly enacted Section 352 of the USA Patriot Act effective January 1, 2006.
      Superior must comply with requirements to collect certain information about
      customer transactions and report it to the IRS on Form 8300 or on a Suspicious
      Activity Report Form. As a second hand dealer of jewelry, Superior must also
      collect and report customer information to the Beverly Hills Police Department
      within 72 hours of the item purchase. Superior cannot provide assurances that
      additional regulations will not be imposed upon Superior in the future, and
      that
      its business will not be harmed as a result.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Taxation of Mail
      Order
      Sales</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      does not collect California sales tax on mail order sales to out-of-state
      customers, because interstate sales generally are tax-exempt. Nor does Superior
      collect use tax on its interstate mail order sales. Most states impose a use
      tax
      on &#8220;retailer(s) engaged in business in this state&#8221; on sales of &#8220;tangible
      personal property for storage, use, or other consumption in this state.&#8221; Use tax
      is usually set at the same rate as sales tax, and its purpose is to equalize
      the
      tax affects on local retailers who pay sales tax and out-of-state mail order
      companies who do not. Some states exempt rare coin sales over $1,000 from sales
      or use tax, but most do not. Although the United States Constitution restricts
      the right of states to tax interstate commerce, states can assess use tax on
      any
      transaction where the out-of-state mail order firm is deemed to be &#8220;engaged in
      business&#8221; in the state. A retailer which has a &#8220;nexus&#8221; with the state, i.e., any
      physical presence in the state, regardless of whether the sales themselves
      arise
      from that local presence, is deemed to be &#8220;engaged in business&#8221; in the state.
&#8220;Nexus&#8221; includes attending conventions, although at least one state (California)
      provides a seven-day &#8220;safe harbor&#8221; for out-of-state dealers attending
      conventions and whose sales are less than a certain dollar threshold. It also
      would include attending auctions or making buying or selling trips. On that
      basis, Superior may be deemed to have &#8220;nexus&#8221; in many states.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Payment
      of use tax is the buyer&#8217;s obligation, but states require retailers engaged in
      business in that state to collect the tax on sales to customers in that state
      and remit it to the state along with a use tax return. There is no statute
      of
      limitations for use tax if the dealer has filed no returns. To date, Superior
      has not been assessed for use tax by the taxing authority of any other state
      for
      sales to customers in that state claiming that Superior is engaged in business
      in that state and therefore required to collect and remit the tax, nor has
      Superior received any inquiry indicating that Superior was being audited for
      the
      purposes of such an &#8220;assessment&#8221;. However, there is no assurance that Superior
      will not be audited by state taxing authorities and be assessed for unpaid
      use
      taxes (plus interest and penalties) for a period of many years.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition to use tax, many states impose income and franchise taxes on
      out-of-state companies that derive net income from business with their
      residents. For example, California applies an income-based franchise tax to
      out-of-state corporations operating in California for the privilege of using
      the
      corporate form. The maximum California corporate tax rate is approximately
      9%,
      with a minimum tax of $400 per year. Income derived outside of California is
      not
      taxed, and in-state income of taxpayers liable for tax in more than one state
      is
      calculated using a formula contained in the Uniform Division of Income for
      Taxation Purposes Act, a statute in effect in about one-half of the </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">130</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">states.
      As with use tax, nexus principles
      apply, and the U.S. Supreme Court requires &#8220;a minimal connection between the
      interstate activities and the taxing state, and a rational relationship between
      the income attributed to the State and the intrastate values of the
      enterprise.&#8221;</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Assuming
      the existence of nexus, Superior could be subject to income-based taxes in
      each
      of the states in which it had a physical presence at conventions, auctions
      or
      otherwise. The only exceptions would be in states where Superior is protected
      by
      a federal law, 15 U.S.C. &#167; 381, which immunizes companies from state income
      taxes if the company&#8217;s only business activities in the taxing state consists of
&#8220;solicitation of orders for interstate sales.&#8221; There is no statute of
      limitations for income or franchise tax if the dealer has filed no return.
      To
      date, Superior has not been assessed for income tax or franchise tax by the
      taxing authority of any other state, nor has Superior received any inquiry
      indicating that Superior was being audited for purposes of such an assessment.
      However, Superior cannot provide assurances that it will not be audited by
      state
      taxing authorities and be assessed for unpaid income or franchise taxes (plus
      interest and penalties) for a period of many years.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Customers/Dependence
      on Key Customers</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      generally sells to a large variety of individual retail purchasers as well
      as
      several wholesale purchasers throughout the nation and world. During the fiscal
      year ended June 30, 2006, none of Superior&#8217;s customers accounted for more than
      10% of its sales.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On May
      18, 2005, Superior entered into a Primary Supplier Agreement with Stanford
      Coins
&amp; Bullion, Inc., which we refer to as Stanford C&amp;B, under which Superior
      has been provided with a preferential right to source coins that Stanford
      C&amp;B is seeking for its customers. When the agreement expired in December
      2005, the business relationship between the parties continued under the same
      terms of the previous agreement. During the fiscal year ended June 30, 2006,
      Stanford C&amp;B purchased $2,277,000 of rare coins from Superior, and during
      the current fiscal year, Stanford C&amp;B has purchased greater than $2,117,012
      of rare coins from Superior. Stanford C&amp;B is an affiliate of its principal
      stockholder and lender, Stanford International Bank Limited.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Number of
      Employees</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      February 22, 2007, Superior co-employed or obtained contract services from
      21
      persons, all of whom were full-time co-employees. Superior&#8217;s co-employment
      relationship is with Administaff, as a professional employer organization.
      Superior believes that its future success depends in part upon its ability
      to
      recruit and retain qualified numismatists, marketing and other personnel.
      Superior considers its relations with its employees to be good. None of
      Superior&#8217;s employees are represented by a labor union.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Properties</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      corporate headquarters are located in an approximately 7,000 square foot
      storefront facility located at 9478 West Olympic Boulevard, Beverly Hills,
      California, which Superior leases from a company controlled by another rare
      coin
      dealer. This facility includes administrative, customer support, auction,
      gallery and retail space. One lease for the store front lease expires on
      September 30, 2012; and one lease for the office space expires July 31, 2010.
      The combined monthly rental rate is $21,147, plus an additional $6,353 for
      parking fees and rent of storage space, subject to annual increases based on
      increases in the consumer price index. Superior believes that its facilities
      are
      adequate for its needs in the near future.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Legal
      Proceedings</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      6, 2006 Superior was sued in the U.S. District Court for Central California
      by
      Elaine and Dean Sanders in connection with a loan made to them against 32 coins
      placed on consignment on June 26, 2004. Fourteen of the coins were sold, and
      the
      proceeds from this sale of approximately $186,750 were insufficient to repay
      the
      remaining loan balance of $359,471 that Superior made to the Sanders. The
      plaintiffs subsequently paid an additional $155,000 in December 2005 with
      respect to the loan, but now allege that Superior violated its agreement with
      them relating to the sale of the coins. Superior strongly denies that it
      violated the agreement or that it acted improperly in any way. The complaint
      seeks undefined dollar amounts, accrued interest and reimbursement of
      plaintiffs&#8217; legal costs.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In April
      2004 Superior sued its former chief financial officer, Malingham Shrinivas,
      in
      Los Angeles Superior Court for breach of contract, fraud and conspiracy. In
      that
      lawsuit, Superior alleged that Mr. Shrinivas fraudulently arranged to receive
      more salary than he was entitled to, to pay personal expenses using Superior
      funds, and to pay </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">131</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">third
      party vendors with Superior funds for
      services which were not rendered. In July 2004 Mr. Shrinivas filed a
      counterclaim in this litigation, claiming that he was terminated without just
      cause and was therefore entitled to $58,250 in severance pay. Although the
      case
      had been scheduled for trial in August 2006, prior to that time the case was
      stayed by order of the Superior Court because the Court had been advised that
      criminal charges against Mr.&#160;Shrinivas related to this matter were
      imminent. Those criminal charges were subsequently filed, and therefore further
      proceedings in connection with the civil case continue to be stayed. Superior
      believes that Mr. Shrinivas was terminated with cause and that he is therefore
      not entitled to any severance pay. If and when the stay of Superior&#8217;s civil case
      is terminated, Superior intends to vigorously pursue its claims and defend
      Mr.
      Shrinivas&#8217; claims for severance pay.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      September 26, 2006 Superior was sued in the California Superior Court by a
      former customer, Michael Iatesta, for breach of contract and intentional and
      negligent misrepresentation. The suit relates to Superior&#8217;s sale of the
      plaintiff&#8217;s coins at an auction in September 2005. The plaintiff claims that
      Superior made errors in connection with the marketing and sale of his coins,
      and
      that as a result his coins were sold for approximately $123,000 instead of
      their
      alleged full value of from $225,000 to $250,000. Superior sold the plaintiff&#8217;s
      coins at or above the minimum price set by the plaintiff. Superior believes
      that
      his allegations are without merit and intends to vigorously defend this
      suit.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      November 7, 2006 Superior was sued in the United States District Court for
      the
      Northern District of Texas by a competitor, Heritage Numismatic Auctions, Inc.,
      which we refer to as Heritage. In its complaint, Heritage alleges that Superior
      violated Heritage&#8217;s copyright rights by copying Heritage&#8217;s catalog descriptions
      of certain coins and currency offered for sale by Heritage. Heritage claims
      that
      these alleged actions also violate the California Unfair Competition Act.
      Heritage seeks an injunction ordering Superior to cease the alleged acts of
      infringement and to destroy the infringing items and damages in unspecified
      amounts. Superior denies that it has infringed any of Heritage&#8217;s legal rights
      and intends to vigorously defend this suit. Superior has reserved for its own
      legal costs, estimated to be $50,000.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      may from time to time be involved in various claims, lawsuits or disputes with
      third parties, actions involving allegations of discrimination, or breach of
      contract actions incidental to the operation of its business. Superior is not
      currently involved in any litigation which it believes could have a materially
      adverse effect on its financial condition or results of operations.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Financial Information
      About Segments</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      views its operations and manages its business as one segment,
      collectibles.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Financial Information
      About Geographic Areas</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Primarily
      all of Superior&#8217;s revenues from external customers currently are attributed to
      Superior&#8217;s domestic operations, and primarily all of Superior&#8217;s long-lived
      tangible assets currently are maintained in the United States.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">132</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>MANAGEMENT&#8217;S
      DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
      SUPERIOR</strong></font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Uncertainties
      Resulting from Planned Merger with DGSE</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On July
      12, 2006, Superior entered into an Agreement and Plan of Merger and
      Reorganization with DGSE and SIBL. On January 6, 2007, Superior entered into
      a
      revised Merger Agreement with DGSE and SIBL, as described in the section
      entitled &#8220;Merger Agreement&#8221; beginning on page 62, which amended and restated the
      merger agreement of July 12, 2006. If the merger is consummated, DGSE Merger
      Corp., a newly-formed Delaware corporation and wholly-owned subsidiary of DGSE,
      will merge with and into Superior. Superior would survive the merger as a
      wholly-owned subsidiary of DGSE, and therefore would cease to be an independent
      publicly traded company at that time. The closing of the merger is subject
      to
      certain conditions, however, and if these conditions are not satisfied the
      merger may not be consummated.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      has incurred costs of approximately $490,000 in connection with the combination
      during the due diligence and closing process through December 31, 2006. Superior
      expects to incur additional costs related to the combination during fiscal
      2007,
      including substantial legal and accounting costs, but Superior is presently
      unable to quantify these costs. In addition, Superior has entered into an
      agreement with DGSE under which Superior will pay one-half of the total costs
      and expenses incurred in connection with the combination by both Superior and
      DGSE, if the combination is not consummated. These expenses would include,
      among
      others, legal fees, accounting fees and investment banking fees. Under this
      arrangement, if the combination is not consummated, Superior&#8217;s share of the
      total expenses may be substantially more than the amount of expenses Superior
      has directly incurred.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Trends and
      Uncertainties</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a
      dealer and auctioneer of rare coins, Superior&#8217;s revenue and profitability can be
      materially affected by economic factors such as interest rates, inflation,
      stock
      market performance, the price of gold and other precious metals and world
      political stability. The demand for and therefore the price of rare coins tends
      to increase with the price of gold. During times of unstable stock market
      performance and low interest rates rare coins may become more attractive as
      an
      investment as compared to the stock market or interest bearing securities.
      In
      times of strong stock market returns and high interest rates, rare coins may
      be
      viewed as a less favorable investment. Political instability may also increase
      the demand for rare coins as individuals may perceive the security and
      portability of rare coins more favorably as compared to other financial assets
      such as stocks, bonds or cash. Future changes in the economy such as rapid
      increases in interest rates, a decrease in the price of gold or strong growth
      in
      the stock market could materially reduce Superior&#8217;s revenue, margins and
      profitability and affect Superior&#8217;s liquidity as inventory turns would
      diminish.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Furthermore,
      certain types of rare coins, as is the case with other collectibles, may become
      more or less popular based on market trends that Superior cannot predict.
      Although Superior carries a diverse range of categories of rare coins, a
      decrease in popularity in a particular category could result in diminished
      liquidity as inventory turns decrease for the affected category.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Within
      the rare coin industry many of Superior&#8217;s customers and suppliers are other
      dealers. Superior may be materially affected by both external and internal
      factors that could affect the financial stability and liquidity of other dealers
      with whom Superior conducts business. Superior&#8217;s revenues and profitability
      could significantly decrease if several dealers faced financial difficulties
      that curtailed their ability to sell or purchase rare coins either directly
      or
      at Superior&#8217;s auctions.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Over
      the
      past five years, except for the year ended June 30, 2004, Superior incurred
      substantial losses that severely diminished its capital base and liquidity.
      As a
      result, Superior has negative shareholders&#8217; equity and working capital. In
      addition, most of Superior&#8217;s debt is short-term and bears a variable interest
      rate. Any significant unfavorable change in the economic environment or in
      Superior&#8217;s industry could quickly result in declining revenue and operating
      losses. Superior&#8217;s challenge is to both raise additional permanent equity
      capital and restructure its debt to include a larger long-term portion, which
      may be accomplished through the intended combination with DGSE described below.
      Although Superior cannot assure you that it will be able to accomplish these
      objectives either with or without the combination, it is Superior&#8217;s hope that if
      it is able to restructure its debt and raise additional equity, Superior will
      mitigate some of the impact of a future negative economic environment and
      conversely will benefit more sharply from a positive environment.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
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    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>Critical
      Accounting
      Policies</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      financial statements are based on the selection and application of significant
      accounting policies, which require Superior&#8217;s management to make estimates and
      assumptions that affect the amounts reported in the balance sheets and the
      statements of operations. Superior believes that the following are the most
      critical areas that may affect its financial condition and results of
      operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Revenue
      Recognition</i>. Superior generates revenue from wholesale and retail sales of
      rare coins, precious metals bullion and second-hand jewelry and artifacts.
      The
      recognition of revenue varies for wholesale and retail transactions and is,
      in
      large part, dependent on the type of payment arrangements made between the
      parties.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      sells rare coins to other wholesalers/dealers within its industry on credit,
      generally for terms of 15 to 60 days, but in no event greater than one year.
      Superior grants credit to new dealers based on extensive credit evaluations
      and
      for existing dealers based on established business relationships and payment
      histories. Superior generally does not obtain collateral with which to secure
      its accounts receivable when the sale is made to a dealer. Superior recognizes
      revenue for monetary transactions (i.e., cash and receivables) with dealers
      when
      the merchandise is shipped to a dealer.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      also sells rare coins to retail customers on credit, generally for terms of
      30
      to 60 days, but in no event greater than one year. Superior grants credit to
      retail customers based on credit evaluations and for existing retail customers
      based on established business relationships and payment histories. When a retail
      customer is granted credit, Superior generally collects a payment of 25% of
      the
      sales price, establishes a payment schedule for the remaining balance and holds
      the merchandise as collateral as security against the customer&#8217;s receivable
      until all amounts due under the credit arrangement are paid in full. If the
      customer defaults in the payment of any amount when due, Superior may declare
      the customer&#8217;s obligation in default, liquidate the collateral in a commercially
      reasonable manner using such proceeds to extinguish the remaining balance and
      disburse any amount in excess of the remaining balance to the customer. Under
      this retail arrangement, Superior recognizes revenue when its customer agrees
      to
      the terms of the credit and makes the initial payment. Superior has
      limited-in-duration money back guaranty policies for its retail customers only,
      as discussed below.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      limited circumstances, Superior exchanges merchandise for similar merchandise
      and/or monetary consideration with both dealers and retail customers, for which
      it recognizes revenue in accordance with APB No.&#160;29, &#8220;Accounting for
      Non-monetary Transactions.&#8221; When Superior exchanges merchandise for similar
      merchandise and there is no monetary component to the exchange, it does not
      recognize any revenue. Instead, the basis of the merchandise relinquished
      becomes the basis of the merchandise received, less any indicated impairment
      of
      value of the merchandise relinquished. When Superior exchanges merchandise
      for
      similar merchandise and there is a monetary component to the exchange, Superior
      recognizes revenue to the extent of monetary assets received and determines
      the
      cost of sale based on the ratio of monetary assets received to monetary and
      non-monetary assets received multiplied by the cost of the assets
      surrendered.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      has a return policy (money-back guarantee). The policy covers retail
      transactions involving graded rare coins only. Superior&#8217;s customers may return
      graded rare coins purchased within 7 days of the receipt of the rare coins
      for a
      full refund as long as the rare coins are returned in exactly the same condition
      as they were delivered. In the case of rare coin sales on account, Superior&#8217;s
      customers may cancel the sale within 7 days of making a commitment to purchase
      the rare coins. The receipt of a deposit and a signed purchase order evidences
      the commitment.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Revenues
      from the sale of consigned goods are recognized as commission income on such
      sale if Superior is acting as an agent for the consignor. If in the process
      of
      selling consigned goods, Superior makes an irrevocable payment to a consignor
      for the full amount due on the consignment and the corresponding receivable
      from
      the buyer(s) has not been collected by Superior at that payment date, then
      Superior records that payment as a purchase and the sale of the consigned
      good(s) to the buyer as revenue as Superior has assumed all collection
      risk.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      auction business generates revenue in the form of commissions charged to buyers
      and sellers of auction lots. Auction commissions include buyers&#8217; commissions,
      sellers&#8217; commissions, and buyback commissions, each of which is calculated based
      on a percentage of the hammer price. Buyers&#8217; and sellers&#8217; commissions are
      recognized upon the confirmation of the identification of the winning bidders.
      Funds charged to winning bidders include the hammer price plus the commission.
      Only the commission portion of the funds received by winning bidders is recorded
      as revenue. Buyback commissions represent an agreed upon rate charged by
      Superior for goods </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">134</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">entered
      in the auction and not sold. Goods
      remain unsold when an auction lot does not meet the consignor reserve, which
      is
      the minimum sales price as determined prior to auction, and when items sold
      at
      auction are returned subsequent to the winning bidder taking possession. Buyback
      commission is recognized along with sellers&#8217; commission or at the time an item
      is returned. Returns from winning bidders are very limited and primarily occur
      when a rare coin sold auction has an error in its description which the winning
      bidder relied upon to purchase the item.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Accounts
      Receivable</i>. Superior is required to estimate the collectibility of its
      accounts receivables. A considerable amount of judgment is required in assessing
      the collectibility of these receivables, including judgments about the current
      creditworthiness and financial condition of each client and related aging of
      past due balances. Superior evaluates specific accounts receivable balances
      when
      it becomes aware of a situation where a client may not be able to meets its
      financial obligations to it. The amount of the required allowance is based
      on
      the facts available to Superior and is reevaluated and adjusted as additional
      information is available, including Superior&#8217;s right to offset debts with
      accounts payable balances and the proceeds from consigned inventory sales.
      Allowances are also established for probable loss inherent in the remainder
      of
      the accounts receivable based on a factor of 0.1% of annualized total gross
      sales. As a result of the expansion of Superior&#8217;s rare coin auction business,
      Superior may attract new customers that may adversely affect its estimates
      of
      accounts receivable collectibility, and the creditworthiness of its clients
      may
      deteriorate. These factors would require the reassessment of Superior&#8217;s
      estimates and additional allowances resulting in a reduction of its operating
      results.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Auction
      and
      Customer Advances</i>. Superior is required to estimate the collectibility of
      its auction and dealer customer advances. All of Superior&#8217;s advances are secured
      by rare coins. Although Superior makes its decision to advance funds based
      on
      customers&#8217; creditworthiness, business history, and collateral valuation; the
      collectibility of advances is primarily based on Superior&#8217;s estimate of sale
      prices for customers&#8217; rare coin collateral on a wholesale liquidation basis.
      Superior evaluates specific advance balances when it becomes aware of situations
      where a client may not be able to meet its financial obligations to Superior
      or
      the value of collateral securing the advance is impaired. During fiscal 2007,
      advances for auction consignments and dealer purchases have been made from
      operating cash flows as there was no availability under Superior&#8217;s line of
      credit from SIBL. Superior has not had any significant history of losses on
      this
      type of asset. It is difficult to assess future performance of the rare coin
      market. A rapid adverse change in the rare coin market could diminish the value
      of the collateral and the creditworthiness of Superior&#8217;s clients may
      deteriorate. These factors would require the reassessment of Superior&#8217;s
      estimates and any additional allowances would result in a reduction of its
      operating results.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Inventory
      Valuation</i>. Superior values its inventory at the lower of cost or market in
      accordance with generally accepted accounting principles related to the fair
      market valuation of assets. On a periodic basis Superior&#8217;s numismatic staff will
      review market data from recognized industry sources, published auction results
      in the Bluesheets and Greysheets and offers made by customers on specific items
      to determine whether or not the cost of its inventory is above or below market
      price. If the market value of a coin is significantly less than its cost to
      Superior, Superior will establish a reserve against inventory to reflect that
      the market value of its rare coin inventory in the aggregate is below cost,
      which results in reflecting the value of its inventory at the lower of cost
      or
      market.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Stock-Based
      Compensation</i>. Superior&#8217;s 2003 Omnibus Stock Option Plan (&#8220;2003 Plan&#8221;) is
      shareholder approved and permits the granting of up to 1,200,000 options to
      purchase Superior common stock to Superior employees, directors and outside
      consultants. Stock option awards are granted with an exercise price that is
      equal to or greater than the market price of Superior&#8217;s common stock on the date
      of the grant. The options vest generally over a range of one to five years
      and
      expire five years after the final vesting date. Stock options under the 2003
      Plan provide for accelerated vesting if there is a change in control (as defined
      by the 2003 Plan).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The fair
      value of each stock option granted is estimated on the date of the grant using
      the Black-Scholes option pricing model and factors in an estimated forfeiture
      based on management assessment of historical employee termination experience.
      The Black-Scholes option pricing model has assumptions for risk free interest
      rates, dividends, stock volatility and expected life of an option grant. The
      risk free interest rate is based the U.S. Treasury Bill rate with a maturity
      based on the expected life of the options and on the closest day to an
      individual stock option grant. Dividend rates are based on Superior&#8217;s dividend
      history. The stock volatility factor is based on the past three years of market
      prices of Superior&#8217;s common stock. The expected life of an option grant is based
      on its vesting period. The fair value of each option grant is recognized as
      compensation expense over the expected life of the option on a straight line
      basis.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">135</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>Results
      of
      Operations</strong></font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>For the Six Months
      Ended December 31, 2006 and 2005</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table sets forth the percentage of net revenue represented by each
      item in Superior&#8217;s statement of operations for the periods presented and the net
      changes and percentage of change for each item in Superior&#8217;s statement of
      operations between the periods indicated:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="189">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="36">
            </td>
            <td width="13">
            </td>
            <td width="2">
            </td>
            <td width="16">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="36">
            </td>
            <td width="13">
            </td>
            <td width="2">
            </td>
            <td width="16">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="13">
            </td>
            <td width="4">
            </td>
            <td width="27">
            </td>
            <td width="8">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">&#160;</td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="11" valign="bottom" width="219" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Six
                Months Ended<br>(dollars in
                thousands)</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Change</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%<br>Change</strong></div>
            </td>
            <td valign="bottom" width="11">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December<br>31,
                2006</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="24">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December<br>31,
                2005</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="24" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="252">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="24" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="24">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                sales</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">12,863</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">90</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">20,433</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">96</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(7,570</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">-37</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commission
                Income</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,503</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">846</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">658</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">78</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">14,366</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">21,279</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(6,913</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">-32</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of sales</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">11,663</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">81</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">17,782</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">84</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(6,119</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-34</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
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            </td>
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          <tr>
            <td valign="bottom" width="252">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
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            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">2,703</div>
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            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">19</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">3,497</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">16</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(793</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">-23</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,766</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">33</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,467</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">21</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">299</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Loss
                from operations</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(2,063</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">(14</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(970</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">-5</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(1,093</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">113</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(366</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(3</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(252</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-1</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(114</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">45</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Loss
                before provision for taxes</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(2,429</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">(17</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,222</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt" align="right">-6</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt" align="right">(1,207</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">99</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax provision</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="252">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="252">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Income (loss)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(2,430</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(17</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,223</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="21" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(6</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,207</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">99</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s net
      loss for the six months ended December 31, 2006 was $2,430,000 or $0.51 per
      share on both a basic and diluted basis as compared to a net loss of $1,223,000
      or $0.25 per share on both a basic and diluted basis for the six months ended
      December 31, 2005. The 99% decline in Superior&#8217;s operating results was primarily
      due to 32% lower sales revenues available to cover operating costs, allowances
      for uncollectible accounts receivable, inventory adjustments, higher net
      interest expenses, and costs incurred in connection with the proposed
      combination with DGSE.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Revenues</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      table below sets forth Superior&#8217;s primary sources of revenue for the periods
      indicated:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="114">
            </td>
            <td width="16">
            </td>
            <td width="9">
            </td>
            <td width="52">
            </td>
            <td width="16">
            </td>
            <td width="1">
            </td>
            <td width="19">
            </td>
            <td width="16">
            </td>
            <td width="9">
            </td>
            <td width="52">
            </td>
            <td width="16">
            </td>
            <td width="1">
            </td>
            <td width="20">
            </td>
            <td width="16">
            </td>
            <td width="6">
            </td>
            <td width="34">
            </td>
            <td width="16">
            </td>
            <td width="2">
            </td>
            <td width="32">
            </td>
            <td width="11">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="153">&#160;</td>
            <td valign="bottom" width="22">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="11" valign="bottom" width="288" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Six
                Months Ended<br>(dollars in
                thousands)</strong></div>
            </td>
            <td valign="bottom" width="22">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Change</strong></div>
            </td>
            <td valign="bottom" width="22">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%<br>Change</strong></div>
            </td>
            <td valign="bottom" width="14">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="153">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="22">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="82">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December
                31,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="22">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="28">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%&#160;</strong></div>
            </td>
            <td valign="bottom" width="22">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="82">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December
                31,<br>2005</strong></div>
            </td>
            <td valign="bottom" width="22">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="28" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%&#160;</strong></div>
            </td>
            <td valign="bottom" width="22">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="14" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="153">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Sales</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="82" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="28" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="82" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="153">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rare
                Coin-Wholesale</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="12">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">10,484</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">73</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="12">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">13,801</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">65</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(3,317</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">-24</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="153">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rare
                Coin-Retail</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="12" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,379</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="26" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">17</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="12" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,632</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="26" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">31</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(4,253</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="42" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-64</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="153">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Net Sales</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">12,863</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">90</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="12">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">20,433</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt" align="right">96</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(7,570</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">-37</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="153">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commission
                Income</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="12" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,503</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="26" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="12" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">846</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="26" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">658</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="42" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">78</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="153">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Revenue</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="12" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="69" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">14,366</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="26" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="12" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="69" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">21,279</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="26" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="22" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(6,913</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="42" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">-32</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Total
      revenue for the six months ended December 31, 2006 decreased $6,913,000 or
      32%
      to $14,366,000 from $21,279,000 for the six months ended December 31, 2005.
      This
      decrease in revenues is primarily due to the decrease in retail sales of rare
      coins. Retail rare coin sales for the six months ended December 31, 2006
      decreased $4,253,000 or 64% from the comparable period in 2005. Wholesale rare
      coin sales for the six months ended December 31, 2006 also decreased $3,317,000
      or 24% over the comparable period in 2005. Due to the transfer of $2,117,000
      of
      coins to SIBL to reduce the balance on Superior&#8217;s commercial line of credit,
      those coins were not available for sale to other wholesale customers. On a
      combined basis, sales of rare coins decreased $7,570,000 or 37% from the
      comparable period in 2005.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">136</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">This
      decrease in rare coin sales was
      primarily due to a refocusing of Superior&#8217;s marketing efforts away from the
      direct wholesale and retail customers and toward the auction market for
      consigned collector coins held in private portfolios. This change was made
      to
      mitigate a perceived weakened market demand for quantity purchases which was
      caused by a recent decrease in the price of gold, rising interest rates and
      new
      record highs set in the stock market. It also was necessitated by Superior&#8217;s
      lower levels of owned inventory available for sale, which resulted from the
      lack
      of availability of operating cash flow to purchase that inventory and the need
      to repay debt in-kind with coins.</font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Auction
      sales (hammer prices realized) were $16,757,000 for the six months ended
      December 31, 2006 as compared to $18,726,000 for the six months ended December
      31, 2005 reflecting a decrease of 11%; however the commission income for these
      auction sales increased due to a higher sell through rate. During the six months
      ended December 31, 2006 the buybacks were 21% of auction sales as compared
      to
      51% of auction sales for the comparable period in 2005. Commissions on concluded
      sales are approximately 15% of the hammer price and for buybacks they are
      approximately 5% of the reserved price. Commission income for the six months
      ended December 31, 2006 was $1,504,000, an increase of $658,000, or 78% over
      the
      comparable period in 2005 due to the refocus of Superior&#8217;s business
      strategy.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      revenue and profitability during the year is subject to seasonality. Superior&#8217;s
      first and third fiscal quarters have traditionally been its strongest because
      two well-attended auctions are normally scheduled during each of these quarters
      and during these quarters there are more frequent and better-attended trade
      shows. The second fiscal quarter has traditionally been Superior&#8217;s weakest,
      because it conducts only one auction event and there are fewer, less popular
      trade shows.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To expand
      its wholesale sales efforts, in October 2005 Superior entered into an informal
      preferred supplier arrangement with Stanford Coins and Bullion, Inc. (&#8220;Stanford
      C&amp;B&#8221;), a rare coin retailer and affiliate of Superior&#8217;s principal
      stockholder, SIBL. This arrangement replaced a Primary Supplier Agreement that
      terminated upon the completion of the parties&#8217; obligations in September 2005. In
      addition to providing us a preferred status as a supplier, Stanford C&amp;B will
      exclusively refer their customers wishing to sell rare coins via auctions to
      Superior&#8217;s auction division. Superior expects that this arrangement will
      continue after the combination. Superior believes that it will likely result
      in
      increased coins sales by Superior, but Superior is unable to predict the
      magnitude of that increase.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      growth strategy for wholesale type distribution channels changed as of January
      6, 2007 under the revised merger agreement. In addition to growing the wholesale
      business through the hiring of additional numismatic traders, acquiring small
      rare coin dealers and supplying rare coins to other retailers, Superior has
      created a new profit center with Silvano DiGenova, the former chief executive
      officer of Superior, serving as Managing Director-Numismatics, which will,
      along
      with other activities, provide services to wholesale customers.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To expand
      Superior&#8217;s retail distribution channel, Superior plans to remodel the gallery
      space located in Beverly Hills following the combination. The product mix will
      be diversified to include new high-end jewelry and watches in addition to
      second-hand jewelry. Superior is in the process of obtaining a pawnbroker
      license to make loans against jewelry and other artifacts. The retail business
      will be supported by local advertising in print, radio and television
      media.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To expand
      Superior&#8217;s auction distribution channels, Superior plans to find more consigners
      of rare coins for its auction events through new functions available on its
      internet website (www.SGBH.com) and to integrate that website with DGSE&#8217;s
      websites: www.DGSE.com, www.USBullionExchange.com, www.FairchildWatches.com
      (Fairchild International), and www.CGDEInc.com (Charleston Gold &amp; Diamond
      Exchange). Superior does not hold an internet-only auction during the week
      that
      it holds a live auction as its live auctions are simultaneously broadcast over
      its website to take bids over the internet. Superior plans to hold seven &#8220;Elite&#8221;
live auction events in the fiscal year ending June 30, 2007. Superior currently
      has a strategic relationship with eBay.com for the daily sale of rare coins
      and
      jewelry. Superior pays eBay.com a commission of 5% on sales it makes, and when
      Superior sells goods in this manner Superior increases the charge to its
      customer by 5%, to offset the commission paid to eBay.com. Under this
      relationship, Superior has agreed that when it conducts internet-only auctions
      through eBay.com, Superior will not simultaneously offer the auctioned items
      through any other internet-based auction.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      implementation of these strategies may not result in increased revenues.
      Superior will seek to determine whether the expected benefits from these
      strategies, measured principally in terms of increased revenue, justifies the
      costs of implementing them. If Superior determines that any of these strategies
      is not cost-effective, Superior will terminate or amend the strategy. Superior
      cannot assure you that its growth plans will generate enough revenue to cover
      the additional operating costs associated with these growth plans.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">137</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><i>Cost
      of Revenue</i></font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Cost of
      revenue is primarily comprised of the acquisition price Superior pays for coins,
      and is dependent on Superior&#8217;s skill in identifying coins that may be offered
      for sale at advantageous prices, as well as the supply and demand factors at
      the
      time that Superior is purchasing coins. Commission income has minimal cost
      of
      revenue associated with it.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Cost of
      revenue for the six months ended December 31, 2006 decreased $6,119,000 or
      34%
      to $11,663,000 or 81% of total revenue, from $17,782,000 or 84% of total revenue
      for the six months ended December 31, 2005. The decrease in aggregate dollar
      cost of revenue in the current period over the comparable period in 2005 was
      primarily due to the decrease in wholesale and retail rare coin sales as
      discussed in &#8220;Total Revenue&#8221; above. &#160;The cost of revenue as a percentage of
      total revenue in the current period varied from 81% to 84% in the comparable
      period of the previous year; but as auction commission income has negligible
      cost of revenue, the true comparison is 91% of net rare coin sales in the six
      months ended December 31, 2006 to 87% of net rare coin sales in the six months
      ended December 31, 2005.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">However,
      in
      the six months ended December 31, 2006, mark to market reserves and adjustments
      to inventory values totaled $545,000 as compared to $125,000 reserved during
      the
      six months ended December 31, 2005. Excluding the effect of the mark to market
      inventory reserve of $490,000, the $245,000 inventory adjustment for the
      physical count taken, cost of goods actually sold for the six months ended
      December 31, 2006 would have been 76%. Management&#8217;s mark to market reserve was
      focused on the fair market valuation of the coins and the other items in
      Superior&#8217;s inventory, on an item-by-item basis, and a reserve was recorded if
      the fair market value was determined to be less than Superior&#8217;s cost.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Gross Profit</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Gross profit
      for the six months ended December 31, 2006 decreased $794,000 to $2,703,000
      or
      19% of total revenue from $3,497,000 or 16% of total revenue for the six months
      ended December 31, 2005. The decrease in gross profit dollars in the current
      period over the comparable period in 2005 was primarily due the reduced level
      of
      sales as discussed in &#8220;Total Revenue&#8221; above. Excluding the effects of the mark
      to market inventory reserve and the inventory adjustments in cost of goods
      sold,
      the gross profit margin for the six months ended December 31, 2006 would have
      been 23.9%. The gross profit as a percentage of revenue will vary from period
      to
      period due to variations in the factors discussed in &#8220;Cost of Revenue&#8221;
above.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Selling, General and
      Administrative Expenses</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Selling,
      general and administrative expenses for the six months ended December 31, 2006
      increased $299,000 to $4,766,000 or 33% of total revenue from $4,467,000 or
      21%
      of total revenue for the six months ended December 31, 2005. The net $299,000
      increase in the dollar amount of expenses was primarily due to additional
      spending of approximately $929,000 comprised of (i) merger related legal, audit
      and consulting fees of $413,000 related to the proposed combination with DGSE;
      (ii) office rent increases of $18,000; (iii) insurance premiums of $29,000
      to
      cover higher levels of consigned coins in Superior&#8217;s possession; (iv) additional
      bad debt expense of $394,000 and (v) lesser miscellaneous operational expenses
      of $75,000.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Net cost
      reductions of $630,000 offset some of the additional expenditures for the six
      months ended December 31, 2006. Cost reductions were comprised of: (i) $207,000
      decrease in expenditures for marketing operations and auction operations
      expenses associated with the logistics of attending trade shows, advertising
      and
      having coins graded by professional associations; (ii) reduced employee
      compensation costs of $282,000 which resulted from decreased commissions paid
      to
      salespersons on Superior&#8217;s lower level of sales and reversal of over-stated
      stock option expenses; (iii) $12,000 decrease in freight and postage due to
      a
      change in vendors; (iv) $74,000 saved by the cancellation of a public relations
      service contract; (v) $36,000 decrease in travel and entertainment expense
      and<br>(vi) $19,000 resulting from lesser changes in all other selling, general
      and administrative expense categories.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Other Income and
      Expenses</i></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Other
      expenses for the six months ended December 31, 2006 increased $114,000 to
      $366,000 from $252,000 for the six months ended December 31, 2005. This increase
      was primarily due to increased interest expense, resulting from the combination
      of the increased use of Superior&#8217;s SIBL line of credit to finance its own
      receivables and inventory and increases in the rate of interest charged on
      its
      SIBL line of credit and on notes from other private lenders for the six months
      ended December 31, 2006 as compared to the six months ended December 31,
      2005.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">138</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><i>Provision
      for Income
      Taxes</i></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Although
      Superior reported a net loss for the six months ended December 31, 2006,
      Superior incurred income taxes for state franchise and other minimum taxes
      totaling $600. Similarly, although Superior reported a net loss the six months
      ended December 31, 2005, Superior incurred income taxes for state franchise
      and
      other minimum taxes totaling $800.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>For the Three Months
      Ended December 31, 2006 and 2005</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table sets forth the percentage of net revenue represented by each
      item in Superior&#8217;s statement of operations for the periods presented and the net
      changes and percentage of change for each item in Superior&#8217;s statement of
      operations between the periods indicated:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="145">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="8">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">&#160;</td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="11" valign="bottom" width="262" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three
                Months Ended<br>(dollars in
                thousands)</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Change</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%<br>Change</strong></div>
            </td>
            <td valign="bottom" width="11">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December<br>31,
                2006</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>&#160;%</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December<br>31,
                2005</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%&#160;</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="193">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                sales</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,388</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">93</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">9,485</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">99</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(4,097</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">-43</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commission
                Income</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">417</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">141</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">276</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">196</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,805</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">9,626</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(3,821</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">-40</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of sales</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,609</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">79</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,440</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">88</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(3,831</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-45</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,196</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">21</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,186</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">12</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,505</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">43</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,166</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">23</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">339</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">16</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Loss
                from operations</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,309</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">-23</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(980</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">-11</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(329</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">34</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(182</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-3</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(137</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(45</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">33</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Loss
                before provision for taxes</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,491</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">-26</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,117</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">-12</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(374</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">33</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax provision</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Income (loss)</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,492</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">-26</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,117</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">-12</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(375</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">33</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s net
      loss for the three months ended December 31, 2006 was $1,492,000 or $0.31 per
      share on both a basic and diluted basis as compared to a net loss of $1,117,000
      or $0.23 per share on both a basic and diluted basis for the three months ended
      December 31, 2005. The 16% decline in Superior&#8217;s operating results was primarily
      due to 40% lower sales revenues available to cover operating costs, allowances
      for uncollectible accounts receivable, inventory adjustments, lower interest
      income on auction advances and costs incurred in connection with the proposed
      combination with DGSE.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Revenues</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      table below sets forth Superior&#8217;s primary sources of revenue for the periods
      indicated:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="145">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="36">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="36">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="8">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="11" valign="bottom" width="262" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three
                Months Ended<br>(dollars in
                thousands)</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Change</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%<br>Change</strong></div>
            </td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December
                31, 2006</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="49">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December
                31, 2005</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Sales</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Rare
                Coin-Wholesale</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">4,632</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">80</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">7,267</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">75</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(2,635</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">-36</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Rare
                Coin-Retail</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">756</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">13</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,218</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">23</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(1,462</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-66</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Net Sales</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,388</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">93</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">9,485</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">99</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(4,097</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">-43</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commission
                Income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">417</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">141</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">276</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">196</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Revenue</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">5,805</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">9,626</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(3,821</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">-40</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Total
      revenue for the three months ended December 31, 2006 decreased $3,821,000 or
      40%
      to $5,805,000 from $9,626,000 for the three months ended December 31, 2005.
      This
      decrease in revenues is primarily due to the decrease in sales of rare coins
      to
      both wholesale and retail customers. Wholesale rare coin sales for the three
      months ended December 31, 2006 decreased $2,635,000 or 36% from the comparable
      period in 2005. Due to the transfer of $2,117,000 of coins to SIBL to reduce
      the
      balance on Superior&#8217;s commercial line of credit, those coins were not available
      for sale to other wholesale customers. Retail rare coin sales for the three
      months ended December 31, 2006 </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">139</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">decreased
      $1,462,000 or 66% over the
      comparable period in 2005. On a combined basis, sales of rare coins decreased
      $4,097,000 or 43% over the comparable period in 2005.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">This
      decrease in rare coin sales was primarily due to a refocusing of Superior&#8217;s
      marketing efforts away from the direct wholesale and retail customers and toward
      the auction market for consigned collector coins held in private portfolios.
      This change was made to mitigate a perceived weakened market demand for quantity
      purchases which was caused by a recent decrease in the price of gold, rising
      interest rates and new record highs set in the stock market. It also was
      necessitated by Superior&#8217;s lower levels of owned inventory available for sale,
      which resulted from the lack of availability of operating cash flow to purchase
      that inventory and the need to repay debt in-kind with coins.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Commission
      income for the three months ended December 31, 2006 was $417,000, an increase
      of
      $276,000 or 196% over the comparable period in 2005. This increase was primarily
      due to Superior&#8217;s efforts to attract higher quality consignments with higher
      average commission rates. Auction sales (hammer prices realized) were $3,695,000
      for the three months ended December 31, 2006 as compared to $1,862,000 for
      the
      three months ended December 31, 2005, reflecting an increase of 98% in volume
      and a 12% decrease in the buy back/return rate for the auctions completed during
      the three months ended December 31, 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      revenue and profitability during the year is subject to seasonality. Superior&#8217;s
      first, third and fourth fiscal quarters have traditionally been its strongest
      because two well-attended Elite live auctions are normally scheduled during
      each
      of these quarters and during these quarters there are more frequent and
      better-attended trade shows. Superior&#8217;s second fiscal quarter has traditionally
      been its weakest because it conducts only one auction event and there are fewer,
      less popular trade shows.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Cost of Revenue</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Cost
      of
      revenue is primarily comprised of the acquisition price Superior pays for coins,
      and is dependent on Superior&#8217;s skill in identifying coins that may be offered
      for sale at advantageous prices, as well as the supply and demand factors at
      the
      time that Superior is purchasing coins. Commission income has minimal cost
      of
      revenue associated with it. Cost of revenue for the three months ended December
      31, 2006 decreased $3,831,000 or 45% to $4,609,000 or 79% of total revenue,
      from
      $8,440,000 or 88% of total revenue for the three months ended December 31,
      2005.
      The decrease in aggregate dollar cost of revenue in the current period over
      the
      comparable period in 2005 was primarily due to the decrease in wholesale and
      retail rare coin sales as discussed in &#8220;Total Revenue&#8221; above.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The cost
      of revenue as a percentage of total revenue in the current period varied 9%
      from
      79% to 88% in the comparable period of the previous year; but as auction
      commission income has negligible cost of revenue, the true comparison is 86%
      of
      net rare coin sales in the three months ended December 31, 2006 to 89% of net
      rare coin sales in the three months ended December 31, 2005. The cost of goods
      sold as a percent of net rare coin sales decreased by 7% because fewer wholesale
      rare coins were sold with unfavorable margins during the three months ended
      December 31, 2006 than during the comparable period of the previous year.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">However,
      in the three months ended December 31, 2006, mark to market reserves and
      adjustments to inventory values totaled $735,000 as compared to $125,000
      reserved during the three months ended December 31, 2005. Excluding the effect
      of the mark to market inventory reserve of $490,000, the $245,000 inventory
      adjustment for the physical count taken, cost of goods sold for the three months
      ended December 31, 2006 would have been 72%. Management&#8217;s mark to market reserve
      was focused on the fair market valuation of the coins and the other items in
      Superior&#8217;s inventory, on an item-by-item basis, and a reserve was recorded if
      the fair market value was determined to be less than its cost.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Although
      the cost of revenue as a percentage of total revenue in the current period
      may
      be similar to that in the comparable period of the previous year, this may
      result from a coincidental combination of factors that are not always
      consistent. These factors, which Superior cannot predict from period to period,
      include Superior&#8217;s success in buying coins that generate substantial margin, the
      supply of coins that Superior&#8217;s customers wish to purchase, and the level of
      auction sales and the percentage of commission on these sales that Superior
      earns.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Gross Profit</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Gross
      profit for the three months ended December 31, 2006 increased $10,000 to
      $1,196,000 or 21% of total revenue from $1,186,000 or 12% of total revenue
      for
      the three months ended December 31, 2005. Superior&#8217;s gross </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">140</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">profit
      margin increased 1% because (i)
      fewer wholesale rare coins were sold with unfavorable margins during the three
      months ended December 31, 2006 than during the comparable period of the previous
      year and (ii) the $276,000 increase in auction commissions during the three
      months ended December 31, 2006 had a minimal cost of revenue associated with
      the
      consigned coins sold. Excluding the effects of the mark to market inventory
      reserve and the inventory adjustments in cost of goods sold, the gross profit
      margin for the three months ended December 31, 2006 would have been 33%. The
      gross profit as a percentage of revenue will vary from period to period due
      to
      variations in the factors discussed in &#8220;Cost of Revenue&#8221; above.</font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Selling, General and
      Administrative Expenses</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Selling,
      general and administrative expenses for the three months ended December 31,
      2006
      increased $339,000 or 16% to $2,505,000 from $2,166,000 for the three months
      ended December 31, 2005. These expenses represent 43% of total revenue for
      the
      three months ended December 31, 2006 as compared to 23% of total revenue for
      the
      three months ended December 31, 2005. The higher percentage that selling,
      general and administrative expenses for the three months ended December 31,
      2006
      is a function of there being 40% less total revenue for that fiscal period
      and
      because there was additional expenses incurred in the three months ended
      December 31, 2006 than during the comparable period of the previous year.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The net
      increase in the dollar amount of expenses was primarily due to additional
      spending of approximately $832,000 comprised of (i) legal, audit and consulting
      fees of $335,000 related to the proposed combination with DGSE; (ii) internet
      web hosting fee increases of $12,000; (iii) additional bad debt expense of
      $448,000 and<br>(iv) other miscellaneous operational expenses of $37,000.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Net cost
      reductions of $493,000 offset some of the additional expenditures for the three
      months ended December 31, 2006. Cost reductions were comprised of: (i) $96,000
      decrease in expenditures for marketing operations and auction operations
      expenses associated with the logistics of attending trade shows, advertising
      and
      having coins graded by professional associations; (ii) reduced employee
      compensation costs of $262,000 which resulted from decreased commissions paid
      to
      salespersons on Superior&#8217;s lower level of rare coin sales and a one-time
      reversal of over-stated stock option expenses; (iii) $22,000 decrease in dues
      and subscriptions to professional organizations; (iv) $39,000 saved by the
      cancellation of a public relations service contract; (v) $31,000 decrease in
      travel and entertainment expense; (vi) $13,000 decrease in the purchase of
      office supplies; and (vii) $30,000 resulting from lesser changes in all other
      selling, general and administrative expense categories.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Other Income and
      Expenses</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Other
      expenses for the three months ended December 31, 2006 increased $45,000 or
      33%
      to $182,000 from $137,000 for the three months ended December 31, 2005. This
      increase was primarily due to $45,000 less interest earned on auction advances
      and dealer loans because outstanding loan balances were reduced to $1,646,000
      for the three months ended December 31, 2006 from $3,155,000 for the three
      months ended December 31, 2005. Interest expense to finance Superior&#8217;s own
      receivables and inventory remained the same for the three months ended December
      31, 2006 as compared to the three months ended December 31, 2005.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Provision for Income
      Taxes</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Although
      Superior reported a net loss for the three months ended December 31, 2006,
      Superior incurred income taxes for state franchise and other minimum taxes
      totaling $800. Superior reported a net loss the three months ended December
      31,
      2005, and incurred no income taxes for state franchise and other minimum taxes
      during that period.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">141</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman"><strong>For
      the Years Ended June 30, 2006
      and 2005</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table sets forth the percentage of net revenue represented by each
      item in Superior&#8217;s statements of operations for the periods presented and the
      net changes and percentage of change for each item in its statement of
      operations between the periods indicated:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="144">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="35">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="35">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="8">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="193">&#160;</td>
            <td rowspan="2" valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="11" valign="bottom" width="264" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended<br>(dollars in
                thousands)</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="16">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Change</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%<br>Change</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td colspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,
                2006</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="50">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,
                2005</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="51" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="50" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="51">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                sales</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">43,302</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">93</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">37,340</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">94</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,962</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">16</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commission
                Income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,015</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,195</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">820</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">37</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">46,317</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">39,535</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">6,782</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">17</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of sales</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">38,393</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">83</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">32,027</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">81</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,366</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">20</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">7,924</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">17</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">7,508</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">19</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">416</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">6</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,792</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">21</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7,708</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">19</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,084</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">27</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from operations</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,868</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">-4</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(200</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">-1</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,668</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">834</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(669</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(415</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">-1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(254</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">61</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) before provision for taxes and extraordinary item</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(2,537</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">-5</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(615</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">-2</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,922</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">313</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax provision</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) before extraordinary item</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(2,539</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">-5</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(616</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">-2</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,923</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">312</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Extraordinary
                item</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">50</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">50</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Income (loss)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(2,489</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">-5</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(616</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">-2</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,873</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">304</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s net
      loss for the year ended June 30, 2006 was $2,489,000 or $0.52 per share on
      both
      a basic and fully diluted basis as compared to a net loss of $616,000 or $0.13
      per share on a basic and fully diluted basis for the year ended June 30, 2005.
      The decline in Superior&#8217;s operating results was primarily due to additional
      infrastructure costs to support current and anticipated future growth, increased
      reserves against accounts receivable and inventory values, higher net interest
      expenses, and costs incurred in connection with the proposed combination with
      DGSE.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Total Revenue</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      table below sets forth Superior&#8217;s primary sources of revenue for the periods
      indicated:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="145">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="36">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="36">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="8">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">&#160;</td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="11" valign="bottom" width="262" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended<br>(dollars in
                thousands)</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Change</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%<br>Change</strong></div>
            </td>
            <td valign="bottom" width="11">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June
                30,<br>2005</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Sales</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="50">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Rare
                Coin-Wholesale</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">30,021</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">65</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">24,533</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">62</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,488</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">22</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Rare
                Coin-Retail</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">13,281</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">28</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">12,807</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">32</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">474</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">4</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Art,
                Collectibles and Other</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Net Sales</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">43,302</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">93</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">37,340</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">94</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,962</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">16</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commission
                Income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,015</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,195</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">820</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">37</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="193">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Revenue</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">46,317</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">39,535</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">6,782</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">17</div>
            </td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      recorded total revenue of $46,317,000 for the year ended June 30, 2006, an
      increase of $6,782,000 or 17% over the total revenue of $39,535,000 recorded
      for
      the year ended June 30, 2005. The increase in revenue is primarily due to
      increased wholesale coin sales. Wholesale rare coin sales increased $5,488,000
      or 22% over last year&#8217;s sales to other coin dealers. This increase was primarily
      due to continued strength in demand for rare coin inventory. Retail rare coin
      sales increased marginally by $474,000 or 4% over last year. This moderate
      increase was primarily due to the focus of Superior&#8217;s print advertising campaign
      toward wholesalers and the slow ramp up of internet capabilities for the retail
      market.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Commission
      income for the year ended June 30, 2006 increased $820,000 or 37% over the
      last
      year ended June&#160;30, 2005. This improvement was primarily due to an increase
      in the volume of consignments and the average </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">142</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">rate
      of commission earned. Auction sales
      (hammer prices realized, which are the aggregate amount of winning bids at
      Superior&#8217;s auctions excluding the buyer&#8217;s commission) were $28,665,000 for the
      year ended June 30, 2006 as compared to $23,234,000 for the year ended June
      30,
      2005, which also contributed to the increased commission income for the current
      year.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      revenue and profitability during the year is subject to seasonality. Superior&#8217;s
      first and third fiscal quarters have traditionally been its strongest because
      two well-attended auctions are normally scheduled during each of these quarters
      and during these quarters there are more frequent and better-attended trade
      shows. Superior&#8217;s second fiscal quarter has traditionally been its weakest
      because Superior conducts only one auction event and there are fewer, less
      popular trade shows.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      believes that for its revenue to continue to grow in the future it must continue
      to expand and diversify its distribution channels. Superior has recently begun
      to consider, test and implement several growth strategies.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To expand
      its wholesale sales efforts, Superior began to supply a television home shopping
      channel with rare coins on a test basis in October 2004. Superior evaluated
      its
      arrangement with this supplier through February 2005, and decided to discontinue
      this arrangement and to examine other home shopping opportunities at some future
      date. In January 2005, Superior began to supply Internet retailer Amazon.com
      with rare coins on a test basis. Superior&#8217;s current relationship with Amazon.com
      is simply to provide that company, on a nonexclusive basis, with coins to be
      offered for sale on its website. Superior pays Amazon.com a commission, which
      is
      presently 15%, on any sales it makes through this relationship. Superior has
      yet
      to determine the length of the test period with Amazon.com. Over the medium
      and
      long-term Superior&#8217;s growth strategy for wholesale type distribution channels
      includes hiring of additional numismatic traders, acquiring small rare coin
      dealers and supplying rare coins to gift and catalog retailers. Superior has
      yet
      to determine the associated costs of its medium and long-term growth strategies
      in the areas discussed above. Superior may extend or terminate any of these
      arrangements at any time.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To expand
      its retail distribution channels, Superior completed a significant upgrade
      of
      its web-site last year. This upgrade included software tools to improve the
      ease
      of use of Superior&#8217;s Internet shopping cart, enhance the presentation of items
      for sale, automate its listing capabilities with e-Bay.com, Amazon.com and
      Overstock.com, increase traffic to its web-site where coins may also be
      purchased and improve on-line bidding and customer want-list capabilities.
      The
      costs incurred last year for this upgrade were approximately $80,000 and the
      annual maintenance cost associated with this upgrade will be approximately
      $42,000. Superior is considering further upgrades to its website in the coming
      year, but has yet to determine the costs associated with these potential
      upgrades. In March 2005, Superior began listing rare coins with Overstock.com
      both in their regular listing format and on their auction platform. Other growth
      plans include the expansion of Superior&#8217;s direct mail advertising targeting high
      net worth collectors who are currently buying rare coins or other fine
      collectibles.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      plans to expand its auction operations to include bi-monthly Internet-only
      auctions through its strategic relationship with e-Bay.com. Under this
      relationship, Superior has agreed that when it conducts Internet-only auctions
      through e-Bay.com, Superior will not simultaneously offer the auctioned items
      through any other Internet-based auction. Superior pays e-Bay.com a commission
      of 5% on sales it makes, and when Superior auctions coins in this manner it
      increases the charge to its customer by 5%, to offset the commission paid to
      e-Bay.com. This arrangement will complement the seven major live auctions that
      Superior currently holds during a year. Superior anticipates ramping toward
      bi-monthly Internet-only auctions by October 2006. Subsequent to the completion
      of the proposed combination with DGSE, Superior plans to expand its Internet
      website (www.SGBH.com) significantly and to integrate the website with DGSE&#8217;s
      websites: www.DGSE.com, www.USBullionExchange.com, www.FairchildWatches.com
      (Fairchild International), and www.CGDEInc.com (Charleston Gold &amp; Diamond
      Exchange).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      would not hold an Internet-only auction during the week that it held a live
      auction as Superior&#8217;s live auctions are simultaneously broadcast over the
      Internet. Superior has seven live auction elite events in the fiscal year ending
      June 30, 2006 and is currently planning to hold two live auctions per quarter
      next year.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      ability to expand its wholesale, retail and auction operations is dependent
      in
      part upon the success of these strategies, which Superior has not yet evaluated.
      The implementation of these strategies may not result in increased revenues.
      Superior will seek to determine whether the expected benefits from these
      strategies, measured principally in terms of increased revenue, justifies the
      costs of implementing them. If Superior determines that any of these strategies
      is not cost-effective, it will terminate or amend the strategy. Superior cannot
      assure you that its </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">143</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">growth
      plans will generate enough revenue
      to cover the additional operating costs associated with these growth
      plans.</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      ability to expand its revenue is significantly contingent on the availability
      of
      additional permanent equity and debt financing. As indicated in &#8220;Other Liquidity
      Plans&#8221; below Superior has plans to raise additional equity and debt, but there
      is no assurance that it will be successful in doing so on terms and conditions
      that are acceptable to it.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Cost of Sales</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Cost
      of
      sales is primarily comprised of the acquisition price Superior pays for coins,
      and is dependent on Superior&#8217;s skill in identifying coins that may be offered
      for sale at advantageous prices, as well as supply and demand factors at the
      time it is purchasing coins. Commission income on consigned coins has minimal
      cost of sales associated with it. Cost of sales increased $6,366,000 or 20%
      to
      $38,393,000 for the year ended June 30, 2006, compared to $32,027,000 for the
      year ended June 30, 2005. The cost of goods sold remained stable at
      approximately 81% of total revenue for both years, excluding the effect of
      the
      mark to market inventory reserve of $840,000 that was recorded for the year
      ended June 30, 2006 as an inventory adjustment in cost of goods sold.
      Management&#8217;s inventory adjustment was focused on the fair market valuation of
      the coins and other items in Superior&#8217;s inventory, on an item by item basis, and
      a reserve was recorded if the fair market value was determined to be less than
      Superior&#8217;s cost.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      increase in the aggregate dollar cost of sales was primarily due to the
      increased sale of wholesale rare coins as discussed in &#8220;Total Revenue&#8221; above,
      rather than factors that might have influenced the cost of any particular item
      of inventory. During Superior&#8217;s 2006 and 2005 fiscal years, Superior had
      comparable success in purchasing coins at advantageous prices, which resulted
      in
      its cost of sales as a percentage of revenue remaining similar. Although cost
      of
      sales as a percentage of total revenue may be similar from year to year, this
      may result from a coincidental combination of factors that are not always
      consistent. These factors, which Superior cannot predict from year to year,
      include Superior&#8217;s success in buying coins that generate substantial margin, the
      supply of coins that Superior&#8217;s customers wish to purchase, and the level of
      auction sales and the percentage of commission on these sales that Superior
      earns.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Gross Profit</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Gross
      profit for the year ended June 30, 2006 increased $416,000 or 6% to $7,924,000
      from $7,508,000 for the year ended June 30, 2005. Superior&#8217;s gross profit margin
      remained at approximately 19% of total revenue for both years excluding the
      effect of the mark to market inventory reserve of $840,000 that was recorded
      for
      the year ended June 30, 2006 as an inventory adjustment in cost of goods sold.
      Due to recording the fair market reserve on inventory value, the gross profit
      margin was 17% for the year ended June 30, 2006, compared to 19% for the year
      ended June 30, 2005. The adjusted $1,256,000 increase in the total gross profit
      figure in 2006 over 2005 was primarily due to the increase in Superior&#8217;s
      wholesale rare coin sales and greater number of consigned coin sales. Gross
      profit as a percentage of revenue will vary from period to period due to
      variations in the factors discussed in &#8220;Cost of Sales,&#8221; above.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Selling, General and
      Administrative Expenses</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Selling,
      general and administrative expenses increased $2,084,000 or 27% to $9,792,000
      for the year ended June 30, 2006, from $7,708,000 for the year ended June 30,
      2005. These expenses represented 21% of total revenue for the year ended June
      30, 2006, as compared to 19% of total revenue for the year ended June 30, 2005.
      The dollar increase in these expenses was due principally to the following
      factors: (i) additional employee compensation costs of $572,000, which resulted
      from increased headcount and increased commissions that resulted from Superior&#8217;s
      higher level of sales; (ii) $446,000 increase in other compensation comprised
      of
      non-cash expenses associated with common stock grants of $36,000 and stock
      option awards of $410,000 realized according to FASB 123(R); (iii) an additional
      $286,000 of marketing and operations expenses associated with the logistics
      of
      attending trade shows, advertising and having coins graded by professional
      associations; (iv) $232,000 increase in legal fees primarily related to the
      proposed combination with DGSE and (v) a net increase of $548,000 resulting
      from
      changes in all other selling, general and administrative expense
      categories.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">144</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><i>Other
      Income and
      Expenses</i></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Other
      expenses for the year ended June 30, 2006 increased $254,000 or 61% to $669,000
      from $415,000 for the year ended June 30, 2005. This increase was primarily
      due
      to: (i) a decrease in interest income of $15,000 that resulted from the lower
      levels of lending to Superior&#8217;s customers; (ii) increases in interest expenses
      of $241,000 that resulted from the combination of increased use of Superior&#8217;s
      lines of credit to finance its own inventory and increases in rates charged
      to
      Superior by its lenders for the year ended June 30, 2006, as compared to the
      year ended June 30, 2005; and (iii) a decrease in the gain on the sales of
      fixed
      assets of $3,000.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Provision for Income
      Taxes</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Superior
      incurred a net loss of $2,489,000 for the year ended June 30, 2006 and a net
      loss of $616,000 for the year ended June 30, 2005. Superior recorded income
      taxes expense of $2,000 for state and other minimum taxes for the year ended
      June 30, 2006 and $1,000 for state and other minimum taxes for the year ended
      June 30, 2005. Superior has net operating losses (&#8220;NOL&#8221;) carried forward from
      previous years. For federal income tax purposes, Superior has a NOL carry
      forward of approximately $10,358,000 which is available to offset future federal
      taxable income through 2025. For state income tax purposes, Superior also has
      a
      NOL carry forward of approximately $5,097,000, which is available to offset
      state taxable income through 2015. The use of these NOL carry forwards in future
      years will be limited due to past changes in Superior&#8217;s ownership and will be
      further limited if the merger is consummated. The full effect of these
      limitations has yet to be calculated. In addition, NOL carry forwards for the
      purposes of offsetting California state taxable income have been limited to
      50%
      for tax years 1998 and 2001, and limited to 60% for the tax years 2002 and
      2003,
      only. All other tax years can carry forward 100% of NOL.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Extraordinary
      Gain</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On March
      31, 2006, Superior repaid the balance of its line of credit from a private
      lender of $1,900,000 by applying the accounts receivable from the sale of
      $1,000,000 of rare coins to the lender, a payment of $850,000 in cash and the
      application of a $50,000 discount for early payment. The $50,000 discount was
      classified as an extraordinary gain on the Statement of Operations.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>For the Years Ended
      June 30, 2005 and 2004</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table sets forth the percentage of net revenue represented by each
      item in Superior&#8217;s statements of operations for the periods presented and the
      net changes and percentage of change for each item in its statement of
      operations between the periods indicated:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="144">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="11">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">&#160;</td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="11" valign="bottom" width="260" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
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                thousands)</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Change</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%<br>Change</strong></div>
            </td>
            <td valign="bottom" width="15">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June
                30,<br>2005</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June
                30,<br>2004</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="192">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                sales</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">37,340</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">94</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">26,916</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">90</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">10,424</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">39</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commission
                Income</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,195</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,081</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(886</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(29</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                revenue</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">39,535</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">29,997</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">9,538</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">32</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of sales</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">32,027</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">81</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">23,382</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">78</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,645</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">37</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                profit</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">7,508</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">19</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">6,615</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">22</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">893</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">13</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7,708</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">19</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,959</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">20</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,749</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">29</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from operations</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(200</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(1</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">656</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(856</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(130</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">%)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense)</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(415</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(92</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(323</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">351</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) before provision for taxes</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(615</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(2</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">564</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(1,179</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(209</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">%)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax provision</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">12</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(11</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(92</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Income (loss)</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(616</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(2</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">552</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(1,168</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(212</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s net
      loss for the year ended June 30, 2005 was $616,000 or $0.13 per share on both
      a
      basic and fully diluted basis as compared to a net income of $552,000 or $0.11
      and $0.06 per share on a basic and fully diluted basis for the year ended June
      30, 2004. The year-to-year decline in Superior&#8217;s operating results was primarily
      due to increased competition in its auction business, infrastructure costs
      to
      support current and anticipated future growth and higher net interest
      expenses.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">145</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><i>Total
      Revenue</i></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      table below sets forth Superior&#8217;s primary sources of revenue for the periods
      indicated:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="144">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="35">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="35">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="12">
            </td>
            <td width="2">
            </td>
            <td width="34">
            </td>
            <td width="11">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">&#160;</td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="11" valign="bottom" width="260" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Year
                Ended<br>(dollars in
                thousands)</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Change</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" rowspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%<br>Change</strong></div>
            </td>
            <td valign="bottom" width="15">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June&#160;30,<br>2005</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="49">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="56">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>June
                30,<br>2004</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>%</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                Sales</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="15">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Rare
                Coin-Wholesale</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">24,533</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">62</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">19,195</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">64</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,338</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">28</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Rare
                Coin-Retail</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">12,807</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">32</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">7,345</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">24</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">5,462</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">74</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Art,
                Collectibles and Other</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">376</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(376</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(100</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Net Sales</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">37,340</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">94</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">26,916</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">90</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">10,424</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">39</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commission
                Income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,195</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,081</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(886</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(29</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">%)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="192">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Revenue</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">39,535</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">29,997</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="1" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">100</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">9,538</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="3" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">32</div>
            </td>
            <td valign="bottom" width="15" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      recorded total revenue of $39,535,000 for the year ended June 30, 2005, an
      increase of $9,538,000 or 32% over the total revenue of $29,997,000 recorded
      for
      the year ended June 30, 2004. The increase in revenue is primarily due to
      increased rare coin sales. Wholesale coin sales for fiscal 2005 increased
      $5,338,000 or 28% over the prior year. This increase was primarily due to the
      strong market demand which was caused, Superior believes, by an increase in
      the
      price of gold, low interest rates and uncertainty in the stock market, and
      due
      to Superior&#8217;s higher level of inventory available for sale, which resulted from
      the availability to Superior of new financing to purchase that inventory. Retail
      coin sales for fiscal 2005 increased $5,462,000 or 74% over the prior year.
      This
      increase was primarily due to continued strength in demand for rare coins as
      described above.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      completed its exit of the Art business in October 2003 and as a result Superior
      had no sales of art, collectibles and other for the years ended June 30, 2005
      and 2004.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Commission
      income for the year ended June 30, 2005 decreased $886,000 or 29% over the
      prior
      year. This decrease was primarily due to the entry of additional auction houses
      into the rare coin market and aggressive pricing by Superior&#8217;s competitors. Both
      of these factors served to reduce Superior&#8217;s market share and resulted in a
      reduction in Superior&#8217;s average commission percentage. Auction sales (hammer
      prices realized, which are the aggregate amount of winning bids at Superior&#8217;s
      auctions excluding the buyer&#8217;s commission) were $23,234,000 for the year ended
      June 30, 2005 as compared to $30,033,000 for the year ended June 30, 2004,
      which
      also contributed to the reduced commissions for the current year.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Cost of Sales</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Cost
      of
      sales increased $8,645,000 or 37% to $32,027,000 for the year ended June 30,
      2005, representing 81% of total revenue, compared to $23,382,000, for the year
      ended June 30, 2004, which represented 78% of total revenue. The increase in
      the
      aggregate cost of sales was primarily due to the increased sale of rare coins
      as
      discussed in &#8220;Total Revenue&#8221; above, rather than factors that might have
      influenced the cost of any particular item of inventory. Superior&#8217;s cost of
      sales as a percentage of revenue increased over last year as a result of the
      decrease in its commission income. During Superior&#8217;s 2005 and 2004 fiscal years,
      Superior had comparable success in purchasing coins at advantageous prices,
      which resulted in Superior&#8217;s cost of sales as a percentage of revenue remaining
      similar.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Gross Profit</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Gross
      profit for the year ended June 30, 2005 increased $893,000 or 13% to $7,508,000
      or 19% of total revenue, from $6,615,000 or 22% of total revenue for the year
      ended June 30, 2004. The increase in the total gross profit in 2005 over 2004
      was primarily due to the increase in Superior&#8217;s rare coin sales. Gross profit as
      a percentage of revenue will vary from period to period due to variations in
      the
      factors discussed in &#8220;Cost of Sales,&#8221; above.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Selling, General and
      Administrative Expenses</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Selling,
      general and administrative expenses increased $1,749,000 or 29% to $7,708,000
      for the year ended June 30, 2005 from $5,959,000 for the year ended June 30,
      2004. These expenses represented 19% of total revenue for the year ended June
      30, 2005 as compared to 20% of total revenue for the year ended June 30, 2004.
      The increase in these expenses was due to the following factors: the hiring
      of
      new employees to enhance Superior&#8217;s </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">146</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">operational
      infrastructure; additional
      employee compensation costs of $711,000, which included commissions that
      resulted from Superior&#8217;s higher level of sales; investor and public relations
      efforts that began during the current year with a cost of $333,000; legal and
      audit cost increases primarily associated with the preparation of registration
      statements, in the amount of $164,000; increases in travel and entertainment
      costs of $160,000 due to the larger number of trade shows Superior attended;
      and
      auction operation costs increased by $262,000.</font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Other Income and
      Expenses</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Other
      expenses for the year ended June 30, 2005 increased $323,000 to $415,000 from
      $92,000 for the year ended June 30, 2004. This increase was primarily due to:
      (i) a decrease in interest income of $100,000 that resulted from the decline
      in
      interest rates charged to Superior&#8217;s customers and lower levels of lending; and
      (ii) increases in interest expenses of $253,000 that resulted from the
      combination of increased use of Superior&#8217;s lines of credit to finance its own
      inventory and increases in rates charged to Superior by its lenders for the
      year
      ended June 30, 2005 as compared to the year ended June 30, 2004.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Provision for Income
      Taxes</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Although
      Superior incurred a loss for the year ended June 30, 2005, Superior recorded
      income taxes expense of $1,000 for state and other minimum taxes for that year.
      Although Superior recorded income for the year ended June&#160;30, 2004,
      Superior had net operating losses (&#8220;NOL&#8221;) carried forward from previous years
      and Superior had only recorded income tax expenses of $12,000 for state and
      other minimum taxes for the year ended June 30, 2004.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Liquidity and Capital
      Resources</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">At
      December 31, 2006, Superior had negative working capital of $3,369,000 and
      a
      current ratio of 0.68:1.00. Superior recorded net losses of $2,430,000. Given
      Superior&#8217;s December 31, 2006 cash balance of $1,615,000 and its projected
      operating cash requirements, Superior anticipates that its existing capital
      resources will probably be adequate to satisfy its cash flow requirements
      through the close of the combination with DGSE. Until the combination is closed,
      Superior entered into a forbearance agreement with SIBL, waiving certain
      defaults and enabling draw downs under its existing commercial line of credit
      facility despite its negative stockholders&#8217; equity. The forbearance agreement is
      effective until six months after the date DGSE files a registration statement
      on
      Form S-4 with the SEC related to the combination, or upon the earlier notice
      by
      SIBL of the occurrence of a new event of default under the credit facility.
      Superior&#8217;s cash flow estimates are based upon achieving certain levels of sales
      and reductions in operating expenses. Should sales be less than forecast or
      expenses become higher than forecast, then Superior may require additional
      financing through debt and/or equity, and Superior may not have adequate
      resources to fund operations. Superior expects future fixed obligations through
      the close of the combination to be paid solely by cash generated from operating
      activities. However, if Superior is unable to do so, Superior intends to satisfy
      fixed obligations from: (i) additional debt/equity financings; (ii) extending
      vendor payments; and (iii) liquidation of inventory. No assurance can be given
      that Superior will be able to pay or satisfy its fixed obligations from these
      sources. Although Superior anticipates being able to satisfy its fixed
      obligations, if Superior is unable to satisfy its fixed obligations as they
      become due, its creditors will be entitled to take legal action against it.
      If
      they do, Superior&#8217;s business could be materially harmed.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Operating
      Activities</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Cash
      increased $4,353,000 during the year ended June 30, 2006 to $4,770,000 from
      $417,000 at June 30, 2005. Cash increased $904,000 during the six months ended
      December 31, 2006 to $1,616,000 from $712,000 at December 31, 2005.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Net cash
      used in operating activities totaled $158,000. Cash used in Superior&#8217;s operating
      activities totaled $9,022,000 resulting primarily from its net loss of
      $2,240,000; decreases in its accounts payable of $6,173,000; non-cash decrease
      in its inventory reserves of $350,000 due to the sale of revalued coins;
      decreases in its prepaid expenses of $60,000 and non-cash net reversals of
      stock
      option expense of $10,000. Cash provided by operations totaled $8,864,000
      resulting from decreases in inventories of $6,085,000; pay downs of accounts
      receivable of $2,029,000; increases in non-cash allowances for accounts
      receivable of $458,000; increases in auction and customer advances of $183,000;
      non-cash depreciation expense of $100,000 and non-cash fair value of common
      stock grants of $10,000.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">147</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 18pt"><font style="FONT-FAMILY: Times New Roman">To
      generate cash to be used for operations,
      in the six months ended December 31, 2006, Superior made fewer advances against
      consigned coins and sold off inventory. Cost cutting measures were implemented
      for all expenses related to trade shows, the marketing of the inventory and
      delivery of goods. Superior will continue to strive to gain operating
      efficiencies by turning its inventory more quickly and monitoring the amount
      of
      inventory that it carries, although there is no assurance Superior will achieve
      these efficiencies.</font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Investing
      Activities</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Cash
      used
      in investing activities during year ended June 30, 2006 was $310,000 consisting
      of purchases of property and equipment. Cash used in investing activities for
      the three months ended December 31, 2006 was $130,000 consisting of purchases
      of
      property and equipment.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Financing
      Activities</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Until
      the
      quarter ending March 31, 2004, Superior had incurred losses since July 1999
      and
      has financed these losses through short-term and long-term borrowings, by
      issuing shares in various private placement transactions and by liquidating
      assets. Losses in fiscal 2007 and 2006 have been financed primarily through
      the
      restructuring of debt and conversion of revolving debt to equity by SIBL. Net
      cash used by financing activities totaled $2,867,000 for the six months ended
      December 31, 2006, resulting from the transactions described below.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Financing Activities &#8212;
Debt</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On April
      10, 2002 Superior executed a subordinated note payable to its then CEO, Silvano
      DiGenova, bearing interest at 9% per annum with quarterly installment payments
      of $150,000 plus interest. No principal payments had been made through February
      2003. On February 10, 2003, the terms of the note were modified to provide
      for
      repayment of principal in the amount of $50,000 per quarter commencing on
      September 30, 2003 and for interest to be paid monthly. Superior was in arrears
      of $150,000 of principal payments that were due on December 31, 2004, March
      31,
      2005 and June 30, 2005 of $50,000 each. However, the former CEO agreed to delay
      these principal repayments to September 30, 2005 when $50,000 was paid. During
      the year ended June 30, 2006, the note was reduced by $250,000 and the interest
      rate was increased to 12%. During the six month period ended December 31, 2006,
      there was a principal repayment of $100,000. At December 31, 2006, the balance
      due was $400,000 and there was no accrued interest payable.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      October 13, 2003, Superior executed a Commercial Loan and Security Agreement
      with SFG, an affiliate of Superior&#8217;s principal stockholder, SIBL, to provide
      Superior with a $7,500,000 line of credit for purposes of financing its
      inventory, auction advances and inventory loans to other rare coin dealers
      and
      collectors. A portion of this indebtedness was assigned to SIBL, and on March
      31, 2005, as described below, pursuant to SIBL&#8217;s purchase of $2,500,000 of
      Superior&#8217;s Series E Preferred Stock, SIBL assumed, converted and cancelled
      $2,500,000 of this indebtedness under the line of credit. In addition, SFG
      further amended the line of credit increasing the line of credit to $10,000,000,
      and subsequently assigned the indebtedness to SIBL. Effective July 21, 2005,
      the
      line of credit was renewed through October 1, 2006. On May 2, 2006, the line
      of
      credit was further amended to increase the line of credit to $10,850,000 to
      reflect an additional advance made March 30, 2006, and to partially fund the
      repayment of the private line of credit described in the next paragraph. On
      September 5, 2006, the SIBL line of credit was renewed through October 1, 2007.
      On November 21, 2006, Superior entered into an agreement with SIBL pursuant
      to
      which the outstanding balance on the line of credit would be reduced by up
      to
      $2,408,481 through the transfer of rare coins to SIBL. As of December 29, 2006
      the final amount of the transfer of coins was determined to be $2,117,012.
      As of
      December 31, 2006, the outstanding balance was $8,732,987 and there was no
      accrued interest payable. The line of credit bears interest at the prime-lending
      rate (8.25% at December 31, 2006) and is secured by substantially all of
      Superior&#8217;s assets. Superior is currently in compliance with all of the financial
      covenants or has waivers in effect with respect to any covenants with which
      it
      is not in compliance. If Superior defaults in the performance of its obligations
      under this loan the lender could foreclose its security interest, which could
      lead to a termination of Superior&#8217;s business or require Superior to file a
      bankruptcy petition.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      October 2004 Superior executed three demand notes payable with a private lender
      totaling $650,000 bearing interest at 10% per annum secured by specific
      inventory. Interest was payable monthly. As of January 1, 2006, the interest
      rate increased to 12% per annum. During the six months ended December 31, 2006,
      the entire outstanding balance of $650,000 was repaid.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">148</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><i>Anticipated
      Equity
      Transactions</i></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As
      documented in the merger agreement, one hundred percent of the issued and
      outstanding shares of Superior&#8217;s capital stock will be converted into the right
      to receive shares of DGSE common stock. The conversion will be made in
      accordance with the DGCL, Chapters 78 and 92A of Title 7 of the NPCA and the
      approvals of Superior&#8217;s and DGSE&#8217;s respective boards of directors. In supporting
      documents, Superior entered into conversion agreements with each of SIBL and
      Silvano DiGenova, Superior&#8217;s former chairman, chief executive officer and
      interim chief financial officer.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to the conversion agreement with SIBL, on January 6, 2007 SIBL converted and
      exchanged all of its shares of preferred stock, which included (i) 3,000,000
      shares of the Series B $1.00 Convertible Preferred Stock,<br>(ii) 2,000,000
      shares of the Series D $1.00 Convertible Preferred Stock, and (iii) 2,500,000
      shares of the Series E $1.00 Convertible Preferred Stock, into an aggregate
      of
      3,600,806 shares of Superior common stock. In addition, in connection with
      the
      closing of the combination, Superior anticipates that SIBL will convert
      $8,392,340 in debt owed under its commercial line of credit into 4,936,671
      shares of Superior common stock at a conversion ratio of $1.70 per share.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to the merger agreement, fifteen percent of the number of shares of DGSE common
      stock to be issued at the closing of the combination, less 33,648 shares to
      which DGSE is entitled under the merger agreement due to the fact that
      Superior&#8217;s actual December 31, 2006 shareholders&#8217; equity was $89,840 less than
      Superior&#8217;s estimated December 31, 2006 shareholders&#8217; equity used for purposes of
      determining the amount of debt to be converted by SIBL under the note exchange
      agreement, will be deposited in an escrow account as security for the payment
      of
      indemnification claims made under the merger agreement in the event Superior&#8217;s
      representations and warranties concerning its capitalization are inaccurate.
      The
      escrow will expire one year after the consummation of the Merger. The
      stockholder agent, which will initially be SIBL, will have the exclusive right
      to defend the escrow against claims made by DGSE or its related parties on
      behalf of Superior&#8217;s stockholders.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to the conversion agreement with Silvano DiGenova, Superior&#8217;s former chairman,
      chief executive officer and interim chief financial officer, Mr. DiGenova
      converted his 400,000 shares of Series B $1.00 Convertible Preferred Stock
      into
      202,330 shares of Superior&#8217;s common stock.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Other Liquidity
      Plans</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a
      condition to the closing of the combination, Superior expects to enter into
      a
      note exchange agreement with SIBL, as described more fully in the section
      entitled &#8220;Note Exchange Agreement, Warrants and Registration Rights Agreement &#8212;
Note Exchange Agreement&#8221; beginning on page 78. Pursuant to the note exchange
      agreement, SIBL would convert $8,392,340 in debt into 4,936,671 shares of
      Superior&#8217;s common stock immediately prior to the consummation of the
      combination. SIBL would also provide a secured commercial line of credit in
      the
      amount of $11,500,000 to replace the existing facility, which new facility
      will
      be available to both Superior and DGSE. These transactions are subject to
      satisfaction of all of the other conditions to closing of the merger, and if
      the
      merger is not consummated, these transactions will not occur.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Although
      Superior will seek to secure additional financing and/or to raise additional
      capital if the combination is not closed as presently anticipated, Superior
      cannot assure you that it will be successful in completing these critical tasks.
      If Superior is unable to successfully obtain such financing, Superior may be
      forced to significantly and materially reduce its operations and/or liquidate
      inventory at amounts below current carrying value to generate the necessary
      working capital to fund any ongoing operations.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><i>Capital
      Expenditures</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      incurred approximately $310,000 of capital expenditures for property and
      equipment during the year ended June 30, 2006, relating primarily to needed
      leasehold improvements and development of its website. Superior does not have
      any plans for material capital expenditures through the current fiscal year
      ending June 30, 2007. Superior did not incur any material capital expenditures
      for property and equipment during the three months ended December 31, 2006
      and
      does not presently have any plans to make material capital expenditures through
      the current fiscal year ending June 30, 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">149</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><i>Contractual
      Obligations</i></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table outlines payments due under Superior&#8217;s significant contractual
      obligations over the periods shown, exclusive of interest:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="163">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="47">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="47">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="42">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="34">
            </td>
            <td width="13">
            </td>
            <td width="14">
            </td>
            <td width="29">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="217">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="14" valign="bottom" width="385" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Payments
                Due by Period</strong></div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="217">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Contract
                Obligations At June&#160;30, 2006</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="70">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Total</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="70">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Less
                than<br>1 Year</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="63">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>1-3
                years</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="52">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>3-5
                years</strong></div>
            </td>
            <td valign="bottom" width="17">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>More
                than<br>5 years</strong></div>
            </td>
            <td valign="bottom" width="3">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="217" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="70" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="70" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="63" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="52" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="217">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Long
                Term Debt</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">300,000</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">300,000</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="217">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                Leases</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">1,296,088</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">301,803</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">994,285</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">576,967</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="217">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Short
                Term Debt</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="63" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">11,700,000</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="63" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">11,700,000</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="19" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="38" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="217">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Contractual Obligations</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="63" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">13,296,088</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="63" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">12,001,803</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1,294,285</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">576,967</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ffffff 3pt double;">&#160;</td>
            <td valign="bottom" width="19" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="38" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3" style="border-bottom: #ffffff 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The above
      table outlines Superior&#8217;s obligations as of June 30, 2006 and does not reflect
      any changes in its obligations that have occurred after that date.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">150</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman"><strong>QUANTITATIVE
      AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK OF SUPERIOR</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Market
      risk represents the risk of loss that may impact Superior&#8217;s financial position,
      results of operations or cash flows due to adverse changes in financial market
      prices, including interest rate risk, foreign currency exchange rare risk,
      commodity price risk and other relevant market rate or price risks.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      is exposed to a degree of market risk through changes in short-term interest
      rates. At January 7, 2007, Superior had a line of credit from a related party,
      SIBL, with a balance payable of $8,392,340. This line of credit bears an
      interest rate that is tied to the bank prime rate. Superior is exposed to the
      risk of increasing short-term interest rates, but Superior does not consider
      this risk to be material.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior
      has no activities that would expose it to foreign currency exchange rate risk
      or
      commodity price risks.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>MARKET PRICE OF AND
      DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS &#8212;
SUPERIOR</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Market
      Information</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      common stock is traded on the NASDAQ over-the-counter Bulletin Board under
      the
      ticker symbol &#8220;SPGR.OB&#8221;. Prior to July 1, 2003, Superior&#8217;s trading symbol was
&#8220;TAGZ.&#8221;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table shows the trading price data for Superior&#8217;s common stock as
      reported by NASDAQ as the range of representative bid prices for its common
      stock for the quarters indicated. Superior&#8217;s common stock is quoted in the
      National Quotation Bureau&#8217;s Pink Sheets and listed on the NASD&#8217;s Electronic
      Bulletin Board. The quotations reflect inter-dealer prices, without retail
      mark-up, markdown or commission, may not represent actual transactions.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="146">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="39">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="39">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="39">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="39">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="39">
            </td>
            <td width="12">
            </td>
            <td width="1">
            </td>
            <td width="39">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="195">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="125" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="125" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="125" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2005</strong></div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="195">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Fiscal
                Quarter Ended</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="54">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>High</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="54">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Low</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="54">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>High</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="54">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Low</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="54">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>High</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Low</strong></div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="195" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
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          <tr>
            <td valign="bottom" width="195">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">September
                30</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.31</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.00</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">4.00</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.50</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">2.00</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.25</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="195">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">December
                31</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.00</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">.75</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.80</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">0.92</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.52</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">0.65</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="195">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">March
                31</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.90</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">0.82</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">4.20</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.50</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="195">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">June
                30</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">1.25</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">0.81</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">4.75</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">2.90</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On [&#9679;],
      2007, the closing sales price for Superior&#8217;s common stock was $[&#9679;] per
      share.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Holders</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      January 6, 2007, Superior had 176 stockholders of record. Within the holders
      of
      record of Superior&#8217;s common stock are depositories such as Cede &amp; Co. that
      hold shares of stock for brokerage firms which, in turn, hold shares of stock
      for beneficial owners.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      combination is expected to result in the issuance of approximately 3.6 million
      shares of DGSE common stock to the Superior stockholders. This corresponds
      to
      approximately 73% of DGSE&#8217;s currently outstanding shares of common stock. The
      table in the section entitled &#8220;Ownership Of Superior Capital Stock&#8221; beginning on
      page 153 indicates the potential effect of the combination on the stockholdings
      in the combined company of Superior&#8217;s officers, directors and nominees.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Dividends</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To date,
      Superior has declared no common stock dividends, and Superior does not expect
      to
      pay cash dividends on its common stock in the near future. Superior intends
      to
      retain future earnings, if any, to provide funds for the operation of its
      business. All of Superior&#8217;s outstanding shares of Series A Redeemable 8%
      Convertible Preferred Stock, or Series A Preferred Stock, were redeemed by
      cash
      payments by the end of fiscal 2006, and therefore all restrictions on the
      payment of dividends that were previously associated with these securities
      have
      been terminated. All of Superior&#8217;s outstanding shares of Series B $1.00
      Convertible Preferred Stock, or Series B Preferred Stock, Series D $1.00
      Convertible Preferred Stock, or Series D Preferred Stock, and Series E $1.00
      Convertible Preferred Stock, or Series E Preferred Stock, were converted into
      shares of Superior common stock on January 6, 2007 in </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">151</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman">connection
      with the entry into the merger
      agreement, and therefore all restrictions on the payment of dividends that
      were
      previously associated with these securities have been terminated.</font></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Securities Authorized
      for Issuance Under Equity Compensation Plans</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table provides information about Superior&#8217;s common stock that may be
      issued upon the exercise of options, warrants and rights that Superior has
      granted under (a) its 2003 Omnibus Stock Option Plan and (b) individual
      compensation arrangements in exchange for consideration in the form of goods
      or
      services as of December 31, 2006:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="212">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="72">
            </td>
            <td width="12">
            </td>
            <td width="11">
            </td>
            <td width="53">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="66">
            </td>
            <td width="2">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="283">&#160;</td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="104" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Number&#160;of&#160;Securities
                to&#160;Be&#160;Issued<br>Upon&#160;Exercise&#160;of<br>Outstanding&#160;Options,<br>Warrants&#160;and<br>Rights(1)</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="87" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Weighted
                Average<br>Exercise&#160;Price&#160;of<br>Outstanding<br>Options,<br>Warrants&#160;and<br>Rights</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="95" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Number&#160;of<br>Securities<br>Remaining<br>Available&#160;for<br>Future&#160;Issuance</strong></div>
            </td>
            <td valign="bottom" width="3">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="283">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="104">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="87">&#160;</td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="95">&#160;</td>
            <td valign="bottom" width="3">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="283">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Equity
                compensation plan approved by stockholders(2)</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="96">
              <div style="MARGIN: 0pt" align="right">356,250</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="71">
              <div style="MARGIN: 0pt" align="right">2.68</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="88">
              <div style="MARGIN: 0pt" align="right">843,750</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="283">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Equity
                compensation plan not approved by stockholders(3)</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="96">
              <div style="MARGIN: 0pt" align="right">3,000</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="71">
              <div style="MARGIN: 0pt" align="right">20.00</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="88">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="283">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt"><strong>Total</strong></div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="96">
              <div style="MARGIN: 0pt" align="right">359,250</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="15">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="71">
              <div style="MARGIN: 0pt" align="right">2.82</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="88">
              <div style="MARGIN: 0pt" align="right">843,750</div>
            </td>
            <td valign="bottom" width="3">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Number
      of
      shares is subject to adjustment in the future for changes in capitalization
      resulting from stock splits, stock dividends and similar events.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(2)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Consists
      of Superior&#8217;s 2003 Omnibus Stock Option Plan. This Plan authorizes Superior to
      grant options to purchase up to 1,200,000 shares of its common stock during
      the
      term of the Plan. The Plan permits grants of both incentive stock options and
      non-qualified stock options. Options under all plans generally vest over 1
      to 5
      years, though the vesting periods may vary from person to person, and are
      exercisable subject to continued employment and other conditions.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(3)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Consists
      of remaining options to purchase Superior&#8217;s common stock granted to employees
      prior to the adoption of Superior&#8217;s 2000 Omnibus Stock Option Plan which was
      replaced by Superior&#8217;s 2003 Omnibus Stock Option Plan that came into effect on
      June 30, 2003.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Superior&#8217;s
      2003 Omnibus Stock Option Plan was adopted by its board of directors on May
      1,
      2003 and approved by its stockholders at its annual stockholders&#8217; meeting on
      June 30, 2003. This plan permits Superior to grant both incentive stock options
      and nonqualified stock options. Options under this plan generally vest over
      one
      to five years, though the vesting periods may vary from person to person, and
      are exercisable subject to continued employment and other conditions.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>CHANGES IN AND
      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE OF
      SUPERIOR</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">None.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">152</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman"><strong>&#160;OWNERSHIP
      OF SUPERIOR CAPITAL
      STOCK</strong></font></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">The
      following table sets forth, as of February 5, 2007, certain information with
      respect to the beneficial ownership of Superior&#8217;s common stock by (i) each of
      its executive officers named in the summary compensation table above, (ii)
      each
      of its directors, (iii) each person known to Superior to be the beneficial
      owner
      of more than 5% of each class of its outstanding voting securities, and (iv)
      all
      of its directors and executive officers as a group.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="232">
            </td>
            <td width="14">
            </td>
            <td width="1">
            </td>
            <td width="75">
            </td>
            <td width="19">
            </td>
            <td width="1">
            </td>
            <td width="39">
            </td>
            <td width="19">
            </td>
            <td width="1">
            </td>
            <td width="39">
            </td>
            <td width="22">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="310" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Name
                and Address of Beneficial Owner</strong></div>
            </td>
            <td valign="bottom" width="18">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="103" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amount
                and Nature<br>of
                Beneficial<br>Ownership(1)</strong></div>
            </td>
            <td valign="bottom" width="26">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Percent<br>of
                Class(1)</strong></div>
            </td>
            <td valign="bottom" width="26">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="55" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong><i>Pro
                Forma<br></i>Percent
                of<br>Class(2)</strong></div>
            </td>
            <td valign="bottom" width="29">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="310">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 6pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="103">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 6pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td colspan="2" valign="bottom" width="55">&#160;</td>
            <td valign="bottom" width="29">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="310" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Lawrence
                Fairbanks Abbott, Jr.(3)</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="100" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">55,000</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">(4)</div>
            </td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="29" bgcolor="#ccffcc">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="310">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">David
                Rector(3)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="100">
              <div style="MARGIN: 0pt" align="right">30,000</div>
            </td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt">(4)</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="29">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="310" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Mitch
                Stoltz(3)</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="100" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">10,000</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">(5)</div>
            </td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="29" bgcolor="#ccffcc">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="310">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">William
                H. Oyster(6)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="100">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="29">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="310" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">S.
                Scott Williamson(6)</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="100" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="29" bgcolor="#ccffcc">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="310">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">John
                Benson(6)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="100">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="29">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="310" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Silvano
                DiGenova<br>32001 S. Coast Highway<br>Laguna Beach, California
                92651</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="100" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">1,583,264</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">(7)</div>
            </td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">18.32</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">6.14</div>
            </td>
            <td valign="bottom" width="29" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">%</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="310">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Stanford
                International Bank Ltd.<br>6075 Poplar Avenue<br>Memphis, Tennessee
                38119</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="100">
              <div style="MARGIN: 0pt" align="right">4,350,806</div>
            </td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt">(8)</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">50.47</div>
            </td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="2">&#160;</td>
            <td valign="bottom" width="52">
              <div style="MARGIN: 0pt" align="right">35.81</div>
            </td>
            <td valign="bottom" width="29">
              <div style="MARGIN: 0pt">%(9)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="310" bgcolor="#ccffcc">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">All
                Executive Officers and Directors<br>as a Group (6 persons)</div>
            </td>
            <td valign="bottom" width="18" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="100" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">95,000</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">(10)</div>
            </td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">1.09</div>
            </td>
            <td valign="bottom" width="26" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt">%</div>
            </td>
            <td valign="bottom" width="2" bgcolor="#ccffcc">&#160;</td>
            <td valign="bottom" width="52" bgcolor="#ccffcc">
              <div style="MARGIN: 0pt" align="right">*</div>
            </td>
            <td valign="bottom" width="29" bgcolor="#ccffcc">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">Based
      upon information furnished to Superior by the directors and executive officers
      or obtained from Superior&#8217;s stock transfer books showing 8,621,416 shares of
      common stock outstanding as of February 5, 2007. Superior is informed that
      these
      persons hold the sole voting and dispositive power with respect to the common
      stock except as otherwise stated in the footnotes below. For purposes of
      computing &#8220;beneficial ownership&#8221; and the percentage of outstanding common stock
      held by each person or group of persons named above as of February 5, 2007,
      any
      security which such person or group of persons has the right to acquire within
      60 days after such date is deemed to be outstanding for the purpose of computing
      beneficial ownership and the percentage ownership of such person or persons,
      but
      is not deemed to be outstanding for the purpose of computing the percentage
      ownership of any other person. A &#8220;*&#8221; indicates less than one percent.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(2)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">Giving
      <i>pro forma</i> effect to the combination. The combination is expected to
      result in the issuance to Superior stockholders of approximately 3.7 million
      shares of DGSE common stock, as well as the issuance to Mr.&#160;DiGenova of
      96,951 shares of DGSE common stock upon the automatic exercise of a warrant
      and
      the issuance to SIBL of warrants to purchase up to 854,317 shares of DGSE common
      stock. The table shows the percentage stockholdings of DGSE common stock of
      the
      individuals and entities listed in the table after the consummation of the
      combination. A &#8220;*&#8221; indicates less than one percent.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(3)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt; FONT-FAMILY: Times New (W1)"><font style="FONT-FAMILY: Times New (W1)">The
      address for Messrs. Abbott, Rector and
      Stoltz is 9478 West Olympic Blvd., Beverly Hills, California 90212.</font></div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt"><font style="FONT-FAMILY: Times New Roman">(4)</font></div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">Includes
      30,000 shares of common stock issuable upon exercise of options that are
      exercisable within 60 days.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(5)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">Includes
      10,000 shares of common stock issuable upon exercise of options that are
      exercisable within 60 days.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(6)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">The
      address for Messrs. Oyster, Williamson and Benson is 2817 Forest Lane, Dallas,
      Texas 75234.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(7)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">Includes
      20,000 shares of common stock issuable upon the exercise of options and
      warrants, all of which were exercisable within 60 days of the date of this
      table, and 1,000 shares held by Mr. DiGenova&#8217;s minor children, over which Mr.
      DiGenova exercises voting control.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(8)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">This
      figure does not include the estimated 4,936,671 shares of Superior common stock
      which are to be exchanged for $8.4 million of SIBL&#8217;s debt in connection with the
      closing of the merger.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(9)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">This
      percentage gives <i>pro forma</i> effect to the exchange of 4,936,671 shares of
      Superior common stock for $8.4&#160;million of SIBL&#8217;s debt, and the issuance to
      SIBL of warrants to purchase 854,317 shares of DGSE common stock, in connection
      with the closing of the merger.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(10)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt">Includes
      75,000 shares of common stock issuable upon exercise of options that are
      exercisable within 60 days.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><strong>Changes of
      Control</strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Other
      than the transactions contemplated by the merger agreement, Superior is not
      aware of any arrangements which may result in a change of control of
      Superior.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">153</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always"><font style="FONT-FAMILY: Times New Roman"><strong>CERTAIN
      RELATIONSHIPS AND RELATED
      TRANSACTIONS OF SUPERIOR</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      January 31, 2003, Superior entered into a consulting agreement with Stanford
      Group Company, an affiliate of its principal stockholder, Stanford International
      Bank Limited (&#8220;SIBL&#8221;), to provide financial and advisory services to Superior
      for a three year period commencing on April 1, 2003. The annual fee for such
      services was $60,000 and was payable on a quarterly basis. These fees are
      comparable to or lower than those that would be charged to Superior by an
      unrelated third party. The consulting agreement expired on March 31, 2006 and
      was not renewed.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On October
      13, 2003, Superior executed a Commercial Loan and Security Agreement
      (&#8220;Commercial LOC&#8221;&#8216;) with Stanford Financial Group Company, an affiliate of its
      principal stockholder, SIBL, to provide Superior with a $7.5 million line of
      credit for purposes of financing its inventory, auction advances and inventory
      loans to other rare coin dealers and collectors. On March 31, 2005, the lending
      limit on the Commercial LOC was increased to $10&#160;million. Effective July
      21, 2005 the Commercial LOC was renewed through October 1, 2006. On May 2,
      2006
      Stanford Financial further amended the Commercial LOC increasing the line of
      credit to $10,850,000 to reflect an additional advance made March 30, 2006.
      On
      September 5, 2006, the Commercial LOC was renewed through October 1, 2007.
      The
      Commercial LOC bears interest at the prime-lending rate (8.25% at June 30,
      2006)
      and is secured by substantially all of Superior&#8217;s assets. As of June 30, 2006
      the outstanding balance was $10,850,000 and there was no accrued interest
      payable.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On May 18,
      2005 Superior entered into a Primary Supplier Agreement with Stanford Coins
      &amp; Bullion, Inc. (&#8220;Stanford C &amp;B&#8221;), which is an affiliate of SIBL. Under
      this arrangement, which had a term of six months commencing June 1, 2005,
      Stanford C&amp;B was required to provide Superior with a preferential right to
      source coins on a wholesale basis for that company. Stanford C&amp;B paid a flat
      7% over Superior&#8217;s bid for all rare coins and 3.5% over Superior&#8217;s bid for all
      generic coins. Superior provided marketing services for Stanford C&amp;B,
      including providing information on possible sales leads and making its inventory
      of coins available on Stanford C&amp;B&#8217;s web site. For Stanford C&amp;B&#8217;s
      customers that sell coins through Superior&#8217;s auctions, Superior paid Stanford
      C&amp;B a fee of 6%, and paid their sales person a commission of 2%. When the
      agreement expired in December 2005, the business relationship between the
      parties continued under the same terms of the previous agreement. During the
      fiscal year ended June 30, 2006, Stanford C&amp;B purchased $2,276,946 of rare
      coins from Superior.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On July
      5,
      2006, Superior agreed to engage its former Chief Financial Officer and
      then-director, Paul Biberkraut, as a consultant to the company in connection
      with the combination with DGSE. On January 6, 2007, Superior entered into a
      new
      three-month consulting agreement with Mr. Biberkraut, who resigned as a director
      of Superior on that date. His fee is $4,000 per month.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">From time
      to
      time in fiscal years prior to 2006 Superior borrowed funds from its CEO. See
      &#8220;Management&#8217;s Discussion and Analysis of Financial Condition and Results of
      Operation of Superior &#8212; Liquidity and Capital Resources; Financing Activities.&#8221;
On January 6, 2007, Superior repaid in full all of its debt to Mr.
      DiGenova.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On January
      6, 2007, Superior entered into Conversion Agreements with each of SIBL and
      Mr.
      DiGenova. Pursuant to the Conversion Agreement with Stanford, Stanford converted
      and exchanged all of its shares of preferred stock, which included (i) 3,000,000
      shares of the Series B $1.00 Convertible Preferred Stock; (ii)&#160;2,000,000
      shares of the Series D $1.00 Convertible Preferred Stock; and (iii) 2,500,000
      shares of the Series E $1.00 Convertible Preferred Stock; into an aggregate
      of
      3,600,806 shares of common stock of Superior. Pursuant to the Conversion
      Agreement with Mr. DiGenova, Mr. DiGenova converted his 400,000 shares of Series
      B $1.00 Convertible Preferred Stock into 202,330 shares of common stock of
      Superior. All of the shares of common stock of Superior Galleries issued
      pursuant to the Conversion Agreements were issued pursuant to current conversion
      rights under the terms of the preferred shares.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On January
      6, 2007, Superior entered into a Management Agreement with DGSE Merger Corp.,
      a
      wholly-owned subsidiary of DGSE. Pursuant to the Management Agreement, DGSE
      Merger Corp. will provide two to three senior executives to serve as the senior
      management of Superior. The initial individuals are (i) William Oyster, a
      director and the president and chief operating officer of DGSE, who has been
      appointed interim chief executive officer, (ii) John Benson, the chief financial
      officer of DGSE, who has been appointed interim chief financial officer and
      vice
      president, finance, and (iii) Scott Williamson, the executive vice president
&#8212;
consumer finance of DGSE and president of American Pay Day Centers, Inc., a
      DGSE
      subsidiary, who has been appointed interim chief operating officer. These
      individuals do not have an employment agreement with, and are not being paid
      any
      compensation by, Superior. Upon termination of the Management Agreement, if
      the
      merger has not been consummated, these individuals are expected to resign their
      offices.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">154</font></div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always" align="center"><font style="FONT-FAMILY: Times New Roman"><strong>LEGAL
      MATTERS</strong></font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Selected
      legal matters with respect to this offering and the validity of the common
      stock
      offered by this prospectus and certain tax matters with respect to the
      combination will be passed upon for DGSE by Sheppard, Mullin, Richter &amp;
Hampton LLP, San Diego, California.</div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>EXPERTS</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      financial statements of DGSE included in this joint proxy statement/prospectus
      have been audited by BKR Cornwell Jackson and CF &amp; Co., L.L.P., each an
      independent registered public accounting firm, to the extent and for the periods
      set forth in their respective reports, and are included in reliance upon such
      reports given upon the authority of said firms as experts in auditing and
      accounting.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      financial statements of Superior included in this joint proxy
      statement/prospectus have been audited by Singer Lewak Greenbaum &amp; Goldstein
      LLP, an independent registered public accounting firm, to the extent and for
      the
      periods set forth in its report, and are included in reliance upon such report
      given upon the authority of said firm as experts in auditing and
      accounting.</div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>WHERE
      YOU CAN FIND MORE INFORMATION</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">DGSE
      and
      Superior each files annual, quarterly and current reports, proxy statements
      and
      other documents with the SEC pursuant to the information requirements of the
      Securities Exchange Act of 1934. These filings may be read and copied at the
      SEC&#8217;s Public Reference Room located at 100 F. Street, N.E., Room 1580,
      Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more
      information about the operation of the Public Reference Room. In addition,
      the
      SEC maintains an Internet site (http://www.sec.gov/) that contains certain
      reports, proxy statements and other information regarding DGSE and
      Superior.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>DGSE
      and Superior will provide you with copies of this information, without charge,
      excluding all exhibits, unless those exhibits are specifically incorporated
      by
      reference into this joint proxy statement/prospectus, upon your written or
      oral
      request. In order for you to receive timely delivery of the documents in advance
      of the special meetings, DGSE or Superior should receive your request no later
      than [&#9679;], 2007, which is five business days before the date of DGSE&#8217;s and
      Superior&#8217;s special meetings.</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">You can
      obtain any of the information described above regarding DGSE by requesting
      it in
      writing or by telephone from DGSE at the following address and telephone
      number:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>DGSE
      Companies, Inc.<br>2817 Forest Lane<br>Dallas, Texas 75234<br>Attention:
      Investor Relations<br>(972) 484-3662</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">You can
      obtain any of the information described above regarding Superior by requesting
      it in writing or by telephone from Superior at the following address and
      telephone number:</div>
    <div style="MARGIN-TOP: 6.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Superior
      Galleries, Inc.<br>9478 West Olympic Blvd.<br>Beverly Hills, California
      90212<br>Attention: Investor Relations<br>(800) 421-0754</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt; FONT-FAMILY: Times New (W1)" align="center"><font style="FONT-FAMILY: Times New (W1)">155</font></div>
    <div style="MARGIN: 0pt"><br></div>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; page-break-before:always" align=center><FONT FACE="Times New Roman" COLOR=#000000><B>INDEX TO FINANCIAL STATEMENTS</B></FONT></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=432.8></TD><TD width=14.05></TD><TD width=21.15></TD></TR>
<TR><TD valign=bottom width=577.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=28.2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Page</B></P>
</TD></TR>
<TR><TD valign=bottom width=577.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">INDEX TO FINANCIAL STATEMENTS</P>
</TD><TD valign=top width=18.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-1</P>
</TD></TR>
<TR><TD valign=bottom width=577.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED<BR>
SEPTEMBER 30, 2006 &#150; DGSE</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-2</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Balance Sheets (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-3</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Operations (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-5</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Operations (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-6</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Cash Flows (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-7</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Notes to Consolidated Financial Statements (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-8</P>
</TD></TR>
<TR><TD valign=bottom width=577.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED<BR>
DECEMBER 31, 2005 &#150; DGSE</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-13</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Report of Independent Registered Public Accounting Firm</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-14</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Balance Sheets</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-15</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Operations</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-16</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Shareholders&#146; Equity</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-17</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Cash Flows</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-18</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Notes to Consolidated Financial Statements</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-20</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Report of Independent Registered Public Accountants</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-32</P>
</TD></TR>
<TR><TD valign=bottom width=577.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED<BR>
DECEMBER 31, 2006 &#150; SUPERIOR</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-33</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance Sheets (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-34</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Statement of Operations (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-35</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Statement of Cash Flows (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-36</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Notes to Interim Financial Statements (Unaudited)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-37</P>
</TD></TR>
<TR><TD valign=bottom width=577.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED<BR>
JUNE 30, 2006 &#150; SUPERIOR</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-49</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Report of Independent Registered Public Accounting Firms</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-50</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance Sheets</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-51</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Statements of Operations</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-53</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Statements of Stockholders&#146; Equity (Deficit)</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-55</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Statements of Cash Flows</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-56</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Notes to Financial Statements</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-58</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Report of Independent Registered Public Accounting Firm</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-78</P>
</TD></TR>
<TR><TD valign=bottom width=577.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Schedule II</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=28.2><P style="margin:0pt" align=right>F-79</P>
</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>CONSOLIDATED FINANCIAL STATEMENTS FOR THE<BR>
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006</B></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED BALANCE SHEETS<BR>
(Unaudited)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=306.75></TD><TD width=12.9></TD><TD width=6.95></TD><TD width=62.05></TD><TD width=12.9></TD><TD width=6.65></TD><TD width=59.8></TD></TR>
<TR><TD valign=bottom width=409>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=92 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September 30, 2006</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=88.6 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December 31, 2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=409>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>ASSETS</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=409>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Current Assets</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cash and cash equivalents</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=82.733><P style="margin:0pt" align=right>217,282</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=79.733><P style="margin:0pt" align=right>1,042,834</P>
</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Trade receivables</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733><P style="margin:0pt" align=right>947,897</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733><P style="margin:0pt" align=right>688,810</P>
</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inventories</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733><P style="margin:0pt" align=right>8,451,224</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733><P style="margin:0pt" align=right>7,570,120</P>
</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Prepaid expenses</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82.733><P style="margin:0pt" align=right>208,356</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.733><P style="margin:0pt" align=right>215,560</P>
</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total current assets</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733><P style="margin:0pt" align=right>9,824,759</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733><P style="margin:0pt" align=right>9,517,324</P>
</TD></TR>
<TR><TD valign=bottom width=409>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Marketable Securities &#150; Available for Sale&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733><P style="margin:0pt" align=right>74,929</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733><P style="margin:0pt" align=right>65,444</P>
</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Property and Equity &#150; At Cost, Net</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733><P style="margin:0pt" align=right>1,026,838</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733><P style="margin:0pt" align=right>1,121,662</P>
</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred Income Taxes</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733><P style="margin:0pt" align=right>779</P>
</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Goodwill</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=82.733><P style="margin:0pt" align=right>837,117</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=8.867>&nbsp;</TD><TD valign=bottom width=79.733><P style="margin:0pt" align=right>837,117</P>
</TD></TR>
<TR><TD valign=bottom width=409><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other Assets</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82.733><P style="margin:0pt" align=right>632,662</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.733><P style="margin:0pt" align=right>287,790</P>
</TD></TR>
<TR><TD valign=bottom width=409>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=82.733><P style="margin:0pt" align=right>12,396,305</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=79.733><P style="margin:0pt" align=right>11,830,116</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-3</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED BALANCE SHEETS &#150; (continued)<BR>
(Unaudited)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=304.6></TD><TD width=12.75></TD><TD width=7.6></TD><TD width=60.75></TD><TD width=12.75></TD><TD width=7.4></TD><TD width=58.7></TD><TD width=3.45></TD></TR>
<TR><TD valign=bottom width=406.133>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=91.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September 30, 2006</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=88.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December 31, 2005</B></P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Current Liabilities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Notes payable</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.133><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>194,183</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>594,183</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Current maturities of long-term debt</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>259,273</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>259,152</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts payable &#150; trade</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>326,834</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>789,724</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accrued expenses</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>419,757</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>580,823</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Customer deposits</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>382,346</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>206,320</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Federal income taxes payable</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>210,584</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>13,920</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total Current Liabilities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=81><P style="margin:0pt" align=right>1,792,977</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>2,444,122</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Long-term debt, less current maturities&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>3,996,128</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>3,314,886</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred income taxes</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=81><P style="margin:0pt" align=right>2,446</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>13,920</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total Liabilities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>5,791,551</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>5,759,008</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Shareholders&#146; Equity</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Common stock, $.01 par value; authorized 10,000,000 shares;<BR>
4,913,290 shares issued and outstanding at the end of each period</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>49,133</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>49,133</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Additional paid-in capital</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>5,708,760</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>5,708,760</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accumulated other comprehensive (loss)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=10.133>&nbsp;</TD><TD valign=bottom width=81><P style="margin:0pt" align=right>(120,992</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>(127,252</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Retained earnings</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=81><P style="margin:0pt" align=right>967,853</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>440,647</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total Shareholders&#146; Equity</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=81><P style="margin:0pt" align=right>6,604,754</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>6,071,108</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.133>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=81><P style="margin:0pt" align=right>12,396,305</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>11,830,116</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-4</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED STATEMENTS OF OPERATIONS<BR>
(Unaudited)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=305.75></TD><TD width=12.5></TD><TD width=7.45></TD><TD width=59.45></TD><TD width=12.55></TD><TD width=7.5></TD><TD width=59.45></TD><TD width=3.35></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=407.667><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Three Months Ended</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=89.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September 30, 2006</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=89.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September 30, 2005</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Sales&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.933><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>9,497,528</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>7,129,321</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Consumer loan service fees</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>111,422</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>85,536</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>9,608,950</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>7,214,857</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Costs and expenses</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cost of goods sold</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>8,085,866</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>5,837,846</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Selling, general and administrative expenses</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>1,251,108</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>1,124,435</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>29,548</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>46,219</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>9,366,522</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>7,008,500</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Operating income</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>242,428</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>206,357</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other income (expense)</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Other income</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>(3,895</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Interest expense</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>78,646</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>71,553</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Income before income taxes</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>163,782</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>138,719</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income tax expense</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>55,686</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>47,165</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Net earnings</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.933><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>108,096</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>91,554</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Earnings per common share</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic and diluted</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.933><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>.02</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=79.267><P style="margin:0pt" align=right>.02</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Weighted average number of common shares:</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Diluted</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.933>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>5,056,133</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=79.267><P style="margin:0pt" align=right>5,040,148</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-5</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED STATEMENTS OF OPERATIONS &#150; (continued)<BR>
(Unaudited)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=305.75></TD><TD width=12.5></TD><TD width=6.7></TD><TD width=60.2></TD><TD width=12.55></TD><TD width=6.75></TD><TD width=60.2></TD><TD width=3.35></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=407.667><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Nine Months Ended</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=89.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September 30, 2006</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=89.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September 30, 2005</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Sales&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.933><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>31,570,446</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>20,475,598</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Consumer loan service charges</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>305,554</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>257,481</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>31,876,000</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>20,733,079</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Costs and expenses</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cost of goods sold</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>27,014,402</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>16,608,461</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Selling, general and administrative expenses</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>3,724,797</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>3,288,686</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>108,563</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>138,090</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>30,847,762</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>20,035,237</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Operating income</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>1,028,238</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>697,842</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other income (expense)</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Other income</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>(3,895</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Interest expense</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>229,227</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>214,696</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Earnings before income taxes</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>799,011</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>487,041</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income tax expense</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>271,664</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>165,594</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Net earnings</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.933><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>527,347</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>321,447</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Earnings per common share</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic and diluted</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.933><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>0.11</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=80.267><P style="margin:0pt" align=right>0.06</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Weighted average number of common shares:</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=407.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Diluted</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.933>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>4,989,065</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=9>&nbsp;</TD><TD valign=bottom width=80.267><P style="margin:0pt" align=right>5,059,709</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-6</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(Unaudited)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=302.05></TD><TD width=12.8></TD><TD width=7></TD><TD width=61.5></TD><TD width=12.8></TD><TD width=7></TD><TD width=61.5></TD><TD width=3.35></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=402.733><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Nine Months Ended</B></P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=91.333 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September 30, 2006</B></P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=91.333 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September 30, 2005</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash Flows From Operating Activities&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net earnings</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>527,347</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>321,447</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Adjustments to reconcile net earnings to net cash provided<BR>
by operating activities:</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>108,563</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>138,090</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Realized gain on sale of marketable securities</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(3,895</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">(Increase) decrease in operating assets and liabilities:</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Trade receivables</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(197,173</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>52,935</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Inventories</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(881,104</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(594,535</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Prepaid expenses and other current assets</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>7,204</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(133,001</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Accounts payable and accrued expenses</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(623,956</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(575,112</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Customer deposits</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>176,026</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>105,548</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Federal income taxes payable</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>196,664</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(66,258</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Other assets</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82><P style="margin:0pt" align=right>(344,872</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82><P style="margin:0pt" align=right>27,111</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Net Cash Used in Operating Activities</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(1,031,301</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(727,670</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash Flows From Investing Activities</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Pawn loans made</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(387,966</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(469,839</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Pawn loans repaid</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>319,203</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>338,069</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Recovery of pawn loan principal through sale of forfeited collateral</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>67,503</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>220,356</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Pay day loans made</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(207,428</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(100,871</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Pay day loans repaid</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>146,813</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>64,270</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Purchase of property and equipment</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(13,739</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(210,709</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Proceeds from sale of marketable securities</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82><P style="margin:0pt" align=right>4,277</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Net Cash Used in Investing Activities</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(75,614</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(154,447</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash Flows From Financing Activities</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Proceeds from notes issued</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>840,000</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>3,481,365</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Payments on notes payable</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82><P style="margin:0pt" align=right>(558,637</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82><P style="margin:0pt" align=right>(2,603,519</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Net Cash Provided by Financing Activities</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>281,363</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>877,846</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net Decrease in Cash and Cash Equivalents</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(825,552</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.333>&nbsp;</TD><TD valign=bottom width=82><P style="margin:0pt" align=right>(4,271)</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and Cash Equivalents at Beginning of Period</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82><P style="margin:0pt" align=right>1,042,834</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=82><P style="margin:0pt" align=right>314,897</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=402.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and Cash Equivalents at End of Period</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=82><P style="margin:0pt" align=right>217,282</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=82><P style="margin:0pt" align=right>310,626</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt">Supplemental disclosures:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt">Interest paid for the nine months ended September 30, 2006 and 2005 was $229,227 and $214,696, respectively. Income taxes paid for the nine months ended September 30, 2006 and 2005 was $75,000 and $225,000, respectively. Pawn loans forfeited and transferred to inventory amounted to $67,503 and $220,356, respectively, for the nine months ended September 30, 2006 and 2005.</P>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-7</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Basis of Presentation</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The accompanying unaudited condensed consolidated financial statements of DGSE Companies, Inc. and Subsidiaries include the financial statements of DGSE Companies, Inc. and its wholly-owned subsidiaries, DGSE Corporation, National Jewelry Exchange, Inc., Charleston Gold and Diamond Exchange, Inc. and American Pay Day Centers, Inc. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The interim financial statements of DGSE Companies, Inc. included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the Commission&#146;s rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. We suggest that these financial statements be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2005, and our Quarterly Reports on Form 10-Q for the three months ended March 31, 2006 and our Quarterly report on Form 10-Q for the six months ended June 30, 2006. In our opinion, the accompanying unaudited
interim financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly its results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. Certain reclassifications were made to the prior year&#146;s consolidated financial statements to conform to the current year presentation.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>2. Trade Receivables</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Pawn loans receivable in the amount of $112,042 and $142,611 as of September 30, 2006 and 2005, respectively, are included in the Consolidated Balance Sheets caption trade receivables. The related pawn service charges receivable in the amount of $37,509 and $50,433 as of September 30, 2006 and 2005, respectively, are also included in the Consolidated Balance Sheets caption trade receivables. Pay day loans receivable in the amount of $77,273 as of September 30, 2006 and $27,614 as of September 30, 2005, respectively, are also included in the Consolidated Balance Sheets caption trade receivables.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>3. Earnings Per Share</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">A reconciliation of the income and shares of the basic earnings per common share and diluted earnings per common share for the periods ended September 30, 2006 and 2005 is as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=151></TD><TD width=12.55></TD><TD width=5.9></TD><TD width=38.55></TD><TD width=12.55></TD><TD width=39.95></TD><TD width=12.55></TD><TD width=9.75></TD><TD width=24.45></TD><TD width=12.55></TD><TD width=5.9></TD><TD width=38.55></TD><TD width=12.55></TD><TD width=44.55></TD><TD width=12.55></TD><TD width=9.75></TD><TD width=24.35></TD></TR>
<TR><TD valign=bottom width=201.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=191.6 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=197.6 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=201.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=191.6 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Nine Months Ended September 30,</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=197.6 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Nine Months Ended September 30,</B></P>
</TD></TR>
<TR><TD valign=bottom width=201.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Net Earnings</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=45.6 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Per Share</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Net Earnings</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=45.467 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Per Share</B></P>
</TD></TR>
<TR><TD valign=bottom width=201.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.867>&nbsp;</TD><TD valign=bottom width=51.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=13>&nbsp;</TD><TD valign=bottom width=32.6>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.867>&nbsp;</TD><TD valign=bottom width=51.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=59.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=13>&nbsp;</TD><TD valign=bottom width=32.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=201.333><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Basic earnings per common share</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt; font-size:9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.867><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=51.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>527,347</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt; font-size:9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=53.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt; font-size:9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=13><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=32.6><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>.11</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt; font-size:9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.867><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=51.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>321,447</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt; font-size:9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=59.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt; font-size:9pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=13><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=32.467><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>.06</P>
</TD></TR>
<TR><TD valign=bottom width=201.333><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Effect of dilutive stock options</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>75,775</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.6><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>146,419</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.467><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=201.333><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Diluted earnings per common share</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.867><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=51.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>527,347</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>4,989,065</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=32.6><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>.11</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.867><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=51.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>321,447</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=59.4><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>5,059,709</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=32.467><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>.06</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=150.9></TD><TD width=12.45></TD><TD width=5.8></TD><TD width=38.45></TD><TD width=12.45></TD><TD width=39.85></TD><TD width=12.45></TD><TD width=9.9></TD><TD width=24.8></TD><TD width=12.45></TD><TD width=5.8></TD><TD width=38.45></TD><TD width=12.55></TD><TD width=44.45></TD><TD width=12.55></TD><TD width=9.9></TD><TD width=24.8></TD></TR>
<TR><TD valign=bottom width=201.2>&nbsp;</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD valign=bottom width=191.6 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD valign=bottom width=198 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=201.2>&nbsp;</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=191.6 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Three Months Ended September 30,</B></P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=198 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Three Months Ended September 30,</B></P>
</TD></TR>
<TR><TD valign=bottom width=201.2>&nbsp;</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD valign=bottom width=59 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Income</B></P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD valign=bottom width=53.133><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD valign=bottom width=46.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Per-Share<BR>
Amount</B></P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD valign=bottom width=59 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Income</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=59.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Per-Share<BR>
Amount</B></P>
</TD></TR>
<TR><TD valign=bottom width=201.2><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Basic earnings per common share</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=7.733><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=51.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>108,096</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=13.2><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=33.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>.02</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=7.733><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=51.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>91,554</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=59.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=13.2><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=33.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>.02</P>
</TD></TR>
<TR><TD valign=bottom width=201.2><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Effect of dilutive stock options&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>142,843</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>126,858</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=201.2><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Diluted earnings per common share</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.733><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=51.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>108,096</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>5,056,133</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.2><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=33.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>02</P>
</TD><TD valign=bottom width=16.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.733><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=51.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>91,554</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=59.267><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>5,040,148</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.2><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=33.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>.02</P>
</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-8</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>4. Business Segment Information</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Management identifies reportable segments by product or service offered. Each segment is managed separately. Corporate and other includes certain general and administrative expenses not allocated to segments and pawn operations. The Company&#146;s operations by segment for the nine months ended September 30 were as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=139.1></TD><TD width=13.95></TD><TD width=5.6></TD><TD width=30.8></TD><TD width=13.95></TD><TD width=7.1></TD><TD width=32.2></TD><TD width=13.95></TD><TD width=5.6></TD><TD width=30.8></TD><TD width=13.95></TD><TD width=7.85></TD><TD width=35.2></TD><TD width=13.95></TD><TD width=8.5></TD><TD width=31.25></TD><TD width=13.95></TD><TD width=7.7></TD><TD width=42.6></TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Retail<BR>
Jewelry</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Wholesale<BR>
Jewelry</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Bullion</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Rare Coins</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Corporate<BR>
and Other</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Consolidated</B></P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=419.933 colspan=17><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(Amounts in thousands)</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>10,885</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>3,775</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>13,117</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>3,659</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=11.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>440</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>31,876</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>9,790</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>2,962</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>5,536</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>1,895</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>550</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>20,733</P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>171</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>113</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>181</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>204</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>(142</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>527</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>204</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>144</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>27</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>145</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>(199</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>321</P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Identifiable Assets</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>9,102</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>1,987</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>300</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>266</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>741</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>12,396</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>8,041</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>1,742</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>236</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>145</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>810</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>10,974</P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Capital Expenditures</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>137</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>137</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>169</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>42</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>211</P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Depreciation and Amortization</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>48</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>31</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>79</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>56</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>11</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>25</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>92</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The Company&#146;s operations by segment for the three months ended September 30 were as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=139.1></TD><TD width=13.95></TD><TD width=5.6></TD><TD width=30.8></TD><TD width=13.95></TD><TD width=7.1></TD><TD width=32.2></TD><TD width=13.95></TD><TD width=5.6></TD><TD width=30.8></TD><TD width=13.95></TD><TD width=7.85></TD><TD width=35.2></TD><TD width=13.95></TD><TD width=8.5></TD><TD width=31.25></TD><TD width=13.95></TD><TD width=7.7></TD><TD width=42.6></TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Retail<BR>
Jewelry</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Wholesale<BR>
Jewelry</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Bullion</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Rare Coins</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Corporate<BR>
and Other</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Consolidated</B></P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=419.933 colspan=17><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(Amounts in thousands)</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>3,325</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>1,472</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>3,526</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>1,141</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=11.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>145</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>9,609</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>3,362</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>1,015</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>1,964</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>732</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>142</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>7,215</P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>18</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>56</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>31</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>38</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>(35</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>108</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>44</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>45</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>12</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>58</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>(68</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>91</P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Identifiable Assets</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>8,633</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>1,944</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>172</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>372</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>694</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>11,815</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>8,041</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>1,742</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>236</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>145</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>810</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>10,974</P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Capital Expenditures</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>132</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>132</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>18</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>26</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>44</P>
</TD></TR>
<TR><TD valign=bottom width=185.467>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Depreciation and Amortization</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>19</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>11</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>30</P>
</TD></TR>
<TR><TD valign=bottom width=185.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>29</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=9.467>&nbsp;</TD><TD valign=bottom width=42.933><P style="margin:0pt" align=right>5</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.467>&nbsp;</TD><TD valign=bottom width=46.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=11.333>&nbsp;</TD><TD valign=bottom width=41.667><P style="margin:0pt" align=right>12</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=56.8><P style="margin:0pt" align=right>46</P>
</TD></TR>
</TABLE>
<P style="margin:5.35pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-9</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:6.65pt; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=139.1></TD><TD width=13.95></TD><TD width=5.6></TD><TD width=30.8></TD><TD width=13.95></TD><TD width=7.1></TD><TD width=32.2></TD><TD width=13.95></TD><TD width=5.6></TD><TD width=30.8></TD><TD width=13.95></TD><TD width=7.85></TD><TD width=35.2></TD><TD width=13.95></TD><TD width=8.5></TD><TD width=31.25></TD><TD width=13.95></TD><TD width=7.7></TD><TD width=42.6></TD></TR>
</TABLE>
<P style="margin:0pt" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>5. Other Comprehensive Income</B></P>
<P style="line-height:11pt; margin-top:5.85pt; margin-bottom:5.85pt; text-indent:18pt">Other comprehensive income is as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=257.8></TD><TD width=16.35></TD><TD width=6.55></TD><TD width=47.1></TD><TD width=20.8></TD><TD width=6.55></TD><TD width=38.4></TD><TD width=16.4></TD><TD width=6.55></TD><TD width=47.1></TD><TD width=4.4></TD></TR>
<TR><TD valign=bottom width=343.733>&nbsp;</TD><TD valign=bottom width=21.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.533 colspan=2><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>Before Tax<BR>
Amount</B></P>
</TD><TD valign=bottom width=27.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.933 colspan=2><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>Tax<BR>
(Expense)<BR>
Benefit</B></P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.533 colspan=2><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>Net-of-Tax<BR>
Amount</B></P>
</TD><TD valign=bottom width=5.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=343.733>&nbsp;</TD><TD valign=bottom width=21.8>&nbsp;</TD><TD valign=bottom width=8.733>&nbsp;</TD><TD valign=bottom width=62.8>&nbsp;</TD><TD valign=bottom width=27.733>&nbsp;</TD><TD valign=bottom width=8.733>&nbsp;</TD><TD valign=bottom width=51.2>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=8.733>&nbsp;</TD><TD valign=bottom width=62.8>&nbsp;</TD><TD valign=bottom width=5.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=343.733><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other comprehensive loss at December 31, 2005</P>
</TD><TD valign=bottom width=21.8><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>(162,071</P>
</TD><TD valign=bottom width=27.733><P style="line-height:10.3pt; margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=51.2><P style="line-height:10.3pt; margin:0pt" align=right>34,819</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>(127,252</P>
</TD><TD valign=bottom width=5.867><P style="line-height:10.3pt; margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=343.733><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized gains during the period ended March 31, 2006</P>
</TD><TD valign=bottom width=21.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>4,385</P>
</TD><TD valign=bottom width=27.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.2><P style="line-height:10.3pt; margin:0pt" align=right>(1,491</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=21.867><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>2,894</P>
</TD><TD valign=bottom width=5.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=343.733><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other comprehensive loss at March 31, 2006</P>
</TD><TD valign=bottom width=21.8>&nbsp;</TD><TD valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>(157,686</P>
</TD><TD valign=bottom width=27.733><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=51.2><P style="line-height:10.3pt; margin:0pt" align=right>33,328</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>(124,358</P>
</TD><TD valign=bottom width=5.867><P style="line-height:10.3pt; margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=343.733><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized gains during the period ended June 30, 2006 and September 30, 2006</P>
</TD><TD valign=bottom width=21.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>5,100</P>
</TD><TD valign=bottom width=27.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.2><P style="line-height:10.3pt; margin:0pt" align=right>(1,734</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=21.867><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>3,366</P>
</TD><TD valign=bottom width=5.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=343.733><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other comprehensive loss at September 30, 2006</P>
</TD><TD valign=bottom width=21.8>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>(152,586</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=27.733><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=51.2><P style="line-height:10.3pt; margin:0pt" align=right>31,594</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.733><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=62.8><P style="line-height:10.3pt; margin:0pt" align=right>(120,992</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=5.867><P style="line-height:10.3pt; margin:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin-top:9.15pt; margin-bottom:0pt"><B>6. Stock-based Compensation</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Prior to January 1, 2006, the Company elected to follow Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations to account for its employee and director stock options, as permitted by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Effective January 1, 2006, the Company adopted the fair value recognition provision of SFAS<BR>
No. 123 (revised 2004), Share-Based Payments, (SFAS No. 123(R)) for all share-based payment awards to employees and directors including employee stock options. In addition, the Company has applied the provisions of Staff Accounting Bulletin No. 107 (SAB No. 107), issued by the Securities and Exchange Commission, in its adoption of SFAS No. 123(R).</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company adopted SFAS No. 123(R) using the modified-prospective-transition method. Under this transition method, stock-based compensation expense recognized after the effective date includes: (1) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimate in accordance with the original provisions of SFAS No. 123, and (2) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimate in accordance with the provision of SFAS No. 123. Results from prior periods have not been restated and do not include the impact of SFAS No. 123(R). Stock-based compensation expense under SFAS No. 123(R) for the first nine months of 2006 was $0, relating to employee and director stock options and the Company&#146;s employee stock purchase plan. Stock-based compensation expense
under the provision of APB No. 25 for the first nine months of 2006 was insignificant.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Stock-based compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the Company&#146;s <I>pro forma</I> disclosures required under SFAS No. 123 for periods prior to 2006, the Company accounted for forfeitures as they occurred.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Upon adoption of SFAS No. 123(R), the Company elected to use the Black-Scholes-Merton option-pricing formula to value share-based payments granted to employees subsequent to January 1, 2006 and elected to attribute the value of stock-based compensation to expense using the straight-line single option method. These methods were previously used for the Company&#146;s <I>pro forma</I> information required under SFAS No. 123.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On November 10, 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 123(R)-3, &#147;Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards&#148;, which detailed an alternative transition method for calculating the tax effects of stock-based compensation pursuant to SFAS No. 123(R). This alternative transition method included simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation and to determine the subsequent impact on the APIC pool and Consolidated Statement of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS No.&nbsp;123(R). As all options outstanding have vested prior to December 31, 2005, the Company has not recorded the tax effects of employee stock-based
compensation and has made no adjustments to the APIC pool.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-10</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>6. Stock-based Compensation &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Prior to the adoption of SFAS No. 123(R) tax benefits of deductions resulting from the exercise of stock options were required to be presented as operating cash flows in the Consolidated Statement of Cash Flows. SFAS No. 123(R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. As there have been no stock options exercised, the Company has not reported these excess tax benefits as of September 30, 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R) for all share based payment awards to employees and directors including employee stock options granted under its employee stock option plan. As all options outstanding have vested prior to December 31, 2005, no stock based compensation expense has been recorded as of September 30, 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following table presents the effect on net income and net income per share compared with <I>pro forma</I> information as if the Company had adopted SFAS No. 123 for the periods ended September 30,</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=331.65></TD><TD width=12.55></TD><TD width=7.5></TD><TD width=48.75></TD><TD width=18.7></TD><TD width=7.5></TD><TD width=41.35></TD></TR>
<TR><TD valign=bottom width=442.2>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=165.067 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Three Months Ended September 30,</B></P>
</TD></TR>
<TR><TD valign=bottom width=442.2>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=24.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=442.2>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=65>&nbsp;</TD><TD valign=bottom width=24.933>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=442.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net Income as reported</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=65><P style="margin:0pt" align=right>108,096</P>
</TD><TD valign=bottom width=24.933><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.133><P style="margin:0pt" align=right>91,554</P>
</TD></TR>
<TR><TD valign=bottom width=442.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less stock-based compensation under the fair value method&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=24.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.133><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=442.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><I>Pro forma</I> net loss</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=65><P style="margin:0pt" align=right>108,096</P>
</TD><TD valign=bottom width=24.933>&nbsp;</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.133><P style="margin:0pt" align=right>91,554</P>
</TD></TR>
<TR><TD valign=bottom width=442.2>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=65>&nbsp;</TD><TD valign=bottom width=24.933>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=442.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Earnings per share:</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=65>&nbsp;</TD><TD valign=bottom width=24.933>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=442.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic and diluted income per common share, as reported</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=65><P style="margin:0pt" align=right>.02</P>
</TD><TD valign=bottom width=24.933>&nbsp;</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.133><P style="margin:0pt" align=right>.02</P>
</TD></TR>
<TR><TD valign=bottom width=442.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic and diluted income per common share, pro forma</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=65><P style="margin:0pt" align=right>.02</P>
</TD><TD valign=bottom width=24.933>&nbsp;</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.133><P style="margin:0pt" align=right>.02</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=332.55></TD><TD width=12.55></TD><TD width=11.8></TD><TD width=44.65></TD><TD width=12.9></TD><TD width=11.8></TD><TD width=41.75></TD></TR>
<TR><TD valign=bottom width=443.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=163.867 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Nine Months Ended September 30,</B></P>
</TD></TR>
<TR><TD valign=bottom width=443.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=75.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=443.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=15.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=59.533>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=55.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net Income as reported</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59.533><P style="margin:0pt" align=right>527,347</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.667><P style="margin:0pt" align=right>321,447</P>
</TD></TR>
<TR><TD valign=bottom width=443.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less stock-based compensation under the fair value method&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.667><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=443.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><I>Pro forma</I> net loss</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59.533><P style="margin:0pt" align=right>527,347</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.667><P style="margin:0pt" align=right>321,447</P>
</TD></TR>
<TR><TD valign=bottom width=443.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=59.533>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=55.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Earnings per share:</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=59.533>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=55.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic and diluted income per common share, as reported</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59.533><P style="margin:0pt" align=right>.11</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.667><P style="margin:0pt" align=right>.06</P>
</TD></TR>
<TR><TD valign=bottom width=443.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic and diluted income per common share, pro forma</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59.533><P style="margin:0pt" align=right>.11</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.667><P style="margin:0pt" align=right>.06</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>7. New Accounting Pronouncements</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July 13, 2006, the FASB issued FASB Interpretation 48, Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies Statement 109, Accounting for Income Taxes, to indicate the criteria that an individual tax position would have to meet for some or all of the benefit of that position to be recognized in an entity&#146;s financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the requirements under FIN 48 and the effect, if any, that the adoption of FIN 48 will have on its consolidated financial statements, statement of cash flows or earnings per share.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September 2006, the FASB issued SFAS 157 Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective as of the beginning of our 2008 fiscal year. The Company is currently evaluating the impact of adopting SFAS 157 on its financial statements.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-11</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>8. Recent Developments</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July 17, 2006, the Company announced that it had executed a definitive agreement to acquire all of the issued and outstanding stock of Superior Galleries, Inc. As of September 30, 2006 the Company had incurred $265,000 in legal and other cost related to this acquisition. This cost is included in the balance sheet caption &#147;Other assets&#148;. In the event this transaction does not close, this and any additional cost incurred related to this transaction will be expensed and charged against operating results during the period in which the transaction is terminated.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-12</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>CONSOLIDATED FINANCIAL STATEMENTS FOR<BR>
THE FISCAL YEAR ENDED DECEMBER 31, 2005</B></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-13</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">To the Board of Directors and<BR>
Shareholders of DGSE Companies, Inc.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have audited the accompanying consolidated balance sheets of DSGE Companies, Inc. and its subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders&#146; equity and comprehensive income, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audits.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We have not been engaged to perform an audit of the Company&#146;s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In our opinion, the 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, 2005 and 2004, and the consolidated results of operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.</P>
<P style="margin-top:20pt; margin-bottom:0pt; padding-left:252pt">/s/ BKR Cornwell Jackson<BR>
Plano, Texas<BR>
March 31, 2006</P>
<P style="margin-top:20pt; margin-bottom:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-14</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED BALANCE SHEETS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=339.55></TD><TD width=12.55></TD><TD width=5></TD><TD width=45></TD><TD width=12.55></TD><TD width=5></TD><TD width=45></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=150.067 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December 31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>ASSETS</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Current Assets</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cash and cash equivalents</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,042,834</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>314,897</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Trade receivables</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>688,810</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>907,238</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inventories</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>7,570,120</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>6,791,383</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Prepaid expenses</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>215,560</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>161,985</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total current assets</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>9,517,324</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>8,175,503</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Marketable Securities &#150; Available for Sale</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>65,444</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>77,062</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Property and Equipment &#150; At Cost, Net</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>1,121,662</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>885,301</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred Income Taxes</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>779</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>15,994</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Goodwill</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>837,117</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>837,117</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other Assets</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>287,790</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>290,722</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>11,830,116</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>10,281,699</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Current Liabilities</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Notes payable</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>594,183</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>548,093</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Current maturities of long-term debt</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>259,152</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>76,172</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts payable &#150; trade</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>789,724</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>590,412</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accrued expenses</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>580,823</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>513,775</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Customer deposits</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>206,320</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>67,173</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Federal income taxes payable</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>13,920</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>146,210</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total current liabilities</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>2,444,122</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>1,941,835</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Long-term debt, less current maturities (Note 8)</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>3,314,886</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>2,749,278</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total liabilities</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>5,759,008</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>4,691,113</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Shareholders&#146; Equity</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Common stock, $.01 par value; authorized 10,000,000 shares; issued and outstanding 4,913,290 shares at December 31, 2005 and 2004</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>49,133</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>49,133</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Additional paid-in capital</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>5,708,760</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>5,708,760</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accumulated other comprehensive (loss)</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>(127,252</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>(122,582</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Retained earnings (deficit)</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>444,467</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>(44,725</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total shareholders&#146; equity</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>6,071,128</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>5,590,586</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=452.733>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>11,830,116</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>10,281,699</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-15</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=261.55></TD><TD width=13.5></TD><TD width=5.45></TD><TD width=48.65></TD><TD width=13.5></TD><TD width=5.45></TD><TD width=48.65></TD><TD width=13.5></TD><TD width=5.45></TD><TD width=48.65></TD><TD width=3.65></TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=252.4 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Years Ended December 31,</B></P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=72.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=72.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=72.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2003</B></P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Sales</P>
</TD><TD valign=bottom width=18><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>35,319,133</P>
</TD><TD valign=bottom width=18><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>28,385,770</P>
</TD><TD valign=bottom width=18><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>25,243,719</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Pawn services charges&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>320,438</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>256,447</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>181,828</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>35,639,571</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>28,642,217</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>25,425,547</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Costs and expenses</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cost of goods sold</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>29,117,784</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>22,743,073</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>20,049,583</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Selling, general and administrative expenses</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>5,349,010</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>4,699,107</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>4,054,048</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>145,337</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>148,327</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>160,131</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>34,612,131</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>27,590,507</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>24,263,762</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Operating income</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>1,027,440</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>1,051,710</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>1,161,785</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other income (expense):</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized loss on investments</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>(1,634,845</P>
</TD><TD valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other income</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>18,038</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>23,500</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Interest expense</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(290,744</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=18><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(247,694</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=18><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(268,344</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total other income (expense)</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(272,706</P>
</TD><TD valign=bottom width=18><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(224,194</P>
</TD><TD valign=bottom width=18><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(1,903,189</P>
</TD><TD valign=bottom width=4.867><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income before income taxes</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>754,734</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>827,516</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(741,404</P>
</TD><TD valign=bottom width=4.867><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income tax expense (benefit)</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>269,542</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>227,797</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(334,361</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.867><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income from continuing operations</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>485,192</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>599,719</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(407,043</P>
</TD><TD valign=bottom width=4.867><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Loss from discontinued operations, net of income taxes</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(248,890</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=18><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(117,097</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.867><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>485,192</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>350,829</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(524,140</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Earnings per common share</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">From continuing operations</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>.12</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>(.08</P>
</TD><TD valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">From discontinued operations</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(.05</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=18><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(.03</P>
</TD><TD valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>.07</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(.11</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Diluted</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">From continuing operations</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>.12</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>(.08</P>
</TD><TD valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">From discontinued operations</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(.05</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=18><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(.03</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>.07</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(.11</P>
</TD><TD valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Weighted average number of common shares:</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=348.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Diluted</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>5,037,073</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>5,135,457</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-16</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=108.7></TD><TD width=12.5></TD><TD width=40></TD><TD width=12.5></TD><TD width=5></TD><TD width=27.5></TD><TD width=12.5></TD><TD width=5></TD><TD width=40></TD><TD width=12.5></TD><TD width=6.2></TD><TD width=43.8></TD><TD width=12.55></TD><TD width=5.6></TD><TD width=49.4></TD><TD width=15.85></TD><TD width=6.1></TD><TD width=48.95></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=144.933 rowspan=2>&nbsp;</TD><TD valign=bottom width=16.667 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=113.333 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><BR>
<BR>
<B>Common Stock</B></P>
</TD><TD valign=bottom width=16.667 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Additional<BR>
Paid-in<BR>
Capital</B></P>
</TD><TD valign=bottom width=16.667 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Retained<BR>
Earnings<BR>
(Accumulated<BR>
Deficit)</B></P>
</TD><TD valign=bottom width=16.733 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=73.333 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Other<BR>
Comprehensive<BR>
(Loss)</B></P>
</TD><TD valign=bottom width=21.133 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=73.4 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Total<BR>
Shareholders&#146;<BR>
Equity</B></P>
</TD><TD valign=bottom width=4.467 rowspan=2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=53.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Amount</B></P>
</TD></TR>
<TR><TD valign=bottom width=144.933>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=66.667 colspan=2><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=73.333 colspan=2><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=73.4 colspan=2><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance at January 31, 2003</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>49,133</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>5,708,760</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.4><P style="margin:0pt" align=right>128,586</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=65.867><P style="margin:0pt" align=right>(1,134,950</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.133><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>4,751,529</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net Income</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4><P style="margin:0pt" align=right>(524,140</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>(524,140</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other comprehensive Income (loss):</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Gain on marketable securities Arising during the year, net of tax</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867><P style="margin:0pt" align=right>60,413</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>60,413</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Reclassification adjustment</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.867><P style="margin:0pt" align=right>1,074,537</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.267><P style="margin:0pt" align=right>1,074,537</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized loss on marketable Securities, net of tax</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.867><P style="margin:0pt" align=right>1,134,950</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.267><P style="margin:0pt" align=right>1,134,950</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance at December 31, 2003</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>49,133</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>5,708,760</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4><P style="margin:0pt" align=right>(395,554</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>5,362,339</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4><P style="margin:0pt" align=right>350,829</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>350,829</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized loss on marketable Securities, net of tax</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867><P style="margin:0pt" align=right>(122,582</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>(122,582</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=144.933>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance at December 31, 2004</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>49,133</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>5,708,760</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4><P style="margin:0pt" align=right>(44,725</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867><P style="margin:0pt" align=right>(122,582</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>5,590,586</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4><P style="margin:0pt" align=right>485,192</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>485,192</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized losses on marketable Securities, net of tax</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000"
valign=bottom width=7.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.867><P style="margin:0pt" align=right>(4,670</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.267><P style="margin:0pt" align=right>(4,670</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=144.933>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.4>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=65.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=8.133>&nbsp;</TD><TD valign=bottom width=65.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=144.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance at December 31, 2005</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>4,913,290</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.667><P style="margin:0pt" align=right>49,133</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>5,708,760</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=58.4><P style="margin:0pt" align=right>440,467</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.467><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=65.867><P style="margin:0pt" align=right>(127,252</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=65.267><P style="margin:0pt" align=right>6,071,108</P>
</TD><TD style="border-top:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-17</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=278.6></TD><TD width=12.75></TD><TD width=5.05></TD><TD width=44.2></TD><TD width=12.75></TD><TD width=5.05></TD><TD width=44.2></TD><TD width=12.75></TD><TD width=5.05></TD><TD width=44.25></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=231.067 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Years Ended December 31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=65.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=65.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.733 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2003</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash Flows From Operations</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Reconciliation of net loss to net cash used in operating activities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net income (loss)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>485,192</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>350,829</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(524,140</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>145,337</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>148,327</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>187,558</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Deferred taxes</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>21,832</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(10,535</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(451,081</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Loss on disposal of assets in discontinued operations</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>31,072</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Loss on sale of marketable securities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>15,600</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>26,998</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Unrealized loss on marketable securities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>1,634,845</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Gain on sale of assets</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(39,098</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Gain on sale of marketable securities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(3,895</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">(Increase) decrease in operating assets and liabilities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Trade receivables</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>183,578</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>42,251</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>49,896</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Other receivables</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>204,730</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(204,430</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Inventories</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(778,735</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(117,518</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(338,123</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Prepaid expenses and other current assets</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(53,577</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>10,840</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>3,577</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Decrease in other long term assets</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>182</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Accounts payable and accrued expenses</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>266,360</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(460,838</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>340,216</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Change in customer deposits</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>139,147</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(82,915</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(6,344</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Federal income taxes payable</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>(132,290</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>(366,781</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59><P style="margin:0pt" align=right>27,538</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total net cash used in operating activities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>273,131</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(305,108</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>777,582</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash flows from investing activities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Pawn loans made</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(602,987</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(633,873</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(521,975)</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Pawn loans repaid</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>454,707</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>406,524</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>428,835</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Recovery of pawn loan principal through</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Sale of forfeited collateral</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>248,695</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>90,523</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>61,248</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Pay day loans made</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(177,775</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Pay day loans repaid</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>112,210</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Proceeds from sale of marketable securities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>4,226</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>46,988</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Purchase of property and equipment</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(285,456</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(43,662</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(34,464</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Purchase of investments</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(48,989</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Proceeds from sale of assets</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>150,000</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash (used) provided by investing activities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(246,380</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(30,488</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>(68,357</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash flows from financing activities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Proceeds from notes issued</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>8,371,525</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>1,132,849</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>737,590</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Payments on notes payable</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>(7,670,339</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>(1,217,649</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59><P style="margin:0pt" align=right>(1,209,930</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash provided by financing activities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>701,186</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>(84,800</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59><P style="margin:0pt" align=right>(472,340</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net increase (decrease) in cash and cash equivalents</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>727,937</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>(420,396</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>236,885</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and cash equivalents at beginning of year</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>314,897</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>735,293</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59><P style="margin:0pt" align=right>498,408</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and cash equivalents at end of period</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>1,042,834</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>314,897</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=59><P style="margin:0pt" align=right>735,293</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-18</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>CONSOLIDATED STATEMENTS OF CASH FLOWS &#150; (continued)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=278.6></TD><TD width=12.75></TD><TD width=5.05></TD><TD width=44.2></TD><TD width=12.75></TD><TD width=5.05></TD><TD width=44.2></TD><TD width=12.75></TD><TD width=5.05></TD><TD width=44.25></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=231.067 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Years Ended December 31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=65.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=65.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.733 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2003</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Supplemental disclosures:</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash paid during the year for:</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Interest</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>300,866</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>242,697</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>249,088</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Income taxes</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>385,000</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>504,430</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>246,212</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">In July 2004 the Company sold the goodwill and trade name of Silverman Consultants, Inc. for $150,000 in cash and a note with a discounted value of $203,100</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Non-cash Investment and Financing Activities:</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Pawn loans forfeited and transferred to inventory</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>248,695</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>114,069</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>74,949</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Equipment financed through capital lease obligations</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>93,492</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin-top:10pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><I>The accompanying notes are an integral part of these consolidated financial statements.</I></P>
<P style="margin:0pt" align=center>F-19</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(a) Nature of Operations</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">DGSE Companies, Inc. and its subsidiaries (the &#147;Company&#148;), 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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(b) Principles of Consolidation</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(c) Cash and Cash Equivalents</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(d) Investments in Marketable Equity Securities</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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&#146; 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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(e) Inventory</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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).</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-20</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(a) Property and Equipment</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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 leases are amortized on the straight-line method over the life of the lease. Expenditures for repairs and maintenance are charged to expense as incurred.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(b) Goodwill</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(c) Impairment of Long-Lived Assets</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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 discounted 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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(d) Financial Instruments</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The carrying amounts reported in the consolidated balance sheets 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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(e) Advertising Costs</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Advertising costs are expensed as incurred and amounted to $719,080, $633,873 and $589,689 for 2005, 2004 and 2003, respectively.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(f) Accounts Receivable</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company records trade receivables when revenue is recognized. Some product has been consigned to customers. The Company&#146;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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Pawn loans receivable in the amount of $110,782 and $229,071 as of December 31, 2005 and 2004, respectively, are included in the Consolidated Balance Sheets caption trade receivables. The related pawn service charges receivable in the amount of $30,451 and $86,671 as of December 31 2005 and 2004, respectively, are also included in the Consolidated Balance Sheets caption trade receivables. Pay day loan receivables at December 31, 2005 in the amount of $50,842 are included in the Consolidated Balance Sheets caption trade receivables.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(g) Income Taxes</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-21</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(h) Revenue Recognition</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Pawn loans (&#147;loans&#148;) 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 plus accrued interest (or the fair value of the collateral, if lower) becomes the carrying value of the forfeited collateral (&#147;inventories&#148;) which is recovered through sales to customers.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(i) Direct cost of Pawn Loan Service Charge Revenue</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The direct cost of pawn loan service charge revenue is included in the Consolidated Statements of Operations caption &#147;Selling, general and administrative expenses&#148;.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(j) Shipping and Handling Costs</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Shipping and handling costs are included in selling general and administrative expenses, and amounted to $155,876, $112,777 and $84,445 for 2005, 2004 and 2003, respectively.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(k) Earnings (Loss) Per Share</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(l) Comprehensive Income</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company reports all changes in comprehensive income in the consolidated statements of changes in shareholders&#146; equity, in accordance with the provisions of Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(m) Stock-based Compensation</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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&#146;s common stock at the date of the grant over the amount an employee must pay to acquire the stock.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-22</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">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.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=307.9></TD><TD width=12.5></TD><TD width=5></TD><TD width=32.5></TD><TD width=12.5></TD><TD width=5></TD><TD width=32.5></TD><TD width=12.55></TD><TD width=5></TD><TD width=39.2></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=410.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=192.333 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Years Ending December 31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=50 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=50 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2003</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net Income (Loss):</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">As reported</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>485,192</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>350,829</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>(524,140</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=410.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">DEDUCT: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>(4,554</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD style="border-bottom:3pt double #000000" valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><I>Pro forma</I> net income (loss)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>480,638</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>350,829</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=52.267><P style="margin:0pt" align=right>(524,140</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=410.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Earnings per share:</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic &#150; as reported</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>.07</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>(11</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic &#150; <I>pro forma</I></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>.07</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>(.11</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Diluted &#150; as reported</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>.07</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>(.11</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=410.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Diluted &#150; <I>pro forma</I></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>.07</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>(.11</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(n) Stock-based Compensation</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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%, risk-free rate of 4.2, no dividend yield and expected life of 3 years.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(o) Use of Estimates</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(p) Reclassifications</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Certain reclassifications were made to the prior years&#146; consolidated financial statements to conform to the current year presentation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:31.05pt; text-indent:-13.05pt"><I>(q) New Accounting Pronouncements<BR>
FAS 123(R), Share-Based Payment</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity&#146;s equity instruments or that may be settled by the issuance of those equity instruments. Management is in the process of assessing the impact to the Company, however, it does not expect the impact, if any, to be material to the financial statements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-23</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>(r) FAS 153, Exchange of Nonmonetary Assets</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. Management is in the process of assessing the impact to the Company, however, it does not expect the impact, if any, to be material to the financial statements.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>2. Concentration of Credit Risk</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company maintains cash balances in financial institutions in excess of federally insured limits.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>3. Inventories</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">A summary of inventories at December 31, is as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=301.1></TD><TD width=12.5></TD><TD width=5></TD><TD width=40></TD><TD width=12.5></TD><TD width=5></TD><TD width=40></TD></TR>
<TR><TD valign=bottom width=401.467>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=401.467>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Jewelry&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>6,730,931</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>6,121,955</P>
</TD></TR>
<TR><TD valign=bottom width=401.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Scrap gold</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>353,288</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>305,801</P>
</TD></TR>
<TR><TD valign=bottom width=401.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Bullion</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>209,167</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>117,973</P>
</TD></TR>
<TR><TD valign=bottom width=401.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Rare coins</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>202,872</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>158,000</P>
</TD></TR>
<TR><TD valign=bottom width=401.467><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Other</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>73,862</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>87,654</P>
</TD></TR>
<TR><TD valign=bottom width=401.467>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>7,570,120</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>6,791,383</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>4. Investments in Marketable Equity Securities</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Marketable equity securities have been classified in the consolidated balance sheet according to management&#146;s intent. The carrying amount of available-for-sale securities and their fair values at December 31, 2005 and 2004 are as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=188.15></TD><TD width=14.3></TD><TD width=5.45></TD><TD width=46.8></TD><TD width=14.3></TD><TD width=7></TD><TD width=64.6></TD><TD width=18.25></TD><TD width=6.45></TD><TD width=46.9></TD><TD width=18.25></TD><TD width=5.45></TD><TD width=32.1></TD></TR>
<TR><TD valign=bottom width=250.867>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=69.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Cost</B></P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=190.933 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Gross<BR>
Unrealized<BR>
Losses</B></P>
</TD><TD valign=bottom width=24.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Fair Value</B></P>
</TD></TR>
<TR><TD valign=bottom width=250.867>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=69.667 colspan=2>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=95.467 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Classified as<BR>
Operating Losses</B></P>
<P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Due to Long-Term<BR>
Impairment</B></P>
</TD><TD valign=bottom width=24.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Classified as<BR>
Unrealized<BR>
Losses in Other<BR>
Comprehensive<BR>
Income</B></P>
</TD><TD valign=bottom width=24.333>&nbsp;</TD><TD valign=bottom width=50.067 colspan=2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=250.867>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=62.4>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=9.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=86.133>&nbsp;</TD><TD valign=bottom width=24.333>&nbsp;</TD><TD valign=bottom width=8.6>&nbsp;</TD><TD valign=bottom width=62.533>&nbsp;</TD><TD valign=bottom width=24.333>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=250.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Equity securities 2005&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=19.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=62.4><P style="margin:0pt" align=right>1,864,441</P>
</TD><TD valign=bottom width=19.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=86.133><P style="margin:0pt" align=right>(1,634,845</P>
</TD><TD valign=bottom width=24.333><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.6><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=62.533><P style="margin:0pt" align=right>(164,152</P>
</TD><TD valign=bottom width=24.333><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=42.8><P style="margin:0pt" align=right>65,444</P>
</TD></TR>
<TR><TD valign=bottom width=250.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Equity securities 2004</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=62.4><P style="margin:0pt" align=right>1,864,441</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=86.133><P style="margin:0pt" align=right>(1,634,845</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=24.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.6><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=62.533><P style="margin:0pt" align=right>(152,534</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=24.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=42.8><P style="margin:0pt" align=right>77,062</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt">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. At December 31, 2004, management believes the equity shares owned in the publicly traded stocks have declined on a temporary basis as these stocks are thinly traded which results in volatile price flections that temporarily changes the fair value of the stocks.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During 2004, the Company deemed certain marketable securities worthless and recognized $15,600 as a realized loss. No realized losses were needed during 2005.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-24</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>5. Property and Equipment</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">A summary of property and equipment at December 31, 2005 and 2004, is as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=323.75></TD><TD width=14.4></TD><TD width=5.8></TD><TD width=50></TD><TD width=14.4></TD><TD width=5.8></TD><TD width=50></TD><TD width=3.85></TD></TR>
<TR><TD valign=bottom width=431.667>&nbsp;</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667>&nbsp;</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667>&nbsp;</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667>&nbsp;</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Buildings and improvements&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=19.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=66.667><P style="margin:0pt" align=right>951,416</P>
</TD><TD valign=bottom width=19.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=66.667><P style="margin:0pt" align=right>732,488</P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Machinery and equipment</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667><P style="margin:0pt" align=right>848,420</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667><P style="margin:0pt" align=right>727,942</P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Furniture and fixtures</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667><P style="margin:0pt" align=right>272,137</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667><P style="margin:0pt" align=right>226,318</P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667>&nbsp;</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667><P style="margin:0pt" align=right>2,072,973</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667><P style="margin:0pt" align=right>1,686,748</P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less accumulated depreciation and</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667>&nbsp;</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667>&nbsp;</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Amortization</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667><P style="margin:0pt" align=right>(1,502,611</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=19.2><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667><P style="margin:0pt" align=right>(1,352,747</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=5.133><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=431.667>&nbsp;</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667><P style="margin:0pt" align=right>570,362</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD valign=bottom width=7.733>&nbsp;</TD><TD valign=bottom width=66.667><P style="margin:0pt" align=right>334,001</P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Land</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667><P style="margin:0pt" align=right>551,300</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667><P style="margin:0pt" align=right>551,300</P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=431.667>&nbsp;</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=66.667><P style="margin:0pt" align=right>1,121,662 &nbsp;</P>
</TD><TD valign=bottom width=19.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=66.667><P style="margin:0pt" align=right>885,301</P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Property and equipment acquired under capital leases was $295,942 and $202,450, respectively, as of<BR>
December 31, 2005 and 2004. Accumulated depreciation for these assets was $120,401 and $188,385 as of December 31, 2005 and 2004, respectively.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>6. Goodwill</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">At December 31, goodwill was reflected for the following reporting units:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=155.55></TD><TD width=12.5></TD><TD width=5></TD><TD width=32.5></TD><TD width=12.5></TD><TD width=5></TD><TD width=32.5></TD></TR>
<TR><TD valign=bottom width=207.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=207.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=207.4><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Wholesale watch sales&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>831,117</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>837,117</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">No impairment losses were recognized during 2005, 2004 or 2003 and no goodwill was acquired during 2005, 2004, or 2003.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During 2004 the Company sold the goodwill ($314,003) and trade name of Silverman Consultants, Inc. The sales of this goodwill resulted in a gain on the disposal of this reporting unit in the amount of $39,098. This gain is included in the caption (&#147;Other Income&#148;) in the consolidated statements of operations for the year ended<BR>
December 31, 2004.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>7. Notes Payable</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">At December 31, 2005, the Company was obligated to various individuals under unsecured, demand notes bearing annual interest rates of 8% to 12% totaling $594,183.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">At December 31, 2004, the Company was obligated to various individuals under unsecured, demand notes bearing annual interest rates of 8% to 14% totaling $548,093.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">At December 31, 2003, 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. At December 31, 2003, one of the notes in the amount of $16,301 was payable to a relative of an officer of the Company. During 2004, the principal amount of this note was paid in full.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-25</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>7. Notes Payable &#150; (continued)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=348.2></TD><TD width=12.5></TD><TD width=5></TD><TD width=40></TD><TD width=12.5></TD><TD width=5></TD><TD width=41.45></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=464.267>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=61.933 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=55.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">A summary of long-term debt and short-term debt expected to be refinanced at December 31, follows:</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=55.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revolving promissory notes payable to bank, a note of $1,744,500 and $1,600,000 at December 31, 2005 and 2004, respectively, which bears interest at prime plus 1-1/2% (6.75% and 6.75% at December 31, 2005 and 2004, respectively, and is due December 22, 2007 and a note of $1,000,000 and 408,333, respectively, which bears interest at prime plus 1-3/4% (7.0% and 7.0% at December 31, 2005 and 2004), respectively, is due in equal monthly installments of $16,667 through December 2010. The defined borrowing base requirement is based on eligible trade receivables and inventory. As of December 31, 2005, available but unused borrowing capacity on the revolver was $755,500. These notes are secured by all accounts receivable, inventory, property and equipment and intangible assets. The notes contain certain covenants, restricting payment of dividends, and requiring the
Company to maintain certain financial ratios.</P>
</TD><TD valign=bottom width=16.667><P style="margin-top:3.35pt; margin-bottom:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>2,744,500</P>
</TD><TD valign=bottom width=16.667><P style="margin-top:3.35pt; margin-bottom:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=55.267><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>2,008,333</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267><P style="line-height:10.3pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:5.75pt; text-indent:-5.75pt">Mortgage payable, due in monthly installments of $5,977, including interest based on 30 year U.S. Treasury note rate plus 2-1/2% (7.64% and 7.41% at December 31, 2005 and 2004);respectively, balance due in January 2014</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>427,756</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=55.267><P style="margin:0pt" align=right>465,724</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267><P style="line-height:10.3pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:5.75pt; text-indent:-5.75pt">Note payable, due March 2, 2005. Interest is payable quarterly at a rate of 8%</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=55.267><P style="margin:0pt" align=right>18,298</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267><P style="line-height:10.3pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:5.75pt; text-indent:-5.75pt">Note payable, due January 2, 2008. Interest is payable monthly at a rate of 8%</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>310,555</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=55.267><P style="margin:0pt" align=right>310,516</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Capital lease obligations</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>91,227</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.267><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>22,539</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>3,574,038</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=55.267><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>2,825,450</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464.267><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less current maturities</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(259,152</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.667><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.267><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(76,172</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=464.267>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>3,314,886</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.267><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>2,749,278</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following table summarizes the aggregate maturities of long-term debt and payments on the capital lease obligations and reflects the revised maturities from refinancing of certain long-term debt subsequent to year-end:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=271.15></TD><TD width=12.5></TD><TD width=5></TD><TD width=40></TD><TD width=12.5></TD><TD width=8.85></TD><TD width=57.15></TD><TD width=12.5></TD><TD width=5></TD><TD width=40></TD><TD width=3.35></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=361.533><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>December 31,</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Long-Term<BR>
Debt</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=88 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Obligations<BR>
Under Capital Leases</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Totals</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=11.8>&nbsp;</TD><TD valign=bottom width=76.2>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>240,844</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=11.8><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=76.2><P style="margin:0pt" align=right>26,484</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>267,328</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2007</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>2,588,436</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=11.8>&nbsp;</TD><TD valign=bottom width=76.2><P style="margin:0pt" align=right>23,837</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>2,612,273</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2008</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>357,817</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=11.8>&nbsp;</TD><TD valign=bottom width=76.2><P style="margin:0pt" align=right>23,837</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>381,654</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2009</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>50,840</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=11.8>&nbsp;</TD><TD valign=bottom width=76.2><P style="margin:0pt" align=right>23,837</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>74,677</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2010</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>54,689</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=11.8>&nbsp;</TD><TD valign=bottom width=76.2><P style="margin:0pt" align=right>15,891</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>70,580</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Thereafter&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>190,185</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=76.2><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>190,185</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>3,482,811</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=11.8>&nbsp;</TD><TD valign=bottom width=76.2><P style="margin:0pt" align=right>113,886</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>3,596,697</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=11.8>&nbsp;</TD><TD valign=bottom width=76.2>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Amount representing interest rates at approximately 10%</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=76.2><P style="margin:0pt" align=right>(22,659</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>(22,659</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=361.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less current portion</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>(240,844</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=76.2><P style="margin:0pt" align=right>(18,308</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>(259,152</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=361.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>3,241,967</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11.8><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=76.2><P style="margin:0pt" align=right>72,919</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>3,314,886</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>8. [None]</B></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-26</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>9. Earnings Per Common Share</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">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, 2005, 2004 and 2003 is as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=301.4></TD><TD width=13.85></TD><TD width=5.5></TD><TD width=35.95></TD><TD width=13.85></TD><TD width=44.25></TD><TD width=13.85></TD><TD width=10.95></TD><TD width=27.4></TD><TD width=1></TD></TR>
<TR><TD valign=bottom width=401.867>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=202.333 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December 31, 2005</B></P>
</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.867>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=55.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Income</B></P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=59><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Per-Share<BR>
Amount</B></P>
</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.867>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=7.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=47.933>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=36.533>&nbsp;</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Basic earnings per common share&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=7.333>&nbsp;</TD><TD valign=bottom width=47.933>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=36.533>&nbsp;</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.867><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Income from operations allocable to common shareholders</P>
</TD><TD valign=bottom width=18.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=47.933><P style="margin:0pt" align=right>485,192</P>
</TD><TD valign=bottom width=18.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=59><P style="margin:0pt" align=right>4,913,920</P>
</TD><TD valign=bottom width=18.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.533><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Effect of dilutive securities</P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=7.333>&nbsp;</TD><TD valign=bottom width=47.933>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=36.533>&nbsp;</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.867><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Stock options</P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=47.933><P style="margin:0pt" align=right>(4,554</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=18.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59><P style="margin:0pt" align=right>123,783</P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=14.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Diluted earnings per common share</P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=7.333>&nbsp;</TD><TD valign=bottom width=47.933>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=59>&nbsp;</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=36.533>&nbsp;</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=401.867><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Income from operations available to common shareholders<BR>
plus assumed conversions</P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=47.933><P style="margin:0pt" align=right>480,638</P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=59><P style="margin:0pt" align=right>5,037,073</P>
</TD><TD valign=bottom width=18.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=14.6><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.533><P style="margin:0pt" align=right>.10</P>
</TD><TD valign=top width=1.333>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=290.75></TD><TD width=14.7></TD><TD width=5.9></TD><TD width=38.2></TD><TD width=14.9></TD><TD width=47></TD><TD width=14.7></TD><TD width=11.6></TD><TD width=29.2></TD><TD width=1.05></TD></TR>
<TR><TD valign=bottom width=387.667>&nbsp;</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=215.333 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December 31, 2004</B></P>
</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=387.667>&nbsp;</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD valign=bottom width=58.8 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Income</B></P>
</TD><TD valign=bottom width=19.867>&nbsp;</TD><TD valign=bottom width=62.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Per-Share<BR>
Amount</B></P>
</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=387.667>&nbsp;</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=7.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=50.933>&nbsp;</TD><TD valign=bottom width=19.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=62.667>&nbsp;</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD valign=bottom width=15.467>&nbsp;</TD><TD valign=bottom width=38.933>&nbsp;</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=387.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Basic earnings per common share</P>
</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD valign=bottom width=7.867>&nbsp;</TD><TD valign=bottom width=50.933>&nbsp;</TD><TD valign=bottom width=19.867>&nbsp;</TD><TD valign=bottom width=62.667>&nbsp;</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD valign=bottom width=15.467>&nbsp;</TD><TD valign=bottom width=38.933>&nbsp;</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=387.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Income from operations allocable to common shareholders</P>
</TD><TD valign=bottom width=19.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.933><P style="margin:0pt" align=right>350,829</P>
</TD><TD valign=bottom width=19.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=62.667><P style="margin:0pt" align=right>4,913,920</P>
</TD><TD valign=bottom width=19.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=38.933><P style="margin:0pt" align=right>.07</P>
</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=387.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Effect of dilutive securities</P>
</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD valign=bottom width=7.867>&nbsp;</TD><TD valign=bottom width=50.933>&nbsp;</TD><TD valign=bottom width=19.867>&nbsp;</TD><TD valign=bottom width=62.667>&nbsp;</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD valign=bottom width=15.467>&nbsp;</TD><TD valign=bottom width=38.933>&nbsp;</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=387.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Stock options</P>
</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=19.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.667><P style="margin:0pt" align=right>221,537</P>
</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=15.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=38.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=387.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Diluted earnings per common share</P>
</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD valign=bottom width=7.867>&nbsp;</TD><TD valign=bottom width=50.933>&nbsp;</TD><TD valign=bottom width=19.867>&nbsp;</TD><TD valign=bottom width=62.667>&nbsp;</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD valign=bottom width=15.467>&nbsp;</TD><TD valign=bottom width=38.933>&nbsp;</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=387.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Income from operations available to common shareholders<BR>
plus assumed conversions</P>
</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.933><P style="margin:0pt" align=right>350,829</P>
</TD><TD valign=bottom width=19.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=62.667><P style="margin:0pt" align=right>5,135,457</P>
</TD><TD valign=bottom width=19.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=15.467><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=38.933><P style="margin:0pt" align=right>.07</P>
</TD><TD valign=bottom width=1.4>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=282.6></TD><TD width=14.3></TD><TD width=5.7></TD><TD width=40.9></TD><TD width=20.95></TD><TD width=45.7></TD><TD width=14.3></TD><TD width=9.55></TD><TD width=30.15></TD><TD width=3.85></TD></TR>
<TR><TD valign=bottom width=376.8>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=228.133 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December 31, 2003</B></P>
</TD></TR>
<TR><TD valign=bottom width=376.8>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=62.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Income</B></P>
</TD><TD valign=bottom width=27.933>&nbsp;</TD><TD valign=bottom width=60.933><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.933 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Per-Share<BR>
Amount</B></P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=376.8>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=7.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=54.533>&nbsp;</TD><TD valign=bottom width=27.933>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=60.933>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=12.733>&nbsp;</TD><TD valign=bottom width=40.2>&nbsp;</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=376.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Basic earnings per common share</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=7.6>&nbsp;</TD><TD valign=bottom width=54.533>&nbsp;</TD><TD valign=bottom width=27.933>&nbsp;</TD><TD valign=bottom width=60.933>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=12.733>&nbsp;</TD><TD valign=bottom width=40.2>&nbsp;</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=376.8><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Income from operations allocable to common shareholders</P>
</TD><TD valign=bottom width=19.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=54.533><P style="margin:0pt" align=right>(524,140</P>
</TD><TD valign=bottom width=27.933><P style="margin:0pt">) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=60.933><P style="margin:0pt" align=right>4,913,920</P>
</TD><TD valign=bottom width=19.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=12.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=40.2><P style="margin:0pt" align=right>(.11</P>
</TD><TD valign=bottom width=5.133><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=376.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Effect of dilutive securities</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=7.6>&nbsp;</TD><TD valign=bottom width=54.533>&nbsp;</TD><TD valign=bottom width=27.933>&nbsp;</TD><TD valign=bottom width=60.933>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=12.733>&nbsp;</TD><TD valign=bottom width=40.2>&nbsp;</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=376.8><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Stock options</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=27.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=12.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=40.2><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=376.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Diluted earnings per common share</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=7.6>&nbsp;</TD><TD valign=bottom width=54.533>&nbsp;</TD><TD valign=bottom width=27.933>&nbsp;</TD><TD valign=bottom width=60.933>&nbsp;</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD valign=bottom width=12.733>&nbsp;</TD><TD valign=bottom width=40.2>&nbsp;</TD><TD valign=bottom width=5.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=376.8><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Income from operations available to common shareholders<BR>
plus assumed conversions</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.6><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=54.533><P style="margin:0pt" align=right>(524,140</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=27.933><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60.933><P style="margin:0pt" align=right>4,913,920</P>
</TD><TD valign=bottom width=19.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=12.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=40.2><P style="margin:0pt" align=right>(.11</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=5.133><P style="margin:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Stock Options</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company has granted stock options to key employees to purchase shares of the Company&#146;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&#146;s common stock at the date of grant, and is payable when the option is exercised.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-27</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Stock Options &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following table summarizes the activity in common shares subject to options for the years ended<BR>
 December 31, 2005, 2004 and 2003:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=212></TD><TD width=14.05></TD><TD width=45></TD><TD width=14.05></TD><TD width=12.15></TD><TD width=42.8></TD><TD width=14.05></TD><TD width=45></TD><TD width=14.05></TD><TD width=12.15></TD><TD width=42.7></TD></TR>
<TR><TD valign=bottom width=282.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=170.733 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December 31, 2004 and 2003</B></P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=151.867 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December 31, 2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=282.667>&nbsp;</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Options</B></P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=73.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise Price</B></P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Options</B></P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=73.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise Price</B></P>
</TD></TR>
<TR><TD valign=bottom width=282.667>&nbsp;</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=16.2>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=57.067>&nbsp;</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=16.2>&nbsp;</TD><TD valign=bottom width=56.933>&nbsp;</TD></TR>
<TR><TD valign=bottom width=282.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Outstanding at beginning of year</P>
</TD><TD valign=bottom width=18.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,420,634</P>
</TD><TD valign=bottom width=18.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.067><P style="margin:0pt" align=right>2.09</P>
</TD><TD valign=bottom width=18.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,420,634</P>
</TD><TD valign=bottom width=18.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=56.933><P style="margin:0pt" align=right>2.09</P>
</TD></TR>
<TR><TD valign=bottom width=282.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Granted</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=16.2>&nbsp;</TD><TD valign=bottom width=57.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>15,000</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=16.2>&nbsp;</TD><TD valign=bottom width=56.933><P style="margin:0pt" align=right>2.82</P>
</TD></TR>
<TR><TD valign=bottom width=282.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Forfeited</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=16.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=16.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.933><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=282.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Outstanding at end of year</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>1,420,634</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=16.2><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.067><P style="margin:0pt" align=right>2.09</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>1,435,634</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=16.2><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.933><P style="margin:0pt" align=right>2.10</P>
</TD></TR>
<TR><TD valign=bottom width=282.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exercisable at end of year</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>1,420,634</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=16.2><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.067><P style="margin:0pt" align=right>2.09</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>1,435,634</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=16.2><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.933><P style="margin:0pt" align=right>2.10</P>
</TD></TR>
<TR><TD valign=bottom width=282.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Weighted average fair value of options granted<BR>
during year</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=16.2>&nbsp;</TD><TD valign=bottom width=57.067>&nbsp;</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=16.2><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.933><P style="margin:0pt" align=right>1.38</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Stock options outstanding at December 31, 2005:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=78.45></TD><TD width=16.95></TD><TD width=54.3></TD><TD width=16.95></TD><TD width=64.2></TD><TD width=16.95></TD><TD width=66></TD><TD width=16.95></TD><TD width=54.3></TD><TD width=16.95></TD><TD width=66></TD></TR>
<TR><TD valign=bottom width=104.6>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=180.6 colspan=3><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Options Outstanding</B></P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=183 colspan=3><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Options Exercisable</B></P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88>&nbsp;</TD></TR>
<TR><TD valign=bottom width=104.6><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Range of<BR>
Exercise<BR>
Price</B></P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=72.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Options</B></P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=85.6><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Expected Life</B></P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise Price</B></P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=72.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Options</B></P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=88><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise Price</B></P>
</TD></TR>
<TR><TD style="border-top:0.5pt solid #000000" valign=bottom width=104.6>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=72.4>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=85.6>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=88>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=72.4>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88>&nbsp;</TD></TR>
<TR><TD valign=bottom width=104.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">$1.12</P>
</TD><TD valign=top width=22.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=72.4><P style="margin:0pt" align=right>267,857</P>
</TD><TD valign=top width=22.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=85.6><P style="margin:0pt" align=center>7 Years</P>
</TD><TD valign=top width=22.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=88><P style="margin:0pt" align=right>$1.12</P>
</TD><TD valign=top width=22.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=72.4><P style="margin:0pt" align=right>267,857</P>
</TD><TD valign=top width=22.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=88><P style="margin:0pt" align=right>$1.12</P>
</TD></TR>
<TR><TD valign=bottom width=104.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">$1.63 to $2.25</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=72.4><P style="margin:0pt" align=right>1,127,777</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=85.6><P style="margin:0pt" align=center>7 Years</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88><P style="margin:0pt" align=right>$2.21</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=72.4><P style="margin:0pt" align=right>1,127,777</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88><P style="margin:0pt" align=right>$2.21</P>
</TD></TR>
<TR><TD valign=bottom width=104.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">$3.63 to $4.19</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=72.4><P style="margin:0pt" align=right>20,000</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=85.6><P style="margin:0pt" align=center>7 Years</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88><P style="margin:0pt" align=right>$3.81</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=72.4><P style="margin:0pt" align=right>20,000</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88><P style="margin:0pt" align=right>$3.83</P>
</TD></TR>
<TR><TD valign=bottom width=104.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">$4.88</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=72.4><P style="margin:0pt" align=right>35,000</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=85.6><P style="margin:0pt" align=center>4 Years</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88><P style="margin:0pt" align=right>$4.88</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=72.4><P style="margin:0pt" align=right>35,000</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88><P style="margin:0pt" align=right>$4.88</P>
</TD></TR>
<TR><TD valign=bottom width=104.6>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=72.4><P style="margin:0pt" align=right>1,435,634</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=85.6>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=72.4><P style="margin:0pt" align=right>1,420,634</P>
</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=bottom width=88>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-28</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>11. Comprehensive Income</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Comprehensive income at December 31, 2005, 2004 and 2003 is as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=276.6></TD><TD width=13.1></TD><TD width=6.25></TD><TD width=45.4></TD><TD width=16.55></TD><TD width=5.25></TD><TD width=37.55></TD><TD width=13.1></TD><TD width=5.25></TD><TD width=45.4></TD><TD width=3.55></TD></TR>
<TR><TD valign=bottom width=368.8>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=68.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Before-Tax<BR>
Amount</B></P>
</TD><TD valign=bottom width=22.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Tax<BR>
Benefit</B></P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Net-of-Tax<BR>
Amount</B></P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=368.8>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=60.533>&nbsp;</TD><TD valign=bottom width=22.067>&nbsp;</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=50.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=60.533>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=368.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accumulated comprehensive income (loss) at January 1, 2003</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60.533><P style="margin:0pt" align=right>(1,728,130</P>
</TD><TD valign=bottom width=22.067><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.067><P style="margin:0pt" align=right>593,180</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60.533><P style="margin:0pt" align=right>(1,134,950</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=368.8><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized holding gains arising during 2003</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>93,285</P>
</TD><TD valign=bottom width=22.067>&nbsp;</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=50.067><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(32,872</P>
</TD><TD valign=bottom width=17.467><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>60,413</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=368.8><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Reclassification to statement of operations</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>1,634,845</P>
</TD><TD valign=bottom width=22.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.067><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(560,308</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.467><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>1,074,537</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=368.8><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accumulated comprehensive income (loss) at December 31, 2003</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=22.067>&nbsp;</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=50.067><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=368.8><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized holding losses arising during 2004</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(150,784</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=22.067><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.067><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>28,202</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(122,582</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=368.8><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accumulated comprehensive income (loss) at December 31, 2004</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=8.333><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(150,784</P>
</TD><TD valign=bottom width=22.067><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD valign=bottom width=7><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=50.067><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>28,202</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(122,582</P>
</TD><TD valign=bottom width=4.733><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=368.8><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized holding losses arising during 2005</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(11,287</P>
</TD><TD valign=bottom width=22.067><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.067><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>6,617</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(4,670</P>
</TD><TD valign=bottom width=4.733><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=368.8><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accumulated comprehensive income (loss) at December 31, 2005</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=8.333><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(162,071</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=22.067><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.067><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>34,819</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7><P style="margin-top:3.35pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60.533><P style="margin-top:3.35pt; margin-bottom:0pt" align=right>(127,252</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.733><P style="margin-top:3.35pt; margin-bottom:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>12. Income Taxes</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The income tax provision reconciled to the tax computed at the statutory Federal rate follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=248.5></TD><TD width=17.3></TD><TD width=6.95></TD><TD width=45></TD><TD width=17.3></TD><TD width=6.95></TD><TD width=47.35></TD><TD width=17.3></TD><TD width=6.95></TD><TD width=49.7></TD><TD width=4.7></TD></TR>
<TR><TD valign=bottom width=331.333>&nbsp;</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=72.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2003</B></P>
</TD><TD valign=bottom width=6.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=331.333>&nbsp;</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=63.133>&nbsp;</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=66.267>&nbsp;</TD><TD valign=bottom width=6.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=331.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Tax (benefit) expense at statutory rate</P>
</TD><TD valign=bottom width=23.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>256,609</P>
</TD><TD valign=bottom width=23.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=63.133><P style="margin:0pt" align=right>162,502</P>
</TD><TD valign=bottom width=23.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=66.267><P style="margin:0pt" align=right>(294,124</P>
</TD><TD valign=bottom width=6.267><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=331.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>12,933</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=63.133><P style="margin:0pt" align=right>24,616</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=66.267><P style="margin:0pt" align=right>16,484</P>
</TD><TD valign=bottom width=6.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=331.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Benefit (expense) of discontinued operations</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=63.133><P style="margin:0pt" align=right>100,679</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=66.267><P style="margin:0pt" align=right>33,279</P>
</TD><TD valign=bottom width=6.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=331.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Change in valuation &nbsp;allowance</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=63.133><P style="margin:0pt" align=right>(60,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=23.067><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.267><P style="margin:0pt" align=right>(90,000</P>
</TD><TD valign=bottom width=6.267><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=331.333><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Tax expense (benefit)</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>269,542</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=63.133><P style="margin:0pt" align=right>227,797</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=66.267><P style="margin:0pt" align=right>(334,361</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=6.267><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=331.333><P style="line-height:10.3pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:5.75pt; text-indent:-5.75pt">Current</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>247,710</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=63.133><P style="margin:0pt" align=right>238,332</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=66.267><P style="margin:0pt" align=right>62,191</P>
</TD><TD valign=bottom width=6.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=331.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>21,832</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=63.133><P style="margin:0pt" align=right>(10,535</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=23.067><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.267><P style="margin:0pt" align=right>(396,552</P>
</TD><TD valign=bottom width=6.267><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=331.333>&nbsp;</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>269,542</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=63.133><P style="margin:0pt" align=right>227,797</P>
</TD><TD valign=bottom width=23.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=66.267><P style="margin:0pt" align=right>(334,361</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=6.267><P style="margin:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Deferred income taxes are comprised of the following at December 31, 2005 and 2004:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=359.85></TD><TD width=13.5></TD><TD width=5.45></TD><TD width=33.3></TD><TD width=13.5></TD><TD width=5.45></TD><TD width=33.3></TD><TD width=3.65></TD></TR>
<TR><TD valign=bottom width=479.8>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=51.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=479.8>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=44.4>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=479.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred tax assets (liabilities)</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4>&nbsp;</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=479.8><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inventory</P>
</TD><TD valign=bottom width=18><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=44.4><P style="margin:0pt" align=right>30,657</P>
</TD><TD valign=bottom width=18><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=44.4><P style="margin:0pt" align=right>25,903</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=479.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized loss on available for sale securities&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4><P style="margin:0pt" align=right>34,819</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4><P style="margin:0pt" align=right>28,202</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=479.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Property and equipment</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4><P style="margin:0pt" align=right>4,607</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4><P style="margin:0pt" align=right>10,952</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=479.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Capital loss carryover</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4><P style="margin:0pt" align=right>9,142</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=44.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=479.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Goodwill</P>
</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.4><P style="margin:0pt" align=right>(78,446</P>
</TD><TD valign=bottom width=18><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.4><P style="margin:0pt" align=right>(49,064</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=479.8>&nbsp;</TD><TD valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=44.4><P style="margin:0pt" align=right>779</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=18>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=44.4><P style="margin:0pt" align=right>15,994</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
</TABLE>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Based upon a review of the remaining temporary differences in marketable securities between book and tax basis amounts at December 31, 2003, the Company determined the deferred tax asset related to marketable securities was limited to approximately $28,000. In 2003, management of the Company determined that the loss on marketable securities was other than temporary and eliminated the balance related to marketable securities in accumulated other comprehensive income. The resulting adjustment eliminated the remaining deferred tax balances in other comprehensive income. In addition, the Company recognized a deferred tax benefit in 2003 of $351,000 related to the reversal of a valuation allowance established primarily for marketable securities due to a change in management&#146;s estimate of the required remaining valuation reserve as of December 31, 2003.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-29</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>13. Operating Leases</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The Company leases certain of its facilities under operating leases. The minimum rental commitments under noncancellable operating leases are as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=171.65></TD><TD width=12.5></TD><TD width=8.2></TD><TD width=52.95></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=228.867><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Year Ending December 31,</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=81.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Lease Obligations</B></P>
</TD></TR>
<TR><TD valign=bottom width=228.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=10.933>&nbsp;</TD><TD valign=bottom width=70.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=228.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2006</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.933><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=70.6><P style="margin:0pt" align=right>162,847</P>
</TD></TR>
<TR><TD valign=bottom width=228.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2007</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=10.933>&nbsp;</TD><TD valign=bottom width=70.6><P style="margin:0pt" align=right>137,418</P>
</TD></TR>
<TR><TD valign=bottom width=228.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2008</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=10.933>&nbsp;</TD><TD valign=bottom width=70.6><P style="margin:0pt" align=right>100,994</P>
</TD></TR>
<TR><TD valign=bottom width=228.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2009</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=10.933>&nbsp;</TD><TD valign=bottom width=70.6><P style="margin:0pt" align=right>54,899</P>
</TD></TR>
<TR><TD valign=bottom width=228.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Thereafter&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=70.6><P style="margin:0pt" align=right>18,300</P>
</TD></TR>
<TR><TD valign=bottom width=228.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.933><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=70.6><P style="margin:0pt" align=right>474,458</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Rent expense for the years ended December 31, 2005, 2004 and 2003 was approximately $174,988, $198,050 and $223,046, respectively was decreased by sublease income of approximately $45,300, $75,300 and $104,000, respectively.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>14. Discontinued Operations</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">During 2004, the Company sold the operations of Silverman Consultants, Inc. and, 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, 2004 and 2003, there were no operating assets to be disposed of or liabilities to be paid in completing the disposition of these operations.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-30</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC. AND SUBSIDIARIES</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
December 31, 2005, 2004 and 2003</B></P>
<P style="margin:0pt"><B>15. Segment Information</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Management identifies reportable segments by product or service offered. Each segment is managed separately. Corporate and other includes certain general and administrative expenses not allocated to segments, pay day lending and pawn operations. The Company&#146;s operations by segment were as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=109.25></TD><TD width=12.5></TD><TD width=5></TD><TD width=27.5></TD><TD width=12.5></TD><TD width=6.35></TD><TD width=28.8></TD><TD width=12.5></TD><TD width=5></TD><TD width=27.5></TD><TD width=12.5></TD><TD width=5></TD><TD width=22.5></TD><TD width=12.5></TD><TD width=44.9></TD><TD width=12.5></TD><TD width=10.85></TD><TD width=39.6></TD><TD width=12.5></TD><TD width=6.9></TD><TD width=38></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=145.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Retail<BR>
Jewelry</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Wholesale<BR>
Jewelry</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Bullion</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Rare<BR>
Coins</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.867><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Discontinued<BR>
Operations</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Corporate&nbsp;and<BR>
Other</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Consolidated</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=457.2 colspan=19><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(amounts in thousands)</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenues</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>14,917</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>4,781</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>10,688</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>4,575</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>679</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>35,640</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2004</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>14,601</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>4,451</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>7,482</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>1,574</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>534</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>28,642</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2003</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>13,179</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>4,218</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>6,648</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>1,014</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>367</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>25,426</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>195</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>250</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>79</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>267</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>(306</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>485</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2004</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>267</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>266</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>63</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>92</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>(249</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>(88</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>351</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2003</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>162</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>200</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>46</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>34</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>(117</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>(849</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>(524</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=145.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Identifiable Assets</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>9,015</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>1,733</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>209</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>203</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>670</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>11,830</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2004</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>7,519</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>1,679</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>117</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>158</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>802</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>10,282</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2003</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>7,988</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>1,737</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>129</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>100</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>588</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>530</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>11,072</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Capital Expenditures</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>202</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>83</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>285</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2004</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>85</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>92</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2003</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>33</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>34</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Depreciation and Amortization</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2005</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>107</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>10</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>25</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>142</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2004</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>92</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>22</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>25</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>148</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=145.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2003</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>130</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.4><P style="margin:0pt" align=right>22</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=36.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=59.867><P style="margin:0pt" align=right>27</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.2>&nbsp;</TD><TD valign=bottom width=50.667><P style="margin:0pt" align=right>187</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>16. Quarterly Results of Operations (Unaudited) Amounts in Thousands Except Per Share Data.</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=209.3></TD><TD width=15.55></TD><TD width=34.05></TD><TD width=15.55></TD><TD width=43.5></TD><TD width=15.55></TD><TD width=31.45></TD><TD width=15.55></TD><TD width=28.55></TD><TD width=19.55></TD><TD width=39.4></TD></TR>
<TR><TD valign=bottom width=279.067 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Year Ended December 31,</B></P>
</TD><TD valign=bottom width=20.733 rowspan=2>&nbsp;</TD><TD valign=bottom width=45.4 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Sales</B></P>
</TD><TD valign=bottom width=20.733 rowspan=2>&nbsp;</TD><TD valign=bottom width=58 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Operating<BR>
Income</B></P>
</TD><TD valign=bottom width=20.733 rowspan=2>&nbsp;</TD><TD valign=bottom width=41.933 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Net<BR>
Income<BR>
(Loss)</B></P>
</TD><TD valign=bottom width=20.733 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=116.667 colspan=3><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Income (Loss)<BR>
Per Common Shares</B></P>
</TD></TR>
<TR><TD valign=bottom width=38.067><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Basic</B></P>
</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.533><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Diluted</B></P>
</TD></TR>
<TR><TD style="border-top:0.5pt solid #000000" valign=bottom width=279.067>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=45.4>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=58>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=41.933>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=38.067>&nbsp;</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533>&nbsp;</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2005:</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=38.067>&nbsp;</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533>&nbsp;</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">First Quarter&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=20.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=45.4><P style="margin:0pt" align=right>6,718</P>
</TD><TD valign=bottom width=20.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=58><P style="margin:0pt" align=right>299</P>
</TD><TD valign=bottom width=20.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=41.933><P style="margin:0pt" align=right>151</P>
</TD><TD valign=bottom width=20.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=38.067><P style="margin:0pt" align=right>.03</P>
</TD><TD valign=bottom width=26.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=52.533><P style="margin:0pt" align=right>.03</P>
</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Second Quarter</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4><P style="margin:0pt" align=right>6,800</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58><P style="margin:0pt" align=right>192</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933><P style="margin:0pt" align=right>79</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=38.067><P style="margin:0pt" align=right>.02</P>
</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533><P style="margin:0pt" align=right>.02</P>
</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Third Quarter</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4><P style="margin:0pt" align=right>7,215</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58><P style="margin:0pt" align=right>206</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933><P style="margin:0pt" align=right>92</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=38.067><P style="margin:0pt" align=right>.02</P>
</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533><P style="margin:0pt" align=right>.02</P>
</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Fourth Quarter</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4><P style="margin:0pt" align=right>14,906</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58><P style="margin:0pt" align=right>330</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933><P style="margin:0pt" align=right>164</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=38.067><P style="margin:0pt" align=right>.03</P>
</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533><P style="margin:0pt" align=right>.03</P>
</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2004:</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933>&nbsp;</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=38.067>&nbsp;</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533>&nbsp;</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">First Quarter</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4><P style="margin:0pt" align=right>6,799</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58><P style="margin:0pt" align=right>402</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933><P style="margin:0pt" align=right>186</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=38.067><P style="margin:0pt" align=right>.04</P>
</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533><P style="margin:0pt" align=right>.04</P>
</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Second Quarter</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4><P style="margin:0pt" align=right>6,217</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58><P style="margin:0pt" align=right>296</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933><P style="margin:0pt" align=right>100</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=38.067><P style="margin:0pt" align=right>.02</P>
</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533><P style="margin:0pt" align=right>.01</P>
</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Third Quarter</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4><P style="margin:0pt" align=right>6,308</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58><P style="margin:0pt" align=right>312</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933><P style="margin:0pt" align=right>110</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=38.067><P style="margin:0pt" align=right>.02</P>
</TD><TD valign=bottom width=26.067>&nbsp;</TD><TD valign=bottom width=52.533><P style="margin:0pt" align=right>.02</P>
</TD></TR>
<TR><TD valign=bottom width=279.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Fourth Quarter</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=45.4><P style="margin:0pt" align=right>9,318</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=58><P style="margin:0pt" align=right>42</P>
</TD><TD valign=bottom width=20.733>&nbsp;</TD><TD valign=bottom width=41.933><P style="margin:0pt" align=right>(45</P>
</TD><TD valign=bottom width=20.733><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=38.067><P style="margin:0pt" align=right>(.01</P>
</TD><TD valign=bottom width=26.067><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=52.533><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-31</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Board of Directors and Shareholders<BR>
DGSE Companies, Inc. and Subsidiaries</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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&#146; equity, and cash flows for the years ended December 31, 2003 and 2002. These consolidated financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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.</P>
<P style="margin-top:30pt; margin-bottom:0pt; padding-left:252pt">CF &amp; Co., L.L.P. Dallas, Texas<BR>
March 22, 2004</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-32</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>CONSOLIDATED FINANCIAL STATEMENTS FOR THE<BR>
SIX-MONTH PERIOD ENDED DECEMBER 31, 2006</B></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-33</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>BALANCE SHEETS<BR>
(In Thousands)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=349.25></TD><TD width=13.4></TD><TD width=6.95></TD><TD width=43.05></TD><TD width=13.4></TD><TD width=5.35></TD><TD width=33.05></TD><TD width=3.55></TD></TR>
<TR><TD valign=bottom width=465.667 rowspan=2>&nbsp;</TD><TD valign=bottom width=17.867 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,<BR>
2006</B></P>
</TD><TD valign=bottom width=17.867 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.2 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June&nbsp;30,<BR>
2006</B></P>
</TD><TD valign=bottom width=4.733 rowspan=2>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(Unaudited)</P>
</TD></TR>
<TR><TD valign=bottom width=465.667>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=135.733 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(amounts in thousands)</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>ASSETS</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Current Assets</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cash</P>
</TD><TD valign=bottom width=17.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>1,615</P>
</TD><TD valign=bottom width=17.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=7.133><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>4,770</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts receivable, net of allowance for uncollectible</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">accounts of $821 (Dec 2006) and $363 (June 2006)</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>2,500</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>4,987</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Auction and customer advances</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>1,646</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>1,829</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inventories, net of reserve of $490 (Dec 2006) and $840 (June 2006)</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>1,857</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>7,592</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Prepaid expense and other</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>292</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>232</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total Current Assets</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>7,910</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>19,410</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Long-term assets</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Property and equipment, net</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>414</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>384</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total long-term assets</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>414</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>384</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt"><B>Total assets</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>8,324</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>19,794</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Current liabilities</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Line of credit &#150; related party</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>8,733</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>10,850</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts payable and accrued expenses</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>2,446</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>8,619</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Notes payable to a related party</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>100</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>200</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Notes payable</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>650</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total current liabilities</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>11,279</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>20,319</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Long-term liabilities</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Notes payable to a related party, net of current portion</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>300</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>300</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total long-term liabilities</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>300</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>300</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt"><B>Total liabilities</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>11,579</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>20,619</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Commitments and Contingencies</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Stockholders&#146; deficit</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Preferred stock, 1,975 shares undesignated, none outstanding</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Series B convertible preferred stock, $1.00 par value,</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">3,400 shares designated, 3,400 shares issued</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">and outstanding with a liquidation preference of $3,400</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>2,967</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>2,967</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Series D convertible preferred stock, $1.00 par value, 2,000 shares designated,<BR>
 2,000 shares issued and outstanding with a liquidation preference of $2,000</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>1,931</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>1,931</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Series E convertible preferred stock, $1.00 par value, 2,500 shares designated,<BR>
2,500 shares issued and outstanding with a liquidation preference of $2,500</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>2,488</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>2,488</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Common stock, $0.001 par value, 20,000 shares authorized; 4,808 and 4,808<BR>
shares issued and outstanding as of December 31, 2006 and June 30, 2006,<BR>
respectively</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>5</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>5</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Additional paid in capital</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=9.267>&nbsp;</TD><TD valign=bottom width=57.4><P style="margin:0pt" align=right>8,787</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=44.067><P style="margin:0pt" align=right>8,788</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accumulated deficit</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>(19,433</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>(17,004</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Total stockholders&#146; deficit</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>(3,255</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>(825</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=465.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Total liabilities and stockholders&#146; deficit</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.4><P style="margin:0pt" align=right>8,324</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=44.067><P style="margin:0pt" align=right>19,794</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying notes to unaudited interim financial statements.</I></P>
<P style="margin:0pt" align=center>F-34</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>STATEMENT OF OPERATIONS<BR>
(Unaudited)<BR>
(In Thousands, Except Per Share Data)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=305.15></TD><TD width=12.9></TD><TD width=10.3></TD><TD width=56.55></TD><TD width=12.9></TD><TD width=10.3></TD><TD width=56.55></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=406.867>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=195.467 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Six Months Ended</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=89.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31, 2006</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=89.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31, 2005</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net Sales</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=13.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>12,863</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=13.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>20,433</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total revenue&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>1,503</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>846</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Total Revenue</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>14,366</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>21,279</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Cost of Revenue</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>11,663</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>17,782</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Gross profit</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>2,703</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>3,497</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Selling, general and administrative expenses</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>4,766</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>4,467</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Loss from operations</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(2,063</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.2><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(970</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Other expense</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Interest income</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>148</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>214</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Interest expense</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(514</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.2><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(466</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total other expense</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(366</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.2><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(252</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Loss before provision for taxes</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>(2,429</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4><P style="margin:0pt" align=right>(1,222</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Income tax provision</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Net loss</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(2,430</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=17.2><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(1,223</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=406.867>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Net loss per share</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(0.51</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(0.25</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Fully diluted</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(0.51</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=17.2><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>(0.25</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Weighted average shares outstanding:</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=75.4>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>4,808</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>4,820</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=406.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Fully diluted</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>4,808</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=75.4><P style="margin:0pt" align=right>4,820</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying notes to unaudited interim financial statements.</I></P>
<P style="margin:0pt" align=center>F-35</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>STATEMENT OF CASH FLOWS<BR>
(Unaudited)<BR>
(In Thousands)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=338.85></TD><TD width=12.9></TD><TD width=7.75></TD><TD width=40.45></TD><TD width=16.4></TD><TD width=7.75></TD><TD width=40.45></TD><TD width=3.45></TD></TR>
<TR><TD valign=bottom width=451.8>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=150.4 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Six Months Ended</B></P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,<BR>
2006</B></P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,<BR>
2005</B></P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Cash flows from operating activities</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net loss&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(2,430</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(1,223</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Adjustments to reconcile net loss to net cash used in operating activities:</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>100</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>55</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Fair value of common stock options granted</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(10</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>205</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Fair value of common stock issued for services</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>10</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>10</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Provision for doubtful accounts receivable</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>458</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>33</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Provision for inventory reserve</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(350</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Increase (decrease) in cash from changes in assets and liabilities:</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts receivable</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>2,029</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>1,954</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Auction and customer advances</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>183</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>1,795</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inventories, net of adjustment of $490 (Dec. 2006) and $165 (Dec. 2005)</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>6,085</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(583</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Prepaid expenses and other</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>(60</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>46</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts payable and accrued expenses</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(6,173</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(1,963</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash provided by (used in) operating activities</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>(158</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>296</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Cash flows from investing activities</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Purchases of property and equipment</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>(130</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>(164</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash used in investing activities</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>(130</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>(164</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Cash flows from financing activities</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Borrowings under related party line of credit</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>7,500</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Repayments under related party line of credit</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(2,117</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(7,500</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Repayments under line of credit</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(150</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Repayments under related party debt</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(100</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(50</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Borrowings under notes payable</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>500</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Repayments under notes payable</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(650</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Payments under Series A preferred stock redemption</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>(137</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash provided by (used in) financing activities</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>(2,867</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>163</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net increase (decrease) in cash and equivalents</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>(3,155</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933><P style="margin:0pt" align=right>295</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and cash equivalents, beginning of period</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>4,770</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>417</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and cash equivalents, end of period</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>1,615</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>712</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Supplemental disclosure of cash flow information</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cash paid during the period for:</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=53.933>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Interest</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>514</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>466</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Income taxes</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.933><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying notes to unaudited interim financial statements.</I></P>
<P style="margin:0pt" align=center>F-36</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Basis of Presentation and Accounting Policies</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Unaudited Interim Financial Information</I>. The accompanying unaudited interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information, but do not include all the information and footnotes required by accounting principles generally accepted in the United States of America. The balance sheet as of June 30, 2006 has been derived from the audited financial statements of Superior Galleries, Inc. (&#147;Superior&#148; or the &#147;Company&#148;) at that date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the six month and three-month period ended December 31, 2006 are not necessarily indicative of the results that may be expected for the year ending June 30, 2007. For further information, refer to the financial statements for the year ended June 30, 2006 contained in Superior&#146;s financial statements included in its Annual Report on Form 10-K filed on September 28, 2006.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Cash and Cash Equivalents</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company places its cash with high credit quality institutions. The Federal Deposit Insurance Corporation (&#147;FDIC&#148;) insures cash accounts at each institution for up to $100,000. From time to time, the Company maintains cash in excess of the FDIC limit.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Accounts Receivable</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company evaluates specific accounts receivable balances when it becomes aware of a situation where a client may not be able to meet its financial obligations to the Company, as indicated by delinquent payments. The amount of the required allowance is based on the facts available to the Company and is reevaluated and adjusted as additional information is available, including its right to offset debts with accounts payable balances and the proceeds from consigned inventory sales. Allowances are also established for probable loss inherent in the remainder of the accounts receivable based on a factor of 0.1% of total gross sales. As of December 31, 2006, the Company had an allowance of $821,000.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Inventories</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Inventories consisting of rare coins, bullion and second-hand jewelry are stated (on a specific identification basis) at the lower of cost or fair market value. As of December 31, 2006, the Company&#146;s inventory had a fair market value reserve of $490,000, set primarily against graded coins.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Property and Equipment</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Property and equipment are stated at cost and are depreciated or amortized (as applicable) using the straight-line method over the estimated useful lives of the related assets, ranging from two to seven years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in operations.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company assesses the recoverability of property and equipment by determining whether the depreciation and amortization of property and equipment over its remaining life can be recovered through projected <BR>
un-discounted future cash flows. The amount of property and equipment impairment, if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. At December 31, 2006 and June 30, 2006, management of the Company has not identified any impaired assets.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-37</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Basis of Presentation and Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Use of Estimates</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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 reported periods. Actual results could materially differ from those estimates. Areas where significant estimation is involved include, but are not limited to, the evaluation of the collectibility of accounts receivable, auction and customer advances, the realizability and valuation of inventories, and valuation of stock-based compensation.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Revenue Recognition</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company generates revenue from wholesale and retail sales of rare coins, precious metals bullion and second-hand jewelry. The recognition of revenue varies for wholesale and retail transactions and is, in large part, dependent on the type of payment arrangements made between the parties. We recognize sales on an F.O.B. shipping point basis.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company sells rare coins to other wholesalers/dealers within its industry on credit, generally for terms of 14 to 60 days, but in no event greater than one year. The Company grants credit to new dealers based on extensive credit evaluations and for existing dealers based on established business relationships and payment histories. The Company generally does not obtain collateral with which to secure its accounts receivable when the sale is made to a dealer. The Company maintains reserves for potential credit losses based on an evaluation of specific receivables and the Company&#146;s historical experience related to credit losses. As of December 31, 2006 and June 30, 2006, management has established an accounts receivable reserve of $821,000 and $363,000, respectively.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Revenues for monetary transactions (i.e., cash and receivables) with dealers are recognized when the merchandise is shipped to the related dealer.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company also sells rare coins to retail customers on credit, generally for terms of 30 to 60 days, but in no event greater than one year. The Company grants credit to retail customers based on extensive credit evaluations and for existing retail customers based on established business relationships and payment histories. When a retail customer is granted credit, the Company generally collects a payment of 25% of the sales price, establishes a payment schedule for the remaining balance and holds the merchandise as collateral as security against the customer&#146;s receivable until all amounts due under the credit arrangement are paid in full. If the customer defaults in the payment of any amount when due, the Company may declare the customer&#146;s obligation in default, liquidate the collateral in a commercially reasonable manner using such proceeds to extinguish the remaining balance and disburse any amount in
excess of the remaining balance to the customer.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Under this retail arrangement, revenues are recognized when the customer agrees to the terms of the credit and makes the initial payment. The Company&#146;s has a limited-in-duration money back guaranty policy (as discussed below).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In limited circumstances, the Company exchanges merchandise for similar merchandise and/or monetary consideration with both dealers and retail customers, for which the Company recognizes revenue in accordance with APB No. 29, &#147;Accounting for Non-monetary Transactions.&#148; When the Company exchanges merchandise for similar merchandise and there is no monetary component to the exchange, the Company does not recognize any revenue. Instead, the basis of the merchandise relinquished becomes the basis of the merchandise received, less any indicated impairment of value of the merchandise relinquished. When the Company exchanges merchandise for similar merchandise and there is a monetary component to the exchange, the Company recognizes revenue to the extent of monetary assets received and determines the cost of sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost of the
assets surrendered.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-38</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Basis of Presentation and Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company has a return policy (money-back guarantee). The policy covers retail transactions involving graded rare coins only. Customers may return graded rare coins purchased within 7 days of the receipt of the rare coins for a full refund as long as the rare coins are returned in exactly the same condition as they were delivered. In the case of rare coin sales on account, customers may cancel the sale within 7 days of making a commitment to purchase the rare coins. The receipt of a deposit and a signed purchase order evidences the commitment. Any customer may return a coin if they can demonstrate that the coin is not authentic, or there was an error in the description of a graded coin.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Revenues from the sale of consigned goods are recognized as commission income on such sale if the Company is acting as an agent for the consignor. If in the process of selling consigned goods, the Company makes an irrevocable payment to a consignor for the full amount due on the consignment and the corresponding receivable from the buyer(s) has not been collected by the Company at that payment date, the Company records that payment as a purchase and the sale of the consigned good(s) to the buyer as revenue as the Company has assumed all collection risk.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company&#146;s auction businesses generate revenue in the form of commissions charged to buyers and sellers of auction lots. Auction commissions include buyers&#146; commissions, sellers&#146; commissions, and buyback commissions, each of which is calculated based on a percentage of the hammer price.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Buyers&#146; and sellers&#146; commissions are recognized upon the confirmation of the identification of the winning bidders. Funds charged to winning bidders include the hammer price plus the commission. Only the commission portion of the funds received by winning bidders is recorded as revenue.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Buyback commissions represent an agreed upon rate charged by the Company for goods entered in the auction and not sold. Goods remain unsold when an auction lot does not meet the consignor reserve, which is the minimum sales price as determined prior to auction, and when items sold at auction are returned subsequent to the winning bidder taking possession. Buyback commission is recognized along with sellers&#146; commission or at the time an item is returned. Returns from winning bidders are very limited and primarily occur when a rare coin sold at auction has an error in its description in which the winner bidder relied upon to purchase the item.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Stock Based Compensation</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company has a stock based compensation plan (&#147;2003 Omnibus Stock Option Plan&#148; or &#147;2003 Plan&#148;) for the benefit of its employees, directors and outside consultants. The 2003 Plan was shareholder approved and permits the granting of up to 1,200,000 options to purchase the Company&#146;s common stock.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Effective with the Company&#146;s fiscal year that began on July 1, 2005, the Company adopted the accounting and disclosure provisions of Statement of Financial Accounting Standards (&#147;SFAS&#148;) No. 123(R), &#147;Share-Based Payments.&#148; &nbsp;SFAS No.123(R) requires that the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. SFAS No. 123(R) applies to all share-based payment transactions in which an entity acquires goods or services by issuing (or offering to issue) its shares, share options, or other equity instruments (except for those held by an ESOP) or by incurring liabilities (1) in amounts based (even in part) on the price of the entity&#146;s shares or other equity instruments, or (2) that require (or may require) settlement by the issuance of an entity&#146;s shares or other equity instruments.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-39</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Basis of Presentation and Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Currently the Company uses the Black-Scholes option pricing model to estimate the fair value of stock options granted to employees for its adoption of SFAS No. 123(R). The fair value of stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following range of assumptions for 2007 and 2006. No options have been granted during the first six months of fiscal 2007.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=163.3></TD><TD width=12.5></TD><TD width=37.5></TD><TD width=12.5></TD><TD width=43.6></TD></TR>
<TR><TD valign=bottom width=217.733>&nbsp;</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2007</B></P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.133><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD></TR>
<TR><TD valign=bottom width=217.733>&nbsp;</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=50><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=58.133>&nbsp;</TD></TR>
<TR><TD valign=bottom width=217.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Risk free interest rate&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=50><P style="margin:0pt" align=center>&#151;</P>
</TD><TD valign=top width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=58.133><P style="margin:0pt" align=center>3.8 &#150; 5.1%</P>
</TD></TR>
<TR><TD valign=bottom width=217.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Dividends</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=50><P style="margin:0pt" align=center>&#151;</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=58.133><P style="margin:0pt" align=center>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=217.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Volatility factor</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=50><P style="margin:0pt" align=center>&#151;</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=58.133><P style="margin:0pt" align=center>246%</P>
</TD></TR>
<TR><TD valign=bottom width=217.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Expected life</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=50><P style="margin:0pt" align=center>&#151;</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=58.133><P style="margin:0pt" align=center>1 &#150; 4 years</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Segment Reporting</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company adopted SFAS No. 131 (&#147;SFAS 131&#148;), &#147;Disclosures about Segments of an Enterprise and Related Information,&#148; during fiscal 1999. SFAS 131 establishes standards for the way that public companies report information about operating segments and related disclosures about products and services, geographic areas and major customers in annual financial statements. The Company views its operations and manages its business as one segment, collectibles.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Comprehensive Income</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, &#147;Reporting Comprehensive Income&#148; (&#147;SFAS 130&#148;). SFAS 130 established new rules for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The adoption of SFAS 130 had no effect on the accompanying financial statements, because the Company had and continues to have no other components of comprehensive income.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>2. Description of Business</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Superior is primarily a wholesaler, retailer and auctioneer of rare coins, bullion and second-hand jewelry. The Company is based in Beverly Hills, California.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>3. Inventories</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Inventory totaling $160,000 and $1,327,000 of owned coins was on consignment with third parties at December 31, 2006 and June 30, 2006, respectively. The balance of inventory was located in the Company&#146;s vault, at trade shows or at grading services. As of December 31, 2006, management reserved $490,000 against the gross inventory cost to reflect its analysis of the fair market of each inventory item. The coins were valued by us using our combined experience buying and selling in the wholesale and retail market places. The valuations are supported by current market prices quoted in the &#147;Certified Coin Dealer Newsletter&#148; by the Bluesheet and Greysheet services. All coins were priced according to eye appeal and demand for specific series of mint dates. Any average or poor-looking coins were valued less than popular coins with a great look. Coins with problems, such as damaged, cleaned or repaired surfaces
were valued less, accordingly.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company, from time to time, enters into informal partnerships with third parties who are either vendors or customers for the purchase and sale of specific rare coins. These arrangements include joint ownership of the rare coin and equal participation in profit or loss on specific transactions adjusted for agreed upon expenses and interest costs. When the rare coins are purchased the Company records its proportional ownership as inventory and upon the sale of the rare coins, the Company records its proportional sale and profit or loss. In most instances, the Company elects to buy-out the partnership interest in rare coins prior to its sale and the recording of a proportional sale and</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-40</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>3. Inventories &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt">profit or loss are no longer applicable. At any given time, the Company may be involved in a few of these agreements. The following table provides information regarding the Company&#146;s lower of cost or market reserve for inventory as of the dates indicated:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=195.55></TD><TD width=12.5></TD><TD width=8.5></TD><TD width=38.15></TD><TD width=12.5></TD><TD width=8.9></TD><TD width=40></TD><TD width=12.5></TD><TD width=5.15></TD><TD width=23.3></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=260.733>&nbsp;</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=62.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,<BR>
2006</B></P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=65.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September&nbsp;30,<BR>
2006</B></P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=37.933 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June&nbsp;30,<BR>
2006</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=260.733>&nbsp;</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=top width=198.667 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=260.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Inventory</B></P>
</TD><TD valign=top width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=11.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.867><P style="margin:0pt" align=right>2,347</P>
</TD><TD valign=top width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=11.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>5,695</P>
</TD><TD valign=top width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=6.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=31.067><P style="margin:0pt" align=right>8,432</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=260.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less Lower of Cost or Market Reserve&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=11.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.867><P style="margin:0pt" align=right>(490</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=top width=16.667><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=11.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>(862</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=top width=16.667><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=6.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.067><P style="margin:0pt" align=right>(840</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=260.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Net Inventory</B></P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=top width=11.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.867><P style="margin:0pt" align=right>1,857</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=top width=11.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>4,833</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=top width=6.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=31.067><P style="margin:0pt" align=right>7,592</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>4. Auction and Customer Advances</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Superior has established two short-term lending programs consisting of (i) advancing consignment customers cash based on consigned inventory acquired for upcoming auctions, and, (ii) advancing customers cash based on the customer&#146;s assigning specific rare coins in their inventory to Superior as collateral. Superior can advance a customer up to 70% of consigned, or assigned, rare coin(s)&#146; wholesale value. For auction advances, Superior will advance cash to a customer and take control of the inventory to be held on consignment for auction. The customer will sign a note receivable for the funds advanced to be secured by the consigned inventory. As consigned inventory is sold, the proceeds will be collected, repaying Superior for the auction advance and any auction fees, with the remaining amount due to the consignor. For customer inventory advances, Superior will advance cash to a customer and take control of
the assigned inventory. The customer will sign a promissory note for the funds advanced to be secured by the assigned inventory. Auction and customer advances bear interest at rates between prime plus 6% and 14% based primarily on the customer&#146;s creditworthiness and the loan size. The average term of the loan is approximately three months and no individual loan will exceed one year. Customers may require minimum prices for their consigned coins, and if the coin has not sold by the loan maturity date, the customer must refinance the loan, repay the loan, or permit Superior to liquidate the coin. Superior will retain control of the assigned inventory until the customer repays the advance. Auction and customer advances consist of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=126.4></TD><TD width=12.5></TD><TD width=8.5></TD><TD width=38.15></TD><TD width=12.5></TD><TD width=8.9></TD><TD width=40></TD><TD width=12.5></TD><TD width=5.15></TD><TD width=23.3></TD></TR>
<TR><TD valign=bottom width=168.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,<BR>
2006</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September&nbsp;30,<BR>
2006</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=37.933 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June&nbsp;30,<BR>
2006</B></P>
</TD></TR>
<TR><TD valign=bottom width=168.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=198.667 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD></TR>
<TR><TD valign=bottom width=168.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Auction advances&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=11.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.867><P style="margin:0pt" align=right>1,521</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=11.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>1,058</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=31.067><P style="margin:0pt" align=right>1,386</P>
</TD></TR>
<TR><TD valign=bottom width=168.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Customer inventory advances</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.867><P style="margin:0pt" align=right>125</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>197</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.067><P style="margin:0pt" align=right>443</P>
</TD></TR>
<TR><TD valign=bottom width=168.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.867><P style="margin:0pt" align=right>1,646</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>1,255</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=31.067><P style="margin:0pt" align=right>1,829</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>5. Line of Credit &#150; Related Party</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Line of Credit &#150; Related Party</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On October 13, 2003, we executed a Commercial Loan and Security Agreement (&#147;Commercial LOC&#148;) with Stanford Financial Group Company (&#147;SFG&#148;), an affiliate of our principal stockholder, Stanford International Bank Limited (&#147;SIBL&#148; or &#147;Stanford&#148;), to provide us with a $7,500,000 line of credit for purposes of financing our inventory, auction advances and inventory loans to other rare coin dealers and collectors. A portion of this indebtedness was assigned to SIBL, and on March 31, 2005, pursuant to SIBL&#146;s purchase of $2,500,000 of our Series E Preferred Stock, SIBL assumed, converted and cancelled $2,500,000 of this indebtedness under the Commercial LOC. The remaining indebtedness was subsequently assigned to SIBL, and further amended the Commercial LOC increasing the line of credit to $10,000,000. Effective July 21, 2005 the Commercial LOC was renewed through October 1, 2006. On
May 2, 2006, SIBL further amended the Commercial LOC increasing the line of credit to $10,850,000 to reflect an additional advance made March 30, 2006, to partially fund the repayment of a private line of credit. On September 5, 2006, the Commercial LOC was renewed through October 1, 2007.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-41</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>5. Line of Credit &#150; Related Party &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On November 21, 2006, the Company entered into an agreement with SIBL pursuant to which the outstanding balance on the Commercial LOC would be reduced by up to $2,408,481.81 through the transfer of rare coins to SIBL. As of December 29, 2006 the final amount of the transfer of coins was determined to be $2,117,012.04. The Commercial LOC bears interest at the prime-lending rate (8.25% at December 31, 2006) and is secured by substantially all of Superior&#146;s assets. As of December 31, 2006, the outstanding balance was $8,732,987.96 and there was no accrued interest payable. We are currently in compliance with all of the financial covenants contained in our existing Commercial LOC agreements or have waivers in place through December 31, 2006 that cover variances and the over-advances on collateral.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In connection with the DGSE Merger, the Company expects to execute an Amended and Restated Commercial Loan and Security Agreement with SIBL to provide us with a $19,892,340 line of credit expiring January 2011 that bears interest at the prime-lending rate (8.25% at December 31, 2006). Of the note amount, $8,392,340 is immediately convertible at the closing of the merger to common stock under a Note Exchange Agreement. The remaining $11,500,000 will be made available to the Company under two revolving loans: &nbsp;$5,500,000 for the acquisition of inventory subject to a monthly borrowing base calculation and $6,000,000 that is not subject to any collateral limitation and that may be used for any purpose. Until the Merger is closed, the Company entered into a Forbearance Agreement with SIBL, waiving certain defaults and enabling draw downs under the existing $10,850,000 Commercial LOC despite the Company&#146;s negative stockholders&#146;
equity. The Forbearance Agreement is effective until six months after the date DGSE files a registration statement on Form S-4 with the SEC related to the merger, or upon the earlier notice by SIBL of the occurrence of a new event of default under the credit facility.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">See Note 11, &#147;Subsequent Events,&#148; below.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>6. Note Payable to a Related Party</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On April 10, 2002 we executed a subordinated note payable for $1,000,000 to our CEO, Silvano DiGenova, bearing interest at 9% per annum with quarterly installment payments of $150,000 plus interest. No principal payments had been made through February 2003. On February 14, 2003, the terms of the note were modified to provide for repayment of principal in the amount of $50,000 per quarter commencing on September 30, 2003 and for interest to be paid monthly. Effective January 1, 2006 the interest rate was changed to 12%. During the six month period ended December 31, 2006, there was a principal payment of $100,000. At December 31, 2006, the balance due was $400,000 and there was no accrued interest payable.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On January 6, 2007, the Company, DGSE Companies, Inc., a Nevada corporation (&#147;DGSE&#148;) and SIBL, as stockholder agent, entered into an Amended and Restated Agreement and Plan of Merger and Reorganization (the &#147;Merger Agreement&#148;), which changed some of the terms and conditions of the original Agreement and Plan of Merger and Reorganization dated July 12, 2006. The revised Merger Agreement allowed for the replacement of the Company&#146;s management team and three of its Directors with persons provided by DGSE which was documented by a Management Agreement by and between DGSE and the Company. In accordance with the Merger Agreement, the Company repaid in full its outstanding indebtedness of $400,000 owed to its former Chief Executive Officer Silvano DiGenova and the note evidencing that indebtedness was terminated.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">See Note 11, &#147;Subsequent Events,&#148; below.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>7. Equity</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Stock Options</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company&#146;s 2003 Omnibus Stock Option Plan (&#147;2003 Plan&#148;) is shareholder approved and permits the granting of up to 1,200,000 options to purchase the Company&#146;s common stock to its employees, directors and</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-42</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>7. Equity &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">outside consultants. Stock option awards are granted with an exercise price that is equal to or greater than the market price of the Company&#146;s common stock on the date of the grant. The options vest generally over a range of one to five years and expire five years after the final vesting date. As of December 31, 2006, 55,000 stock options had been exercised. Stock options under the 2003 Plan provide for accelerated vesting if there is a change in control (as defined by the 2003 Plan).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The fair value of each stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model and factors in an estimated forfeiture based on management assessment of historical employee termination experience. The Black-Scholes option pricing model has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk free interest rate is based the U.S. Treasury Bill rate with a maturity based on the expected life of the options and on the closest day to an individual stock option grant. Dividend rates are based on the Company&#146;s dividend history. The stock volatility factor is based on the past three years of market prices of the Company&#146;s common stock. The expected life of an option grant is based on its vesting period. The fair value of each option grant is recognized as compensation expense over the expected life of the option on a straight
line basis.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During the six-month period ended December 31, 2006, the Company did not grant to employees and directors any stock options to purchase common shares. During this period, 12,500 options vested, 1,250 expired and 208,100 were forfeited.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The weighted average remaining contractual lives of the options outstanding and options exercisable at December 31, 2006, were 6.2 years and 5.3 years respectively.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following tables summarize information about stock options for the periods shown:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=257.2></TD><TD width=12.8></TD><TD width=44.1></TD><TD width=15.35></TD><TD width=7.5></TD><TD width=26.3></TD><TD width=12.8></TD><TD width=41.95></TD><TD width=16.1></TD><TD width=7.5></TD><TD width=26.4></TD></TR>
<TR><TD valign=bottom width=342.933>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=124.333 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Six Month Period Ended<BR>
December 31, 2006</B></P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=122.6 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Six Month Period Ended<BR>
December 31, 2005</B></P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=342.933><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>All Options</B></P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=58.8>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=20.467>&nbsp;</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=bottom width=45.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=55.933>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=21.467>&nbsp;</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=bottom width=45.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD></TR>
<TR><TD valign=bottom width=342.933>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8>&nbsp;</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Outstanding at beginning of period&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>568,600</P>
</TD><TD valign=bottom width=20.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>2.49</P>
</TD><TD valign=bottom width=17.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>636,000</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>2.41</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options granted</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>65,000</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>2.50</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options forfeited</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>(208,100</P>
</TD><TD valign=bottom width=20.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>1.94</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>(76,667</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>1.90</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options expired</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>(1,250</P>
</TD><TD valign=bottom width=20.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>2.00</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options exercised</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Outstanding at end of period</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=58.8><P style="margin:0pt" align=right>359,250</P>
</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=35.067><P style="margin:0pt" align=right>2.82</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.933><P style="margin:0pt" align=right>624,333</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=35.2><P style="margin:0pt" align=right>2.49</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exercisable at end of period</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=58.8><P style="margin:0pt" align=right>188,000</P>
</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=35.067><P style="margin:0pt" align=right>2.54</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.933><P style="margin:0pt" align=right>221,083</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=35.2><P style="margin:0pt" align=right>2.56</P>
</TD></TR>
<TR><TD valign=bottom width=342.933>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8>&nbsp;</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-43</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>7. Equity &#150; (continued)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=257.2></TD><TD width=12.8></TD><TD width=44.1></TD><TD width=15.35></TD><TD width=7.5></TD><TD width=26.3></TD><TD width=12.8></TD><TD width=41.95></TD><TD width=16.1></TD><TD width=7.5></TD><TD width=26.4></TD></TR>
<TR><TD valign=bottom width=342.933>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=124.333 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Six Month Period Ended<BR>
December 31, 2006</B></P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=122.6 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Six Month Period Ended<BR>
December 31, 2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Non-Vested Options</B></P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8>&nbsp;</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=45.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=45.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD></TR>
<TR><TD style="border-top:0.5pt solid #000000" valign=bottom width=342.933>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8>&nbsp;</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067>&nbsp;</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Non-vested at beginning of period</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>242,000</P>
</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>2.55</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>464,000</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>2.28</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options granted</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>65,000</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>2.50</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options forfeited</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>(58,250</P>
</TD><TD valign=bottom width=20.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>1.20</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>(76,667</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>1.90</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options expired</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=58.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD valign=bottom width=55.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=35.2><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options vested</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.8><P style="margin:0pt" align=right>(12,500</P>
</TD><TD valign=bottom width=20.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=35.067><P style="margin:0pt" align=right>1.58</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.933><P style="margin:0pt" align=right>(49,083</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=35.2><P style="margin:0pt" align=right>1.83</P>
</TD></TR>
<TR><TD valign=bottom width=342.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Non-vested at end of period</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=58.8><P style="margin:0pt" align=right>171,250</P>
</TD><TD valign=bottom width=20.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=35.067><P style="margin:0pt" align=right>3.14</P>
</TD><TD valign=bottom width=17.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.933><P style="margin:0pt" align=right>403,250</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=35.2><P style="margin:0pt" align=right>2.44</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During the six months ended December 31, 2006, the company determined that certain stock options, related to terminated employees, were not cancelled in the previous period. As a result, the share-based expense was overstated in the previous period. The Company in the current period adjusted its share-based compensation expense reflecting the expense related to cancelled stock options. The Company determined that the impact of this adjustment on the previous financial statements was not material. At December 31, 2006 there was a total of $537,000 of unrecognized compensation costs related to non-vested share-based compensation arrangements under the 2003 Plan. The cost is expected to be recognized over a weighted average period of 2.5 years. The total fair value of 12,500 shares vested during the six-month period ended December 31, 2006 was approximately $19,800.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>8. Contingencies</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Guaranteed Liquidity and Buy Back</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company provides a two-way market or Guaranteed Buy/Sell Spread (the Guarantee&#148;) to its retail rare coin customers. Retail rare coin sales amounted to $2,379,000 and $6,632,000 for the six months ended December 31, 2006 and 2005, respectively. The policy grants the customer the opportunity to sell their coins back to the Company at the prevailing market &#147;bid&#148; price (below the current wholesale price in most cases). The Company determines the &#147;bid&#148; price based on the prevailing market price at which the Company believes it could readily liquidate the coin. The &#147;bid&#148; price may be substantially below what the customer originally paid for the coin.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The values of the rare coins sold to retail customers continually fluctuate. Furthermore, retail customers continually resell or trade coins purchased from the Company with third parties. Once retail customers resell the rare coins to third parties, the Guarantee is void. Lastly, the Company has had minimal historical experience with customers exercising the Guarantee. As a result, it is not possible for the Company to determine the potential repurchase obligation pursuant to the Guarantee that it may be subject to as a result of previous sales of retail rare coins.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Legal Proceedings</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On June 6, 2006 the Company was sued in the U.S. District Court for Central California by Elaine and Dean Sanders in connection with a loan made to them against 32 coins placed on consignment on June 26, 2004. Fourteen of the coins were sold, and the proceeds from this sale of approximately $186,750 were insufficient to repay the remaining loan balance of $359,471 that the Company made to the Sanders. The plaintiffs subsequently paid an additional $155,000 in December 2005 with respect to the loan, but now allege that the Company violated its agreement with them relating to the sale of the coins. The Company strongly denies that it violated the agreement or that it acted improperly in any way. The complaint seeks undefined dollar amounts, accrued interest and reimbursement of plaintiffs&#146; legal costs.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-44</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>8. Contingencies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In April 2004 the Company sued its former Chief Financial Officer, Malingham Shrinivas, in Los Angeles Superior Court for breach of contract, fraud and conspiracy. In that lawsuit, the Company alleged that he fraudulently arranged to receive more salary than he was entitled to, to pay personal expenses using Company funds, and to pay third party vendors with Company funds for services which were not rendered. In July 2004 Mr. Shrinivas filed a counterclaim in this litigation, claiming that he was terminated without just cause and was therefore entitled to $58,250 in severance pay. Although the case had been scheduled for trial in August 2006, prior to that time the case was stayed by order of the Superior Court because the Court had been advised that criminal charges against Mr. Shrinivas related to this matter were imminent. Those criminal charges were subsequently filed, and therefore further proceedings in connection with the civil
case continue to be stayed. The Company believes that Mr. Shrinivas was terminated with cause and that he is therefore not entitled to any severance pay. If and when the stay of our civil case is terminated, the Company intends to vigorously pursue its claims and defend Mr. Shrinivas&#146; claims for severance pay. On September 26, 2006 the Company was sued in the California Superior Court by a former customer, Michael Iatesta, for breach of contract and intentional and negligent misrepresentation. The suit relates to the Company&#146;s sale of the plaintiff&#146;s coins at an auction in September 2005. The plaintiff claims that the Company made errors in connection with the marketing and sale of his coins, and that as a result his coins were sold for approximately $123,000 instead of their alleged full value of from $225,000 to $250,000. The Company sold the plaintiff&#146;s coins at or above any minimum prices set by the plaintiff. The Company believes that the plaintiff&#146;s allegations are
without merit and intends to vigorously defend this suit.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On November 7, 2006 the Company was sued in the United States District Court for the Northern District of Texas by a competitor, Heritage Numismatic Auctions, Inc. (&#147;Heritage&#148;). In its complaint, Heritage alleges that the Company violated Heritage&#146;s copyright rights by copying Heritage&#146;s catalog descriptions of certain coins and currency offered for sale by Heritage. Heritage claims that these alleged actions also violate the California Unfair Competition Act. Heritage seeks an injunction ordering the Company to cease the alleged acts of infringement and to destroy the infringing items and damages in unspecified amounts. The Company denies that it has infringed any of Heritage&#146;s legal rights and intends to vigorously defend this suit. The Company has reserved for its own legal costs, estimated to be $50,000.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company may from time to time be involved in various claims, lawsuits, disputes with third parties, actions involving allegations of discrimination, or breach of contract actions incidental to the operation of its business. Except as set forth above, the Company is not currently involved in any such litigation which it believes could have a material adverse effect on its financial condition or results of operations, liquidity or cash flows.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>State Sales and Use Taxes</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company does not collect sales and use taxes for interstate sales. Management believes that the Company&#146;s sales to interstate customers are generally tax-exempt due to varying state exemptions relative to the definitions of being engaged in business in particular states and the lack of current internet taxation. We do collect sales taxes on retail sales made, if any, while at conventions and auctions held out of state and file related state tax returns. While the Company has not been contacted by any state authorities seeking to enforce sales or use tax regulations, there is no assurance that the Company will not be contacted by authorities in the future with inquiries relative to compliance with current statutes, nor is there any assurance that future statutes will not be enacted that affect the sales and use aspects of the Company&#146;s business.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>9. Merger Expenses</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July 12, 2006, the Company entered into a Merger Agreement with DGSE which was subsequently superseded by the Amended and Restated Agreement and Plan of Merger and Reorganization dated January 6, 2007. If the merger contemplated by this agreement is consummated (the &#147;Merger&#148;), DGSE Merger Corp., a newly-formed Delaware corporation and wholly-owned subsidiary of DGSE, will merge with and into the Company. The </P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-45</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>9. Merger Expenses &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Company would survive the Merger as a wholly-owned subsidiary of DGSE, and therefore would cease to be an independent publicly traded company at that time. The closing of the Merger is subject to certain conditions, however, and if these conditions are not &nbsp;satisfied the Merger may not be consummated. The Company has incurred costs of approximately $490,000 in connection with the Merger during the due diligence and closing process through December 31, 2006.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Recently Issued Accounting Pronouncements</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>SFAS No. 157</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Issues No. 157, &#147;Fair Value Measurements&#148; (&#147;SFAS 157&#148;), which defines the fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Early adoption is encouraged, provided that the Company has not yet issued financial statements for that fiscal year, including any financial statements for an interim period within that fiscal year. The Company is currently evaluating the impact SFAS 157 may have on its results of operations and financial condition.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>SFAS No. 158</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September 2006, the FASB issued SFAS No. 158, &#147;Employer&#146;s accounting for Defined Benefit Pension and Other Post Retirement Plans&#148;. SFAS No. 158 requires employers to recognize in its statement of financial position an asset or liability based on the retirement plan&#146;s over or under funded status. SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The Company is currently evaluating the effect that the application of SFAS No. 158 will have on its results of operations and financial condition.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>SAB No. 108</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September 2006, the United States Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108, &#147;Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements&#148; (&#147;SAB 108&#148;). This SAB provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects on each of the company&#146;s balance sheets, statements of operations and related financial statement disclosures. The SAB permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the
beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The Company is currently evaluating the impact SAB 108 may have on its results of operations and financial condition.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>11. Subsequent Events</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On January 6, 2007, the Company; DGSE and SIBL, as stockholder agent, entered into an Amended and Restated Agreement and Plan of Merger and Reorganization (the &#147;Merger Agreement&#148;). The Merger Agreement contemplates that DGSE Merger Corp., a wholly-owned subsidiary of DGSE, will merge with and into the Company would survive the merger as a wholly-owned subsidiary of DGSE, and each share of the Company&#146;s common stock would be exchanged for 0.2731 shares of DGSE common stock.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-46</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>11. Subsequent Events &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Pursuant to the Merger Agreement, fifteen percent (15%) of the number of shares of DGSE common stock to be issued at the closing of the Merger, less 33,648 shares to which DGSE is entitled under the Merger Agreement due to the fact that our actual December 31, 2006 stockholders&#146; equity was $89,840 less than our estimated December 31, 2006 stockholders&#146; equity used for purposes of determining the amount of debt to be converted by SIBL, will be deposited in an escrow account as security for the payment of indemnification claims made under the Merger Agreement in the event the Company&#146;s representations and warranties concerning its capitalization are inaccurate. The escrow will expire one year after the consummation of the Merger. The stockholder agent, which will initially be SIBL, will have the exclusive right to defend the escrow against claims made by DGSE or its related parties on behalf of the Company&#146;s
stockholders.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Consummation of the Merger is subject to certain closing conditions, including, among others, stockholder approval of the Merger Agreement; DGSE stockholder approval of an increase in the number of authorized shares of common stock of DGSE; absence of governmental restraints; and effectiveness of a Form S-4 registration statement registering the shares of DGSE common stock to be issued as merger consideration. The Merger Agreement allows DGSE and the Company to terminate the Merger Agreement upon the occurrence (or non-occurrence) of certain events. DGSE and the Company expect the acquisition to close late in March 2007, subject to the satisfaction or waiver of the various closing conditions in the Merger Agreement and depending in part on the length of regulatory review of this transaction.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company has entered into a Support Agreement with DGSE and certain stockholders of the Company whereby such stockholders have agreed to vote their shares in favor of the Merger. Such stockholders of the Company hold sufficient voting power to approve the Merger. Similarly, the Company has entered into a Support Agreement with DGSE and Dr. L.S. Smith, the chairman and chief executive officer of DGSE, whereby Dr. Smith has agreed to vote his shares, which constitutes approximately 46% of the outstanding DGSE shares, in favor of the Merger.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As a condition to the closing of the Merger, the Company expects to enter into a Note Exchange Agreement with SIBL. Pursuant to the Note Exchange Agreement, SIBL would convert $8,392,340 in debt into 4,936,671 shares of common stock of the Company. This conversion would occur immediately prior to the consummation of the Merger. A Commercial Line of Credit in the amount of $11,500,000 is provided in the related Amended and Restated Commercial Loan and Security Agreement with SIBL.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Related to the Merger Agreement, on January 6, 2007, the Company entered into a Management Agreement with DGSE Merger Corp., a wholly-owned subsidiary of DGSE. Pursuant to the Management Agreement, DGSE Merger Corp. will provide two to three senior executives to serve as the senior management of the Company. The initial individuals are (i) William Oyster, who has been appointed interim chief executive officer, (ii) John Benson, who has been appointed interim chief financial officer and vice president, finance, and (iii) Scott Williamson, who has been appointed interim chief operating officer. Mr. Oyster, age 53, has served as a director and president of DGSE since 1990. Mr. Benson, age 60, has served as Chief Financial Officer of DGSE since 1992. Mr. Williamson, age 48, has served as Executive Vice President - Consumer Finance of DGSE and President of American Pay Day Centers, Inc., a DGSE subsidiary, since May 2004. Between 2003 and
2004, Mr. Williamson was president of Texas State Credit Co., a finance company with 63 locations. From 2001 to 2003, Mr. Williamson was the Chief Financial Officer for Westgate Fabrics, LLC, a distributor of decorative fabrics. These individuals do not have an employment agreement with, and are not being paid any compensation by, the Company. However, the Company pays a management fee of $ 50,000 per month to DGSE for the management services provided under this agreement, as well as certain hourly fees and expense reimbursements. Upon termination of the Management Agreement, these individuals are expected to resign their offices with the Company.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-47</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO INTERIM FINANCIAL STATEMENTS<BR>
December 31, 2006<BR>
(Unaudited)</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>11. Subsequent Events &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Related to the Merger Agreement described above, on January 6, 2007 Silvano DiGenova entered into a Termination and Release Agreement with the Company, whereby he resigned as a director, chief executive officer, president, interim chief financial officer and chairman effective January 6, 2007. Pursuant to this agreement, Mr. DiGenova and the Company released each other from claims either might have against the other related to his relationship with the Company as a stockholder, officer, employee, director or otherwise, subject to specified exceptions. The Company then entered into a consulting agreement with Mr. DiGenova, whereby he will continue to provide services to the Company in the Wholesale Coin Division. On January 6, 2007 Mr. DiGenova was paid the outstanding balance of his $400,000 Note from the Company.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-48</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>CONSOLIDATED FINANCIAL STATEMENTS FOR <BR>
THE FISCAL YEAR ENDED JUNE 30, 2006</B></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-49</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></P>
<P style="margin-top:20pt; margin-bottom:0pt">To the Board of Directors<BR>
Superior Galleries, Inc.<BR>
Beverly Hills, California</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have audited the balance sheets of Superior Galleries, Inc. (the &#147;Company&#148;) as of June 30, 2006 and 2005, and the related statements of operations, stockholders&#146; equity (deficit), and cash flows for each of the three years in the period ended June 30, 2006. Our audits also included the financial statement schedule of Superior Galleries, Inc. listed in Item 8. These financial statements and financial statement schedule are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audits.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Superior Galleries, Inc. as of June 30, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.</P>
<P style="margin-top:23.35pt; margin-bottom:0pt">/s/ Singer Lewak Greenbaum &amp; Goldstein LLP</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Los Angeles, California<BR>
September 21, 2006</P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-50</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>BALANCE SHEETS<BR>
(In Thousands)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=348></TD><TD width=12.75></TD><TD width=11.8></TD><TD width=35.45></TD><TD width=12.75></TD><TD width=7.3></TD><TD width=39.95></TD></TR>
<TR><TD valign=bottom width=464>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=63 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2006</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=63 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=464>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Current assets</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cash and cash equivalents (Note 1)</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>4,770</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>417</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts receivable, net of allowance for doubtful</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">accounts of $363 (2006) and $122 (2005) (Note 1)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>4,987</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>4,969</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Auction and customer advances (Notes 1, 5 and 6)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>1,829</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>4,950</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inventories, net of reserve of $840 (2006) and $0 (2005) (Notes 1, 2, 6, 7, 8 and 9)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>7,592</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>8,713</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Prepaid expense</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=47.267><P style="margin:0pt" align=right>232</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.267><P style="margin:0pt" align=right>346</P>
</TD></TR>
<TR><TD valign=bottom width=464>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total current assets</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>19,410</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>19,395</P>
</TD></TR>
<TR><TD valign=bottom width=464>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Property and equipment, net (Notes 1 and 3)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>384</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>220</P>
</TD></TR>
<TR><TD valign=bottom width=464>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt"><B>Total assets</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=47.267><P style="margin:0pt" align=right>19,794</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.267><P style="margin:0pt" align=right>19,615</P>
</TD></TR>
<TR><TD valign=bottom width=464>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Current liabilities</B></P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Line of credit &#150; related party (Note 6)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>10,850</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>9,250</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Line of credit (Note 7)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>2,200</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts payable and accrued expenses</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>8,619</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>5,154</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Notes payable to a related party (Note 8)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>200</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>350</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Series A stock redemption payable (Note 11)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267><P style="margin:0pt" align=right>275</P>
</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Notes payable (Note 9)</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=15.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=47.267><P style="margin:0pt" align=right>650</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.267><P style="margin:0pt" align=right>650</P>
</TD></TR>
<TR><TD valign=bottom width=464>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=15.733>&nbsp;</TD><TD valign=bottom width=47.267>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=53.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=464><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total current liabilities</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=15.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=47.267><P style="margin:0pt" align=right>20,319</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.267><P style="margin:0pt" align=right>17,879</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying Notes to Financial Statements</I></P>
<P style="margin:0pt" align=center>F-51</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>BALANCE SHEETS &#150; (continued)<BR>
(In Thousands)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=340.15></TD><TD width=13.2></TD><TD width=6.85></TD><TD width=42.1></TD><TD width=13.2></TD><TD width=6.85></TD><TD width=42.1></TD><TD width=3.55></TD></TR>
<TR><TD valign=bottom width=453.533>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2006</B></P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2005</B></P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Long-term liabilities</B></P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Notes payable to a related party, net of current portion (Note 8)</P>
</TD><TD valign=bottom width=17.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>300</P>
</TD><TD valign=bottom width=17.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>400</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total long-term liabilities</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>300</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>400</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt"><B>Total liabilities</B></P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>20,619</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>18,279</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Commitments, contingencies and subsequent events (Notes 5, 6, 7, 8, 9, 10,<BR>
11, 12, 13, 14 and 16)</B></P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Stockholders&#146; equity (Note 11)</B></P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Preferred Stock, 1,975 shares undesignated, none outstanding</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Series B convertible preferred stock $1.00 par value, 3,400 shares designated<BR>
3,400 shares issued and outstanding with a liquidation preference of $3,400.</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>2,967</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>2,967</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Series D convertible preferred stock $1.00 par value, 2,000 shares designated<BR>
2,000 shares issued and outstanding with a liquidation preference of $2,000.</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>1,931</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>1,931</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Series E convertible preferred stock $1.00 par value, 2,500 shares designated<BR>
2,500 shares issued and outstanding with a liquidation preference of $2,500.</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>2,488</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>2,488</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Common stock, $.001 par value, 12,500 shares authorized, 4,820 (2005) and<BR>
4,486 (2004) issued and outstanding.</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>5</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>5</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Additional paid in capital</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>8,788</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>8,459</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accumulated deficit</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>(17,004</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.6><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>(14,514</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total stockholders&#146; equity</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>(825</P>
</TD><TD valign=bottom width=17.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=56.133><P style="margin:0pt" align=right>1,336</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=453.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Total liabilities and stockholders&#146; equity</B></P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>19,794</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.133><P style="margin:0pt" align=right>19,615</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying Notes to Financial Statements</I></P>
<P style="margin:0pt" align=center>F-52</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>STATEMENTS OF OPERATIONS<BR>
(In Thousands, Except Per Share Data)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=278.9></TD><TD width=12.95></TD><TD width=7.5></TD><TD width=41.3></TD><TD width=13.1></TD><TD width=7.5></TD><TD width=41.3></TD><TD width=13.1></TD><TD width=7.5></TD><TD width=41.3></TD><TD width=3.55></TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2006</B></P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2005</B></P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2004</B></P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net sales</P>
</TD><TD valign=bottom width=17.267><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>43,302</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>37,340</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>26,916</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Commission income</P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>3,015</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>2,195</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>3,081</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Total revenue</B></P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>46,317</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>39,535</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>29,997</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Cost of sales</B></P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>38,393</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>32,027</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>23,382</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Gross profit</B></P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>7,924</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>7,508</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>6,615</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Selling, general and administrative expenses</B></P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>9,792</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>7,708</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>5,959</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income (loss) from operations</P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(1,868</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(200</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>656</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Other income (expense)</B></P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Interest income</P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>361</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>376</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>476</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Interest expense (Notes 6, 7, 8 and 9)</P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(1,030</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(788</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(535</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other expense, net</P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(3</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(33</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Total other income (expense)</P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(669</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(415</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(92</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Income (loss) before provision for income taxes and extraordinary<BR>
item</B></P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(2,537</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(615</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>564</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Income tax provision (Note 10)</B></P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>12</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income (loss) before extraordinary item</P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(2,539</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(616</P>
</TD><TD valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>552</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Extraordinary gain from extinguishment of debt, net of applicable<BR>
taxes (Notes 7 and 16)</P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>50</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867>&nbsp;</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=17.467>&nbsp;</TD><TD valign=bottom width=10>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Net income (loss)</B></P>
</TD><TD valign=bottom width=17.267>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(2,489</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>(616</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=17.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.067><P style="margin:0pt" align=right>552</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying Notes to Financial Statements</I></P>
<P style="margin:0pt" align=center>F-53</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>STATEMENTS OF OPERATIONS &#150; (continued)<BR>
(In Thousands, Except Per Share Data)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=284.7></TD><TD width=12.65></TD><TD width=7.3></TD><TD width=37.7></TD><TD width=16.1></TD><TD width=7.7></TD><TD width=37.35></TD><TD width=16.1></TD><TD width=8.25></TD><TD width=36.8></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=379.6>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2006</B></P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2005</B></P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2004</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Calculation of net income (loss) per share:</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.267><P style="margin:0pt" align=right>(2,489</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=49.8><P style="margin:0pt" align=right>(616</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=11><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=49.067><P style="margin:0pt" align=right>552</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Preferred stock accretion</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067><P style="margin:0pt" align=right>(50</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Preferred stock dividend</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.067><P style="margin:0pt" align=right>(37</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=379.6>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss) applicable to common shares</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.267><P style="margin:0pt" align=right>(2,489</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.8><P style="margin:0pt" align=right>(616</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.067><P style="margin:0pt" align=right>465</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Net income (loss) per common share:</B></P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic:</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Income (loss) before extraordinary item</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267><P style="margin:0pt" align=right>(0.53</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8><P style="margin:0pt" align=right>(0.13</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067><P style="margin:0pt" align=right>0.11</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Extraordinary item net of applicable taxes</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.267><P style="margin:0pt" align=right>0.01</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.267><P style="margin:0pt" align=right>(0.52</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.8><P style="margin:0pt" align=right>(0.13</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.067><P style="margin:0pt" align=right>0.11</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Fully diluted:</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Income (loss) before extraordinary item</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267><P style="margin:0pt" align=right>(0.53</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8><P style="margin:0pt" align=right>(0.13</P>
</TD><TD valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067><P style="margin:0pt" align=right>0.06</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Extraordinary item net of applicable taxes</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.267><P style="margin:0pt" align=right>0.01</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.267><P style="margin:0pt" align=right>(0.52</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.8><P style="margin:0pt" align=right>(0.13</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.067><P style="margin:0pt" align=right>0.06</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Weighted average number of common shares outstanding:</B></P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=9.733>&nbsp;</TD><TD valign=bottom width=50.267>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=10.267>&nbsp;</TD><TD valign=bottom width=49.8>&nbsp;</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=49.067>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.267><P style="margin:0pt" align=right>4,817</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.267>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.8><P style="margin:0pt" align=right>4,627</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.067><P style="margin:0pt" align=right>4,370</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=379.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Fully diluted</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.267><P style="margin:0pt" align=right>4,817</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.267>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.8><P style="margin:0pt" align=right>4,627</P>
</TD><TD valign=bottom width=21.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.067><P style="margin:0pt" align=right>8,098</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying Notes to Financial Statements</I></P>
<P style="margin:0pt" align=center>F-54</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>STATEMENTS OF STOCKHOLDERS&#146; EQUITY (DEFICIT)<BR>
For the Years Ended June 30, 2006, 2005 and 2004<BR>
(In Thousands)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=151.85></TD><TD width=11.25></TD><TD width=25></TD><TD width=11.25></TD><TD width=5.45></TD><TD width=24.55></TD><TD width=11.25></TD><TD width=25></TD><TD width=11.25></TD><TD width=5.3></TD><TD width=24.7></TD><TD width=11.25></TD><TD width=25></TD><TD width=11.25></TD><TD width=5.3></TD><TD width=24.7></TD><TD width=11.25></TD><TD width=27></TD><TD width=11.25></TD><TD width=10.35></TD><TD width=21.15></TD><TD width=11.3></TD><TD width=7.8></TD><TD width=35></TD><TD width=11.3></TD><TD width=6.85></TD><TD width=43.15></TD><TD width=14.25></TD><TD width=7.9></TD><TD width=42.1></TD><TD width=3></TD></TR>
<TR><TD valign=bottom width=202.467>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=88.333 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Series B<BR>
Preferred Stock</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=88.333 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Series D<BR>
Preferred Stock</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=88.333 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><BR>
<B>Series E<BR>
Preferred Stock</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=93 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Common</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.067 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Additional<BR>
Paid<BR>
in<BR>
Capital</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Retained<BR>
Earnings<BR>
(Accumulated<BR>
Deficit)</B></P>
</TD><TD valign=bottom width=19>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Total<BR>
Stockholder&#146;s<BR>
Equity</B></P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=40 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Amount</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=40 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Amount</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=40 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Amount</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Amount</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=33.333><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=40 colspan=2><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=33.333><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=40 colspan=2><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=40 colspan=2><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=36><P style="margin:0pt; font-size:9pt" align=right><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=42 colspan=2><P style="margin:0pt; font-size:9pt" align=right><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=57.067 colspan=2><P style="margin:0pt; font-size:9pt" align=right><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=66.667 colspan=2><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=66.667 colspan=2><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt"><B>Balance June 30, 2003</B></P>
</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>3,400</B></P>
</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=7.267><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=32.733><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,967</B></P>
</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,000</B></P>
</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=7.067><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>1,931</B></P>
</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>&#151;</B></P>
</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=7.067><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>&#151;</B></P>
</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,641</B></P>
</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.8><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>3</B></P>
</TD><TD valign=bottom width=15.067><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=10.4><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>7,940</B></P>
</TD><TD valign=bottom width=15.067><P style="margin:0pt; font-size:9pt"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=9.133><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>(14,412</B></P>
</TD><TD valign=bottom width=19><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=10.533><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>(1,572</B></P>
</TD><TD valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>)</B></P>
</TD></TR>
<TR><TD valign=bottom width=202.467>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD
valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Issuance of common stock (Note 11)</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,845</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>2</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Fair value of options granted</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>22</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>22</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Accretion of redemption value of<BR>
Series A Preferred Stock (Note 11)</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(50</P>
</TD><TD valign=bottom width=15.067><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(50</P>
</TD><TD valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Dividends on preferred stock</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(38</P>
</TD><TD valign=bottom width=19><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(38</P>
</TD><TD valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:10pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt; font-size:9pt">Net income</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.733><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>552</P>
</TD><TD valign=bottom width=19>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.533>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>552</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt"><B>Balance June 30, 2004</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>3,400</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=32.733><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,967</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,000</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>1,931</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>&#151;</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>&#151;</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>4,486</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>4</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>7,912</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>(13,898</B></P>
</TD><TD valign=bottom width=19><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>)</B></P>
</TD><TD valign=bottom width=10.533><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>(1,084</B></P>
</TD><TD valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>)</B></P>
</TD></TR>
<TR><TD valign=bottom width=202.467>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD
valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Issuance of Series E Preferred stock ,<BR>
net of offering cost (Note 11)</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>2,500</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>2,488</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>2,488</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Issuance of common stock (Note 11)</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>105</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>77</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>77</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Fair value of options granted</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>92</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>92</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Fair value of common stock issued for services<BR>
(Note 11)</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>229</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>378</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>379</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:10pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt; font-size:9pt">Net loss</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.733><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(616</P>
</TD><TD valign=bottom width=19><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.533>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(616</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt"><B>Balance, June 30, 2005</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>3,400</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=32.733><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,967</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,000</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.067><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>1,931</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,500</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.067><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,488</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>4,820</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.8><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>5</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>8,459</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.133><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>(14,514</B></P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=19><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>)</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.533><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>1,336</B></P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD
valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133>&nbsp;</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Issuance/cancellation of common stock<BR>
(Note 11)</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(12</P>
</TD><TD valign=bottom width=15><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(24</P>
</TD><TD valign=bottom width=15.067><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(24</P>
</TD><TD valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Fair value of options granted</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>410</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>410</P>
</TD><TD valign=bottom width=4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Fair value of common stock issued for services<BR>
(Note 11)</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.267>&nbsp;</TD><TD valign=bottom width=32.733>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=33.333>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=7.067>&nbsp;</TD><TD valign=bottom width=32.933>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=36>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=13.8>&nbsp;</TD><TD valign=bottom width=28.2>&nbsp;</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(57</P>
</TD><TD valign=bottom width=15.067><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD><TD valign=bottom width=9.133>&nbsp;</TD><TD valign=bottom width=57.533>&nbsp;</TD><TD valign=bottom width=19>&nbsp;</TD><TD valign=bottom width=10.533>&nbsp;</TD><TD valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(57</P>
</TD><TD valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:10pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt; font-size:9pt">Net loss</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.733><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(2,489</P>
</TD><TD valign=bottom width=19><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.533>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>(2,489</P>
</TD><TD valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=202.467><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt"><B>Balance, June 30, 2006</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>3,400</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.267><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=32.733><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,967</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,000</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.067><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>1,931</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=33.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,500</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.067><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=32.933><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>2,488</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>4,808</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.8><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=28.2><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>5</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD valign=bottom width=10.4><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=46.667><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>8,788</B></P>
</TD><TD valign=bottom width=15.067>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.133><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.533><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>(17,004</B></P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=19><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>)</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.533><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>$</B></P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.133><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right><B>(825</B></P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4><P style="line-height:11pt; margin:0pt; font-size:9pt"><B>)</B></P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying Notes to Financial Statements</I></P>
<P style="margin:0pt" align=center>F-55</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>STATEMENTS OF CASH FLOWS<BR>
(In Thousands)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=270.9></TD><TD width=13.2></TD><TD width=7.95></TD><TD width=41></TD><TD width=16.75></TD><TD width=7.95></TD><TD width=41></TD><TD width=16.75></TD><TD width=7.95></TD><TD width=41></TD><TD width=3.55></TD></TR>
<TR><TD valign=bottom width=361.2>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2004</B></P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2005</B></P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2006</B></P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Cash flows from operating activities</B></P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(2,489</P>
</TD><TD valign=bottom width=22.333><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(616</P>
</TD><TD valign=bottom width=22.333><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>552</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Adjustments to reconcile net income (loss) to net cash used in<BR>
operating activities:</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>145</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>77</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>94</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Loss on retirement of property and equipment</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>33</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Fair value of common stock options granted</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>410</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>379</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>22</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Fair value of common stock issued for services rendered</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>36</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>92</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Increase (decrease) in cash from changes in assets and liabilities</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts receivable</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(18</P>
</TD><TD valign=bottom width=22.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(1,256</P>
</TD><TD valign=bottom width=22.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(887</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Auction and customer advances, net</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>3,121</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>1,451</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(2,907</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inventories</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>1,122</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(2,606</P>
</TD><TD valign=bottom width=22.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(3,609</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Prepaid expenses and other</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>114</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(296</P>
</TD><TD valign=bottom width=22.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>39</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Other assets</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>11</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts payable and accrued expenses</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>3,348</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(2,107</P>
</TD><TD valign=bottom width=22.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>423</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash provided by (used in) operating activities</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.667><P style="margin:0pt" align=right>5,788</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.667><P style="margin:0pt" align=right>(4,868</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=22.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.667><P style="margin:0pt" align=right>(6,237</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=361.2>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Cash flows from investing activities</B></P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Purchases of property and equipment</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>310</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(164</P>
</TD><TD valign=bottom width=22.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>(56</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Proceeds from sale of property and equipment</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD valign=bottom width=10.6>&nbsp;</TD><TD valign=bottom width=54.667><P style="margin:0pt" align=right>10</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2>&nbsp;</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=54.667>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=361.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash provided by (used in) investing activities</P>
</TD><TD valign=bottom width=17.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=54.667><P style="margin:0pt" align=right>310</P>
</TD><TD valign=bottom width=22.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=54.667><P style="margin:0pt" align=right>(164</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=22.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=54.667><P style="margin:0pt" align=right>(46</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying Notes to Financial Statements</I></P>
<P style="margin:0pt" align=center>F-56</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>STATEMENTS OF CASH FLOWS &#150; (continued)<BR>
(In Thousands)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=271.6></TD><TD width=13.7></TD><TD width=7.75></TD><TD width=42.85></TD><TD width=13.65></TD><TD width=8.25></TD><TD width=42.4></TD><TD width=13.65></TD><TD width=7.75></TD><TD width=42.85></TD><TD width=3.55></TD></TR>
<TR><TD valign=bottom width=362.133>&nbsp;</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.467 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2006</B></P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2005</B></P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.467 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2004</B></P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133>&nbsp;</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Cash flows from financing activities</B></P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133>&nbsp;</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Borrowings under related party line of credit</P>
</TD><TD valign=bottom width=18.267><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>10,600</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=11><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>8,400</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>11,000</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Repayments under related party line of credit</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(9,000</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>(5,750</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(4,400</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Borrowings under lines of credit</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>3,300</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Extraordinary gain on early payoff of line of credit</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(50</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Repayments under lines of credit</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(2,150</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>(300</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(3,300</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Borrowings under notes payable</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>650</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Repayments under notes payable</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(64</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Borrowings under related party debt</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Repayments under related party debt</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(250</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>(150</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(460</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Payments under Series A preferred stock redemption</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(275</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>(413</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Issuance of common shares</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>77</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Issuance of Series E preferred shares, net of offering expenses</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>2,488</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Payment of dividends on preferred stock</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>(37</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash provided by (used in) financing activities</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>(1,125</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.533><P style="margin:0pt" align=right>5,002</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>6,041</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133>&nbsp;</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net (decrease) increase in cash and equivalents</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>4,353</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533><P style="margin:0pt" align=right>(30</P>
</TD><TD valign=bottom width=18.2><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>(242</P>
</TD><TD valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=362.133>&nbsp;</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and cash equivalents beginning of year</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>417</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.533><P style="margin:0pt" align=right>447</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>689</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and cash equivalents, end of year</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>4,770</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.533><P style="margin:0pt" align=right>417</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>447</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133>&nbsp;</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Supplemental disclosure of cash flow information</B></P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash paid during the year for:</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=11>&nbsp;</TD><TD valign=bottom width=56.533>&nbsp;</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=57.133>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Interest</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>1,030</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.533><P style="margin:0pt" align=right>788</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>749</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=362.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income taxes</P>
</TD><TD valign=bottom width=18.267>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=11><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=56.533><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=18.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Supplemental disclosure of non-cash investing and financing activity</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">During the years ended June 30, 2006, 2005 and 2004, the Company completed non-cash transactions as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=262.55></TD><TD width=14.05></TD><TD width=58.8></TD><TD width=14.05></TD><TD width=52.25></TD><TD width=14.05></TD><TD width=52.25></TD></TR>
<TR><TD valign=bottom width=350.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2006</B></P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=69.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2005</B></P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=69.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=350.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=78.4>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=350.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Non-cash investing and financing activities</B></P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=78.4>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=350.067>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=78.4>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=350.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accretion of redemption value of Series A Preferred stock</P>
</TD><TD valign=top width=18.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=78.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=top width=18.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=69.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=top width=18.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=69.667><P style="margin:0pt" align=right>50</P>
</TD></TR>
<TR><TD valign=bottom width=350.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series A preferred stock redemption liability</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=78.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667><P style="margin:0pt" align=right>688</P>
</TD></TR>
<TR><TD valign=bottom width=350.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cancellation of treasury common stock</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=78.4><P style="margin:0pt" align=right>(40</P>
</TD><TD valign=top width=18.733><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=69.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=69.667><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center><I>See accompanying Notes to Financial Statements</I></P>
<P style="margin:0pt" align=center>F-57</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Organization and Business</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Superior Galleries, Inc. (&#147;Superior&#148; or the &#147;Company&#148;) is a wholesaler, retailer, and auctioneer of rare coins. The Company is based in Beverly Hills, California. On June 30, 2003 as part of a reincorporation in the State of Delaware the Company&#146;s name was changed to Superior Galleries, Inc. from Tangible Asset Galleries, Inc. Additionally, the Company&#146;s subsidiary Superior Galleries, Inc., a Nevada corporation, name was changed to Superior Galleries Beverly Hills, Inc. (&#147;SGBH&#148;). As of July 1, 2003, all operations in SGBH ceased and were transferred to Superior.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Reclassifications</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Certain amounts for the fiscal year ended June 30, 2005 have been reclassified to conform with the presentation of the June 30, 2006 amounts. These reclassifications have no effect on reported net income (loss).</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Cash and Cash Equivalents</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. The Company places its cash with high credit quality institutions. The Federal Deposit Insurance Corporation (&#147;FDIC&#148;) insures cash accounts at each institution for up to $100,000. From time to time, the Company maintains cash in excess of the FDIC limit.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Accounts Receivable</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company evaluates specific accounts receivable balances when it becomes aware of a situation where a client may not be able to meet its financial obligations to the Company, as indicated by delinquent payments. The amount of the required allowance is based on the facts available to the Company and is reevaluated and adjusted as additional information is available, including its right to offset debts with accounts payable balances and the proceeds from consigned inventory sales. Allowances are also established for probable loss inherent in the remainder of the accounts receivable based on a factor of 0.1% of total gross sales.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Inventories</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Inventories consisting of rare coins and second-hand jewelry are stated (on a specific identification basis) at the lower of cost or fair market value. As of June 30, 2006, management of the company recorded a fair market reserve of $840,000 primarily against ungraded coins and coins held over one year.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Property and Equipment</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Property and equipment are stated at cost and are depreciated or amortized (as applicable) using the straight-line method over the estimated useful lives of the related assets, ranging from three to seven years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in operations.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company assesses the recoverability of property and equipment by determining whether the depreciation and amortization of property and equipment over its remaining life can be recovered through projected un-discounted future cash flows. The amount of property and equipment impairment, if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. At June 30, 2006 and 2005, management of the Company has not identified any impaired assets.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-58</P>
<P style="margin:0pt"><BR></P>
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<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Goodwill</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Effective July 1, 2002, the Company adopted Statement of Financial Accounting Standards (&#147;SFAS&#148;) No. 142, &#147;Goodwill and Other Intangible Assets.&#148; &nbsp;SFAS 142 requires that goodwill be tested for impairment on an annual basis. As the Company recorded goodwill for its purchase of its SGBH subsidiary in July 2001, it tested the goodwill for impairment during the quarter ended December 31, 2002. Management estimated the fair value of the reporting unit (i.e. Company as a whole) using a present value model on estimated future cash flows. This value was then adjusted to calculate the implied fair value of goodwill based on the allocation of the reporting units assets and liabilities. The calculation identified that the implied fair value was less than the carrying amount of goodwill, indicating that the goodwill had been impaired. Based on this analysis, goodwill was determined to be fully impaired and the Company
recorded an impairment of goodwill charge to operations of $591,000 during the quarter ended December 31, 2002, which removed the goodwill account from the balance sheet.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Use of Estimates</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">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 reported periods. Actual results could materially differ from those estimates. Areas where significant estimation is involved include, but are not limited to, the evaluation of the collectibility of accounts receivable, and, auction and customer advances, and the realizability and valuation of inventories.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Revenue Recognition</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company generates revenue from wholesale and retail sales of rare coins, precious metals bullion and second-hand jewelry. The recognition of revenue varies for wholesale and retail transactions and is, in large part, dependent on the type of payment arrangements made between the parties. We recognize sales on an F.O.B. shipping point basis.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company sells rare coins to other wholesalers/dealers within its industry on credit, generally for terms of 15 to 60 days, but in no event greater than one year. The Company grants credit to new dealers based on extensive credit evaluations and for existing dealers based on established business relationships and payment histories. The Company generally does not obtain collateral with which to secure its accounts receivable when the sale is made to a dealer. The Company maintains reserves for potential credit losses based on an evaluation of specific receivables, offset rights and the Company&#146;s historical experience related to credit losses. As of June 30, 2006 and 2005, management established an accounts receivable reserve of $363,000 and $122,000, respectively.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company also sells rare coins to retail customers on credit, generally for terms of 30 to 60 days, but in no event greater than one year. The Company grants credit to retail customers based on extensive credit evaluations and for existing retail customers based on established business relationships and payment histories. When a retail customer is granted credit, the Company generally collects a payment of 25% of the sales price, establishes a payment schedule for the remaining balance and holds the merchandise as collateral as security against the customer&#146;s receivable until all amounts due under the credit arrangement are paid in full. If the customer defaults in the payment of any amount when due, the Company may declare the customer&#146;s obligation in default, liquidate the collateral in a commercially reasonable manner using such proceeds to extinguish the remaining balance and disburse any amount in excess of the
remaining balance to the customer.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-59</P>
<P style="margin:0pt"><BR></P>
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<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Under this retail arrangement, revenues are recognized when the customer agrees to the terms of the credit and makes the initial payment. The Company&#146;s has a limited-in-duration money back guaranty policies (as discussed below).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In limited circumstances, the Company exchanges merchandise for similar merchandise and/or monetary consideration with both dealers and retail customers, for which the Company recognizes revenue in accordance with APB No. 29, &#147;<I>Accounting for Non-monetary Transactions</I>.&#148; When the Company exchanges merchandise for similar merchandise and there is no monetary component to the exchange, the Company does not recognize any revenue. Instead, the basis of the merchandise relinquished becomes the basis of the merchandise received, less any indicated impairment of value of the merchandise relinquished. When the Company exchanges merchandise for similar merchandise and there is a monetary component to the exchange, the Company recognizes revenue to the extent of monetary assets received and determines the cost of sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost
of the assets surrendered.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company has a return policy (money-back guarantee). The policy covers retail transactions involving graded rare coins only. Customers may return graded rare coins purchased within 7 days of the receipt of the rare coins for a full refund as long as the rare coins are returned in exactly the same condition as they were delivered. In the case of rare coin sales on account, customers may cancel the sale within 7 days of making a commitment to purchase the rare coins. The receipt of a deposit and a signed purchase order evidences the commitment. Any customer may return a coin if they can demonstrate that the coin is not authentic, or there was an error in the description of a graded coin.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Revenues from the sale of consigned goods are recognized as commission income on such sale if the Company is acting as an agent for the consignor. If in the process of selling consigned goods, the Company makes an irrevocable payment to a consignor for the full amount due on the consignment and the corresponding receivable from the buyer(s) has not been collected by the Company at that payment date, the Company records that payment as a purchase and the sale of the consigned good(s) to the buyer as revenue as the Company has assumed all collection risk.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company&#146;s auction businesses generate revenue in the form of commissions charged to buyers and sellers of auction lots. Auction commissions include buyers&#146; commissions, sellers&#146; commissions, and buyback commissions, each of which are calculated based on a percentage of the hammer price.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Buyers&#146; and sellers&#146; commissions are recognized upon the confirmation of the identification of the winning bidders. Funds charged to winning bidders include the hammer price plus the commission. Only the commission portion of the funds received by winning bidders is recorded as revenue.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Buyback commissions represent an agreed upon rate charged by the Company for goods entered in the auction and not sold. Goods remain unsold when an auction lot does not meet the consignor reserve, which is the minimum sales price as determined prior to auction, and when items sold at auction are returned subsequent to the winning bidder taking possession. Returns from winning bidders are very limited and primarily occur when a rare coin sold auction has an error in its description in which the winner bidder relied upon to purchase the item. Buyback commission is recognized along with sellers&#146; commission or at the time an item is returned.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Advertising</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Advertising costs are expensed as incurred. During the years ended June 30, 2006, 2005 and 2004, advertising expenses were $762,000, $633,000 and $578,000, respectively.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-60</P>
<P style="margin:0pt"><BR></P>
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<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Income Taxes</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, &#147;<I>Accounting for Income Taxes</I>,&#148; (&#147;SFAS 109&#148;). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be recovered.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Stock-Based Compensation</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In March 2004, the FASB issued SFAS No. 123(R), &#147;<I>Share-Based Payment</I>&#148;. SFAS 123(R) amends SFAS No. 123, &#147;<I>Accounting for Stock-Based Compensation</I>,&#148; and APB Opinion 25, &#147;<I>Accounting For Stock Issued To Employees</I>&#148;. SFAS No. 123(R) requires that the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. SFAS No. 123(R) applies to all share-based payment transactions in which an entity acquires goods or services by issuing (or offering to issue) its shares, share options, or other equity instruments (except for those held by an ESOP) or by incurring liabilities (1) in amounts based (even in part) on the price of the entity&#146;s shares or other equity instruments, or (2) that require (or may require) settlement by the issuance of an entity&#146;s shares or other equity instruments. This statement is effective (1)
for public companies qualifying as SEC small business issuers, as of the first interim period or fiscal year beginning after March 15, 2005, or (2) for all other public companies, as of the first interim period or fiscal year beginning after June 15, 2005, or (3) for all nonpublic entities, as of the first fiscal year beginning after March 15, 2005. Currently the Company uses the Black-Scholes option pricing model to estimate the fair value of stock options granted to employees and is evaluating option valuation models including Black Scholes to determine which model the Company will use upon the adoption of SFAS No. 123(R). The Company adopted SFAS No. 123(R) effective with its fiscal year beginning July 1, 2005.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Earnings (Loss) Per Share</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Basic &#147;Earnings Per Share (&#147;EPS&#148;),&#148; is computed as net income (loss) applicable to common shares divided by the weighted average number of common shares outstanding for the period. Net income (loss) applicable to common shares is calculated as net income (loss) less dividends and accretion on preferred stock. No dividends were paid nor were there any accretion on preferred stock for the years ended June 30, 2006 and 2005. Dividends and accretion on preferred stock totaled $37,000 and $50,000, respectively, for the year ended June 30, 2004. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities. The total potential common shares that have not been included in the calculation of diluted net loss per common share totaled 4,250,000 on June 30, 2006 and 3,808,000 at June 30, 2005 as the effects of such are anti-dilutive for
those years. All share and per share amounts have been retroactively adjusted for the effect of a one-for-twenty reverse stock split of the Company&#146;s common stock at June 30, 2003.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Customer and Vendor Concentrations</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During the years ended June 30, 2006, 2005 and 2004, the Company had no customer that accounted for 10% or more of the Company&#146;s net sales. As of June 30, 2006, the Company had one customer that represented 18.7% or more of accounts receivable as of such date; and all other customers represented less than 9.2% of accounts receivable. As of June 30, 2005, the Company had no customer that represented 10% or more of accounts receivable as of such date. As of June 30, 2004, the Company had one customer that represented 18% of accounts receivable as of such date.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-61</P>
<P style="margin:0pt"><BR></P>
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<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During the year ended June 30, 2006, the Company purchased 10.5% of its inventories from one vendor, and all other vendors represented less than 6.0% of inventory purchases. During the years ended June 30, 2005 and 2004, the Company did not purchase 10% or more of its inventories from any single vendor. As of June 30, 2006, the Company had one vendor that represented 32% of accounts payable; two vendors that represented approximately 16% each, and all other venders represented less than 4% each as of such date. As of June 30, 2005, the Company had one vendor that represented 20% of accounts payable of such date; and as of June 30, 2004 the Company had no vendor that represented 10% or more of accounts payable as of such date.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Fair Value of Financial Instruments</I></B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><I>SFAS No. 107</I></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Statement of Financial Accounting Standards No. 107, &#147;<I>Disclosures about Fair Value of Financial Instruments</I>,&#148; issued in December 1991, requires the disclosure of the fair value, if reasonably obtainable, of the Company&#146;s financial instruments including assets and liabilities that both (a) impose on one entity a contractual obligation (1) to deliver cash or another financial instrument to a second entity or (2) to exchange other financial instruments on potentially unfavorable terms with the second entity; and (b) convey to that second entity a contractual right (1) to receive cash or another financial instrument from the first entity or (2) to exchange other financial instruments on potentially favorable terms with the first entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company&#146;s financial instruments consist of its cash, accounts receivable, line of credit, accounts payable and accrued expense; note payable and notes payable to related parties. Management has determined that, except for the allowance for doubtful accounts receivable, the fair values of the Company&#146;s financial instruments approximate their carrying values at June 30, 2006 and 2005.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Recently Issued Accounting Pronouncements</I></B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><I>SFAS No. 151</I></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In November 2004, the FASB issued SFAS No. 151, &#147;<I>Inventory Costs</I>.&#148; &nbsp;SFAS No. 151 amends the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) under the guidance in ARB No. 43, Chapter 4, &#147;Inventory Pricing.&#148; &nbsp;Paragraph 5 of ARB No. 43, Chapter 4, previously stated that. &#147; . . under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges. . . .&#148; This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of &#147;so abnormal.&#148; In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is
effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management does not expect adoption of SFAS No. 151 to have a material impact on the Company&#146;s financial statements.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><I>SFAS No. 152</I></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In March 2004, the FASB issued SFAS No. 152, &#147;<I>Accounting for Real Estate Time-Sharing Transactions</I>.&#148; &nbsp;The FASB issued this Statement as a result of the guidance provided in AICPA Statement of Position (SOP) 04-2, &#147;Accounting for Real Estate Time-Sharing Transactions.&#148; SOP 04-2 applies to all real estate time-sharing transactions. Among other items, the SOP provides guidance on the recording of credit losses and the treatment of selling costs, but does not change the revenue recognition guidance in SFAS No. 66, &#147;<I>Accounting for Sales of Real Estate</I>,&#148; for real estate time-sharing transactions. SFAS No. 152 amends Statement No. 66 to reference the guidance provided in SOP 04-2. SFAS No. 152 also amends SFAS No. 67, &#147;Accounting for Costs and Initial Rental Operations of Real Estate Projects,&#148; to state that SOP 04-2 provides the relevant guidance on accounting for
incidental operations and costs related to the sale of real estate time-sharing transactions. SFAS No. 152 is effective for years beginning after June 15, 2005, with restatements of previously issued financial statements prohibited. This statement is not applicable to the Company.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-62</P>
<P style="margin:0pt"><BR></P>
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<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><I>SFAS No. 153</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In March 2004, the FASB issued SFAS No. 153, &#147;<I>Exchanges of Nonmonetary Assets</I>,&#148; an amendment to Opinion No. 29, &#147;Accounting for Nonmonetary Transactions.&#148; Statement No. 153 eliminates certain differences in the guidance in Opinion No. 29 as compared to the guidance contained in standards issued by the International Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair value exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Such an exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring in periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in
periods beginning after March 16, 2004. Management does not expect adoption of SFAS No. 153 to have a material impact on the Company&#146;s financial statements.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><I>FAS No. 154</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In May 2005, the FASB issued Statement of Accounting Standards (SFAS) No. 154, &#147;<I>Accounting Changes and Error Corrections</I>&#148; an amendment to Accounting Principles Bulletin (APB) Opinion No. 20, &#147;Accounting Changes,&#148; and SFAS No. 3, &#147;<I>Reporting Accounting Changes in Interim Financial Statements</I>&#148; though SFAS No. 154 carries forward the guidance in APB No. 20 and SFAS No. 3 with respect to accounting for changes in estimates, changes in reporting entity, and the correction of errors. SFAS No. 154 establishes new standards on accounting for changes in accounting principles, whereby all such changes must be accounted for by retrospective application to the financial statements of prior periods unless it is impracticable to do so. SFAS No. 154 is effective for accounting changes and error corrections made in fiscal years beginning after December 15, 2005, with early adoption permitted for changes and
corrections made in years beginning after May 2005.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><I>FIN No. 47</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In March 2005, the FASB issued FASB Interpretation (&#147;FIN&#148;) No. 47, &#147;Accounting for Conditional Asset Retirement Obligations.&#148; &nbsp;FIN No. 47 clarifies the meaning of the term <I>conditional asset retirement obligation</I> as used in FASB Statement No. 143, &#147;Accounting for Asset Retirement Obligations&#148; and clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. This interpretation is effective no later than the end of fiscal years ending after December 15, 2005 (December 31, 2005 for calendar-year companies). Retrospective application of interim financial information is permitted but is not required. &nbsp;Management does not expect adoption of FIN No. 47 to have a material impact on the Company&#146;s financial statements.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><I>FIN No. 48</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109, (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#146;s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return that results in a tax benefit. Additionally, FIN 48 provides guidance on de-recognition, income statement classification of interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the effect that the application of FIN 48 will have on its results of operations and
financial condition.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-63</P>
<P style="margin:0pt"><BR></P>
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<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>2. Inventories</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Inventories are comprised of rare coins, bullion and second-hand jewelry.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Inventory totaling $1,327,000 and $1,286,000 of owned coins was on consignment with third parties at June 30, 2006 and 2005, respectively. The balance of inventory was located in the Company&#146;s vault, at trade shows or with appraisal agencies. As of June 30, 2006, management reserved $840,000 against the gross inventory cost to reflect its analysis of the fair market of each inventory item as determined by third party industry sources such as the Certified Coin Exchange, offers received from customers on specific coins or publicly documented auction results for similar coins.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company, from time to time, enters into informal partnerships with third parties who are either vendors or customers for the purchase and sale of specific rare coins. These arrangements include joint ownership of the rare coin and equal participation in profit or loss on specific transactions adjusted for agreed upon expenses and interest costs. When the rare coins are purchased the Company records its proportional ownership as inventory and upon the sale of the rare coins, the Company records its proportional sale and profit or loss. In most instances, the Company elects to buy-out the partnership interest in rare coins prior to its sale and the recording of a proportional sale and profit or loss are no longer applicable. At any given time, the Company may be involved in a few of these agreements.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>3. Property and Equipment</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Property and equipment consists of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=332.95></TD><TD width=13.95></TD><TD width=11.05></TD><TD width=40.7></TD><TD width=13.95></TD><TD width=11.05></TD><TD width=40.7></TD><TD width=3.65></TD></TR>
<TR><TD valign=bottom width=443.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=69 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2006</B></P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=69 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2005</B></P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=156.6 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Furniture and equipment&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=54.267><P style="margin:0pt" align=right>214</P>
</TD><TD valign=bottom width=18.6><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=54.267><P style="margin:0pt" align=right>143</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Computer equipment and software</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=14.733>&nbsp;</TD><TD valign=bottom width=54.267><P style="margin:0pt" align=right>528</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=14.733>&nbsp;</TD><TD valign=bottom width=54.267><P style="margin:0pt" align=right>351</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Leasehold improvements</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=14.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.267><P style="margin:0pt" align=right>182</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=14.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.267><P style="margin:0pt" align=right>121</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=14.733>&nbsp;</TD><TD valign=bottom width=54.267><P style="margin:0pt" align=right>924</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD valign=bottom width=14.733>&nbsp;</TD><TD valign=bottom width=54.267><P style="margin:0pt" align=right>615</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
<TR><TD valign=bottom width=443.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accumulated depreciation and amortization</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=14.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.267><P style="margin:0pt" align=right>(540</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=18.6><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=14.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.267><P style="margin:0pt" align=right>(395</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.867><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=443.933>&nbsp;</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=14.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=54.267><P style="margin:0pt" align=right>384</P>
</TD><TD valign=bottom width=18.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=14.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=54.267><P style="margin:0pt" align=right>220</P>
</TD><TD valign=bottom width=4.867>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Depreciation expense for the years ended June 30, 2006, 2005 and 2004 were $145,000; $77,000 and $94,000, respectively.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>4. Goodwill</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July 6, 2001, the Company recorded goodwill for its purchase of its SGBH subsidiary in the amount of $591,000. The Company tested the goodwill for impairment during the quarter ended December 31, 2002. Management estimated the fair value of the reporting unit (i.e. Company as a whole) using a present value model on estimated future cash flows. This value was then adjusted to calculate the implied fair value of goodwill based on the allocation of the reporting unit&#146;s assets and liabilities. The calculation identified that the implied fair value was less than the carrying amount of goodwill, indicating that the goodwill had been impaired. Based on this analysis, goodwill was determined to be fully impaired and the Company recorded an impairment of goodwill charge to operations of $591,000 during the year ended June 30, 2003.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>5. Auction and Customer Advances</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Superior has established two short-term lending programs consisting of (i) advancing consignment customers cash based on consigned inventory acquired for upcoming auctions, and, (ii) advancing customers cash based on the customer&#146;s assigning specific rare coins in their inventory to Superior as collateral. According to the terms of its Commercial Line of Credit, Superior can advance a customer up to 70% of consigned or assigned rare coin(s)&#146; wholesale value. For auction advances, Superior will advance cash to a customer and take control of the inventory to be held on consignment for auction. The customer will sign a note receivable for the funds advanced to be secured </P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-64</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>5. Auction and Customer Advances &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt">by the consigned inventory. As consigned inventory is sold, the proceeds will be collected, repaying Superior for the auction advance and any auction fees, with the remaining amount due to the consignor. For customer inventory advances, Superior will advance cash to a customer and take control of the assigned inventory. The customer will sign a promissory note for the funds advanced to be secured by the assigned inventory. Auction and customer advances bear interest at rates between 10% and 18% based primarily on the customer&#146;s creditworthiness and the loan size. The average term of the loan is approximately three months and no individual loan will exceed one year. Customers may require minimum prices for their consigned coins, and if the coin has not sold by the loan maturity date, the customer must choose to refinance the loan, repay the loan, or permit Superior to liquidate the coin. Superior will retain control of the assigned inventory until
the customer repays the advance. Auction and customer advances consist of the follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=334.8></TD><TD width=14.15></TD><TD width=9.55></TD><TD width=42.95></TD><TD width=14.15></TD><TD width=9.55></TD><TD width=42.85></TD></TR>
<TR><TD valign=bottom width=446.4>&nbsp;</TD><TD valign=bottom width=18.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=70 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2006</B></P>
</TD><TD valign=bottom width=18.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=69.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2005</B></P>
</TD></TR>
<TR><TD valign=bottom width=446.4>&nbsp;</TD><TD valign=bottom width=18.867>&nbsp;</TD><TD valign=bottom width=158.733 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD></TR>
<TR><TD valign=bottom width=446.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Auction advances</P>
</TD><TD valign=bottom width=18.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=12.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.267><P style="margin:0pt" align=right>1,386</P>
</TD><TD valign=bottom width=18.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=12.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.133><P style="margin:0pt" align=right>3,358</P>
</TD></TR>
<TR><TD valign=bottom width=446.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Customer inventory advances&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=18.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=12.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.267><P style="margin:0pt" align=right>443</P>
</TD><TD valign=bottom width=18.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=12.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>1,592</P>
</TD></TR>
<TR><TD valign=bottom width=446.4>&nbsp;</TD><TD valign=bottom width=18.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=12.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.267><P style="margin:0pt" align=right>1,829</P>
</TD><TD valign=bottom width=18.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=12.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.133><P style="margin:0pt" align=right>4,950</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>6. Line-of-Credit &#150; Related Party</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On October 13, 2003, we executed a Commercial Loan and Security Agreement (&#147;Commercial LOC&#148;) with Stanford Financial Group Company (&#147;SFG&#148;), an affiliate of our principal stockholder, Stanford International Bank Limited (&#147;SIBL&#148; or &#147;Stanford&#148;), to provide us with a $7,500,000 line of credit for purposes of financing our inventory, auction advances and inventory loans to other rare coin dealers and collectors. A portion of this indebtedness was assigned to SIBL, and on March 31, 2005, as described below, pursuant to SIBL&#146;s purchase of $2,500,000 of our Series E Preferred Stock, SIBL assumed, converted and cancelled $2,500,000 of this indebtedness under the Commercial LOC. In addition, SFG further amended the Commercial LOC increasing the line of credit to $10,000,000. Effective July 21, 2005 the Commercial LOC was renewed through October 1, 2006. On May 2, 2006, SFG further amended the
Commercial LOC increasing the line of credit to $10,850,000 to reflect an additional advance made March 30, 2006, to partially fund the repayment of a private line of credit. On September 5, 2006, the Commercial LOC was renewed through October 1, 2007. The Commercial LOC bears interest at the prime-lending rate (8.25% at June 30, 2006) and is secured by substantially all of Superior&#146;s assets. As of June 30, 2006, the outstanding balance was $10,850,000 and there was no accrued interest payable. During the years ended June 30, 2006, 2005 and 2004, Superior incurred interest expense on the line of credit &#150; related party totaling $701,000; $394,000 and $104,000, respectively.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>7. Lines-of-Credit</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July 9, 2002 and July 26, 2002 the Company entered into temporary working capital loan agreements with a private Lender (&#147;Lender&#148;) in the amounts of $1,500,000 and $1,000,000 respectively. These loans bore interest at the prime lending rate plus 7% per annum (11% at June 30, 2003), were secured by the inventory of the Company and a personal guarantee of the Company&#146;s chief executive officer and a principal stockholder, and, were due to be repaid in 60 days. On August 8, 2002 the Company converted the two loans from the Lender into a Line of Credit with the Lender by executing a Secured Revolving Line of Credit Agreement (&#147;Private Line of Credit&#148;). The Private Line of Credit was modified and extended a number of times between August 2002 and March 2006. On March 31, 2006, the Company repaid the balance of the line of credit of $1,900,000 by applying the accounts receivable from the sale of $1,000,000 of rare
coins to the Lender, by making a payment of $850,000 in cash and by receiving a $50,000 discount for early payment. The $50,000 discount was classified as an extraordinary gain on the Statement of Operations. As of June 30, 2005, the outstanding Private Line of Credit balance was $2,200,000 and there was no accrued interest payable. As of June 30, 2006, the outstanding Private Line of Credit balance was $0 and there was no accrued interest payable.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-65</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>8. Notes Payable to a Related Party</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">On April 10, 2002 we executed a subordinated note payable for $1,000,000 to our CEO, Silvano DiGenova, bearing interest at 9% per annum with quarterly installment payments of $150,000 plus interest. No principal payments had been made through February 2003. On February 14, 2003, the terms of the note were modified to provide for repayment of principal in the amount of $50,000 per quarter commencing on September 30, 2003 and for interest to be paid monthly. The Company was in arrears of $150,000 of principal payments that were due on December 31, 2004, March 31, 2005 and June 30, 2005 of $50,000 each. However, Mr. DiGenova agreed to delay these principal repayments to September 30, 2005. As of the year ending June 30, 2005, the outstanding balance was $750,000 and all interest payments were paid to date and continued to be paid current on a monthly basis. During the year ended June 30, 2006, the note was reduced by $250,000 and the
interest rate was changed to 12%. At June 30, 2006, the balance due was $500,000 and there was no accrued interest payable. The remaining balance is due as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=338.8></TD><TD width=13.25></TD><TD width=10.6></TD><TD width=38.95></TD><TD width=13.3></TD><TD width=10.6></TD><TD width=38.95></TD><TD width=3.55></TD></TR>
<TR><TD valign=bottom width=451.733>&nbsp;</TD><TD valign=bottom width=17.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2006</B></P>
</TD><TD valign=bottom width=17.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2005</B></P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.733>&nbsp;</TD><TD valign=bottom width=17.667>&nbsp;</TD><TD valign=bottom width=149.867 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total</P>
</TD><TD valign=bottom width=17.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14.133><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=51.933><P style="margin:0pt" align=right>500</P>
</TD><TD valign=bottom width=17.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14.133><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=51.933><P style="margin:0pt" align=right>750</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=451.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less current portion&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=14.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.933><P style="margin:0pt" align=right>(200</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.733><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=14.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.933><P style="margin:0pt" align=right>(350</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=451.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Long-term</P>
</TD><TD valign=bottom width=17.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=14.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=51.933><P style="margin:0pt" align=right>300</P>
</TD><TD valign=bottom width=17.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=14.133><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=51.933><P style="margin:0pt" align=right>400</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Interest expense incurred to notes payable to related parties during the year ended June 30, 2006, 2005 and 2004 totaled $66,000, $78,000 and $101,000, respectively. Future minimum payments under notes payable to a related party are as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=137.5></TD><TD width=12.5></TD><TD width=13></TD><TD width=32.6></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=183.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ending June 30,</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.8 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Amount</B></P>
</TD></TR>
<TR><TD valign=bottom width=183.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=60.8 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD></TR>
<TR><TD valign=bottom width=183.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2007</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.467><P style="margin:0pt" align=right>200</P>
</TD></TR>
<TR><TD valign=bottom width=183.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2008&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=17.333><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.467><P style="margin:0pt" align=right>300</P>
</TD></TR>
<TR><TD valign=bottom width=183.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=17.333><P style="line-height:14pt; margin:0pt; font-size:12pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.467><P style="margin:0pt" align=right>500</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>9. Notes Payable</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During October 2004 the Company executed three demand notes payable with a private lender totaling $650,000 bearing interest at 10% per annum secured by specific inventory. Interest is payable monthly. As of January 1, 2006 the interest rate increased to 12% per annum. As of June 30, 2006, the outstanding balance was $650,000 and there was no accrued interest payable.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Income Taxes</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The provision for income taxes consists of the following components:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=289.5></TD><TD width=12.55></TD><TD width=23.3></TD><TD width=23.75></TD><TD width=12.55></TD><TD width=23.4></TD><TD width=23.7></TD><TD width=12.55></TD><TD width=15.15></TD><TD width=31.55></TD></TR>
<TR><TD valign=bottom width=386>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.733 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2006</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.8 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2005</B></P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=62.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=386>&nbsp;</TD><TD valign=bottom width=238 colspan=9><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD></TR>
<TR><TD valign=bottom width=386><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Current:</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=31.067>&nbsp;</TD><TD valign=bottom width=31.667>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=31.2>&nbsp;</TD><TD valign=bottom width=31.6>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=20.2>&nbsp;</TD><TD valign=bottom width=42.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Federal&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=31.067><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=31.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=31.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=31.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=20.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=42.067><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=386><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">State</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.667><P style="margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.6><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=20.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.067><P style="margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=386>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.667><P style="margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.6><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=20.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.067><P style="margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=386><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred:</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=31.067>&nbsp;</TD><TD valign=bottom width=31.667>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=31.2>&nbsp;</TD><TD valign=bottom width=31.6>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=20.2>&nbsp;</TD><TD valign=bottom width=42.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Federal</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=31.067>&nbsp;</TD><TD valign=bottom width=31.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=31.2>&nbsp;</TD><TD valign=bottom width=31.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=20.2>&nbsp;</TD><TD valign=bottom width=42.067><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=386><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">State</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=20.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.067><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=386>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=20.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.067><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=386>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=31.067><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=31.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=31.2><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=31.6><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=20.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=42.067><P style="margin:0pt" align=right>12</P>
</TD></TR>
</TABLE>
<P style="margin:5.35pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-66</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:6.65pt; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=289.5></TD><TD width=12.55></TD><TD width=23.3></TD><TD width=23.75></TD><TD width=12.55></TD><TD width=23.4></TD><TD width=23.7></TD><TD width=12.55></TD><TD width=15.15></TD><TD width=31.55></TD></TR>
</TABLE>
<P style="margin:0pt" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Income Taxes &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The income tax effects of significant items comprising the Company&#146;s net deferred income tax assets and liabilities are as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=275.45></TD><TD width=13.4></TD><TD width=8.05></TD><TD width=41.55></TD><TD width=13.4></TD><TD width=8.05></TD><TD width=41.55></TD><TD width=13.4></TD><TD width=8.05></TD><TD width=41.55></TD><TD width=3.55></TD></TR>
<TR><TD valign=bottom width=367.267>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2006</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2005</B></P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2004</B></P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=234.133 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred tax assets:</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Unearned income&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=17.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net operating loss carryforwards</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>3,972</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>3,592</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>3,747</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inventory reserve</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>360</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Goodwill</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>169</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>186</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>203</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Intangible asset</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accrued vacation pay</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>35</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>23</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>29</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Allowance for doubtful accounts</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>155</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>52</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>111</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Contributions</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Options and warrants not exercised</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>287</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>95</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>54</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Depreciation</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>26</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>12</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Other</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Gross deferred tax assets</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>4,989</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>3,998</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>4,180</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Valuation allowance</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>(4,740</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>(3,836</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>(3,988</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Deferred tax assets, net of reserve</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>249</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>162</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>192</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred tax liabilities:</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4>&nbsp;</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4>&nbsp;</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Repairs and maintenance</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>(26</P>
</TD><TD valign=bottom width=17.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD valign=bottom width=10.733>&nbsp;</TD><TD valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">State tax benefit</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>(223</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>(162</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=17.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=10.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>(192</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.733><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=367.267><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net deferred tax liabilities</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=10.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=55.4><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">At June 30, 2006, 2005 and 2004, a 100% valuation allowance has been provided on the net deferred income tax assets since the Company cannot determine that it is &#147;more likely than not&#148; they will be realized.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The income tax benefit differs from the amount of income tax determined by applying the expected U.S. Federal income tax rate to pretax loss for the fiscal periods as a result of:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=277.35></TD><TD width=12.75></TD><TD width=10.1></TD><TD width=37.25></TD><TD width=16.2></TD><TD width=10.1></TD><TD width=37.25></TD><TD width=16.2></TD><TD width=10.1></TD><TD width=37.25></TD><TD width=3.45></TD></TR>
<TR><TD valign=bottom width=369.8>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=63.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2006</B></P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=63.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2005</B></P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=63.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2004</B></P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.8>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667>&nbsp;</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667>&nbsp;</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Computed tax benefit&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=13.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>(846</P>
</TD><TD valign=bottom width=21.6><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=13.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>(209</P>
</TD><TD valign=bottom width=21.6><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=13.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>192</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Decrease (increase) in income tax benefit resulting from:</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667>&nbsp;</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667>&nbsp;</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Nondeductible expenses</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>35</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>21</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>12</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">State income tax expense</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>(145</P>
</TD><TD valign=bottom width=21.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>(32</P>
</TD><TD valign=bottom width=21.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>46</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Change in valuation allowance</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>958</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>221</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=49.667><P style="margin:0pt" align=right>(238</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=369.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other</P>
</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=13.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=369.8>&nbsp;</TD><TD valign=bottom width=17>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.467><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.667><P style="margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.467><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.667><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=13.467><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.667><P style="margin:0pt" align=right>12</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">At June 30, 2006, the Company has a Federal tax net operating loss (&#147;NOL&#148;) carryforward of approximately $10,358,000 which expires at various dates though 2025, and a state net operating loss carryforward of approximately $5,097,000, which expires at various dates through 2015.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">A portion of the NOLs described above are subject to provisions of the Internal Revenue Code &#167;382 which limits the use of NOL carryforwards when changes of ownership of more than 50% occur during a three-year testing period. During the year ended June 30, 2003, the cumulative effects of SIBL&#146;s investment in the Company through the Sale of Series B and Series D preferred stock on April 3, 2002 and February 14, 2003, respectively, the Company ownership changed by more than 50%. The issues of common and preferred stock during the years-ended</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-67</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Income Taxes &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">June 30, 2002 and 2003 will limit the use of these NOLs. Further changes in common or preferred stock ownership in future years potentially limit the use of NOLs. The effect of such limitations has yet to be determined. In addition, NOL carry forwards for the purposes of offsetting California state taxable income have been limited to 50% for tax years 1998 and 2001, and limited to 60% for the tax years 2002 and 2003, only. All other tax years can carry forward 100% of NOL.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>11. Equity</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Common Stock Transactions</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On June 30, 2003, the Company&#146;s stockholders at the Annual Meeting of the Shareholders approved both an amendment to the Company&#146;s articles of incorporation to effect a one-for-twenty reverse split of the Company&#146;s common shares and the Company&#146;s re-incorporation into the State of Delaware with authorized common stock of 12,500,000 and preferred stock of 10,000,000. The Series A, B and D preferred shares issued before this date retained the same rights and privileges as previously granted. All common share amounts presented have been retroactively adjusted to reflect a one-for-twenty reverse stock split.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July 24, 2003, the Company issued 1,845,100 common shares pursuant to the exercise of 1,845,100 warrants to purchase the Company&#146;s common stock with an exercise price of $0.001 per common share (see additional discussion of warrants in Sale of Series D Convertible Preferred Stock below).</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On August 20, 2004, the Company issued 24,000 common shares to an investor and public relations firm in exchange for services. The services were valued at $30,000 and were based on the closing price of the Company&#146;s common stock as listed on NASDAQ&#146;s Over-the-counter Bulletin Board on the day the shares were issued.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On January 4, 2005, the Company issued 180,000 common shares to an investor relations firm in exchange for services. The services were valued at $270,000 and were based on the closing price of the Company&#146;s common stock as listed on NASDAQ&#146;s Over-the-counter Bulletin Board on the day the shares were issued.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Between March 17, 2005 and June 6, 2005, the Company issued 55,000 common shares for cash of $27,000 pursuant to the exercise of stock options under our 2003 Omnibus Stock Option Plan</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On June 20, 2005, the Company issued 50,000 shares for cash of $50,000 pursuant to the exercise of stock warrants.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On June 20, 2005, the Company issued 25,000 restricted common shares in exchange for future services of an employee. The shares vest over a four year period on either a quarterly or annual basis at the option of the employee. The services were valued at $79,000 based on the closing price of the Company&#146;s common stock as listed on NASDAQ&#146;s Over-the-counter Bulletin Board on the day prior to the day the shares were issued. As of June 30, 2006, $57,785 remained unamortized.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On March 27, 2006, the Company issued 15,000 shares of Common Stock to Mr. Paul Biberkraut, the former Chief Financial Officer and one of our directors, for services performed for the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">On March 31, 2006, the Company cancelled 26,662 shares of Common Stock that had been granted to American Capital Ventures pursuant to the terms of a public relations service agreement that expired on March 31, 2006.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Sale and Redemption of Series A Convertible Preferred Stock</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July 3, 2001, the Board of Directors of the Company authorized the issuance of shares of $.001 par value preferred stock and simultaneously, the Company commenced a private placement of Series A $5.00 Redeemable 8% Convertible Preferred Stock (&#147;Series A Preferred Stock&#148;). The Series A Preferred Stock carried an annual dividend of $0.40 per share payable quarterly in cash or common stock of the Company at the Company&#146;s election, was convertible into 11 shares of the Company&#146;s common stock and provided for cash redemption or conversion into common &nbsp;stock of the Company based on elections by the holder or by the Company with certain contingencies.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-68</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>11. Equity &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company originally issued 125,000 shares of Series A Preferred Stock. On March 31, 2004, in accordance with the redemption provisions of the Series A Preferred Stock, all the holders of the Series A Preferred Stock requested the redemption of their shares. However, at the time, because the Company&#146;s liabilities exceeded its assets, the Company was prohibited under Delaware corporation law from commencing the redemption. As of March 31, 2005, the Company was no longer prohibited from commencing the redemption and in April 2005, the Company began the redemption. As of June 30, 2005, the amount payable with respect to the Series A Preferred Stock redemption was shown as a liability of $275,000 on the balance sheet. All of our shares of Series A Redeemable 8% Convertible Preferred Stock, or Series A Preferred Stock, were redeemed by cash payments by the end of fiscal 2006. The 125,000 shares of Series A Preferred Stock that were
redeemed are no longer available for reissuance.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Series B Convertible Preferred Stock</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company currently has 3,400,000 shares of Series B $1.00 Convertible Preferred Stock, or Series B Preferred Stock, outstanding. These shares were issued on April 10, 2002. In connection with this transaction, the Company issued to the purchasers warrants to purchase an aggregate of 1,700,000 shares of its common stock, at exercise prices ranging from $2.00 to $4.00 per share. Management estimated the fair value of these warrants at $434,000, based on an appraisal of previously issued options with similar terms and the trading price of the Company&#146;s stock, and this amount was recorded as additional paid-in capital. The Series B Preferred Stock has voting rights with respect to all matters presented to our stockholders, and is entitled to the number of votes equal to the number of shares of Common Stock into which it is convertible. The Series B Preferred Stock is not entitled to dividends or preemptive rights.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Each share of Series B Preferred Stock is convertible into 0.5 shares of Common Stock at the election of the holder subject to certain adjustments, and is adjustable upon our issuance of Common Stock or securities convertible into Common Stock at a price less than $1.00 per share.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Sale of Series D Convertible Preferred Stock</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On February 14, 2003, the Company issued 2,000,000 shares of newly created Series D $1.00 convertible preferred stock (&#147;Series D stock&#148;) for a purchase price of $2,000,000 pursuant to a stock purchase and warrant agreement (&#147;purchase agreement&#148;) with Stanford. On that date $1,500,000 of the purchase price was paid with $500,000 in cash and the conversion of $1,000,000 in bridge loans that Stanford granted to the Company in anticipation of the closing of the purchase agreement. The balance of the purchase price less interest due on the converted bridge loans and legal fees was paid on March 14, 2003. The Series D stock is convertible into common shares of the company at any time at the option of Stanford at the conversion rate 0.833333 common shares for each Series D share subject to certain anti-dilution adjustments. The Series D stockholders are entitled to vote on all matters requiring a vote of the shareholders
and are entitled to the number of votes equal to the number of common shares into which the Series D stock is convertible. The purchase agreement also provided for the reduction to $0.001 per common share of the purchase price of 1,500,000 warrants that were issued to Stanford and their designated warrant holders as part of the Series B stock sale in April 2002. In connection with warrant price reduction the Company recorded a dividend of $300,000 on the Series B stock as its estimate of the fair value of the transaction. The reduced warrant price contemplated the reverse stock split that was provided for in the purchase agreement and that was subsequently approved by the Company&#146;s stockholders on June 30, 2003. The warrants were exercised on July 24, 2003. Concurrently with the closing of the purchase agreement, the Company, Stanford and the CEO entered into a share exchange and note modification agreement (&#147;modification agreement&#148;). Under the modification agreement the CEO exchanged
7,000 Series C shares of the Company for 583,333 common shares of the Company. The modification agreement provided for a reduction to $0.001 per common share of the exercise price of 345,100 warrants that were previously issued to the CEO. The previously issued warrants consist of 200,000 warrants issued in connection with the Series B stock in April 2002 and 145,100 warrants issued in connection with personal loan guarantees by the CEO for the Company&#146;s debt. In connection with the warrant price reductions the </P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-69</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>11. Equity &#150; (continued)</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt">Company recorded a dividend of $40,000 on the Series B stock and interest expense of &nbsp;$29,000 as its estimates of the fair value of the transactions. The reduced warrant price contemplated a reverse stock split that was provided for in the purchase agreement and that was subsequently approved by the Company&#146;s stockholders on June 30, 2003. The warrants were exercised on July 24, 2003. Additionally, the CEO agreed to amend his $1,000,000 promissory note due from the Company, to provide for quarterly principal payments of $50,000 that were to commence on September 30, 2003 (Note 8).</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The shareholders of preferred stock issued by the Company have a liquidation preference over the common shareholders. The Series A Preferred shareholders have primary preferential liquidation rights at $5.10 per share, followed by the Series B, Series D and Series E Preferred shareholders at $1.00 per share each.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Sale of Series E Convertible Preferred Stock</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On March 31, 2005, The Company issued 2,500,000 shares of newly created Series E $1.00 convertible preferred stock (&#147;Series E stock&#148;) for a purchase price of $2,500,000 pursuant to a stock purchase agreement (&#147;purchase agreement&#148;) with SIBL, a principal stockholder of the Company. On that date the purchase price of $2.5 million was paid by the conversion and cancellation of $2.5 million of indebtedness under the Company&#146;s Commercial LOC with Stanford Financial, an affiliate of Stanford (see Note 6). The Series E stock is convertible into common shares of the Company at any time at the option of Stanford at a conversion rate of six Series E shares into one common share subject to certain anti-dilution adjustments. The Series E stockholders are entitled to vote on all matters requiring a vote of the shareholders and are entitled to the number of votes equal to the number of common shares into
which the Series E stock is convertible.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>12. Share-Based Stock Option Plans</B></P>
<P style="margin-top:8.35pt; margin-bottom:0pt"><B><I>Stock Options</I></B></P>
<P style="margin-top:8.35pt; margin-bottom:0pt"><I>2003 Omnibus Stock Option Plan</I></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On May 1, 2003, the Company&#146;s Board of Directors approved, subject to shareholder approval which was obtained on June 30, 2003, a stock option plan (the &#147;2003 Plan&#148;) to attract and retain competent personnel and to provide to participating officers, directors, employees and consultants long-term incentive for high levels of performance and for unusual efforts to improve the financial performance of the Company. The 2003 Plan provides for both incentive stock options specifically tailored to the provisions of the Internal Revenue Code and for options not qualifying as incentive stock options. Employees and consultants of the Company, including officers and directors, are eligible to receive options granted under the 2003 Plan. The shares subject to the options will generally be made available from authorized, but unissued shares. The Board of Directors (&#147;Board&#148;) will administer the 2003 Plan.
The Board has full authority to award options under the 2003 Plan, to establish the terms of the option agreements, and to take all other action deemed appropriate for administration of the 2003 Plan. The 2003 Plan replaced the 2000 Omnibus Stock Option Plan.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><I>2000 Omnibus Stock Option Plan</I></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On August 1, 2000, the Company&#146;s Board of Directors approved, subject to shareholder approval which was obtained, a stock option plan (the &#147;2000 Plan&#148;) to attract and retain competent personnel and to provide to participating officers, directors, employees and consultants long-term incentive for high levels of performance and for unusual efforts to improve the financial performance of the Company. The 2000 Plan provides for both incentive stock options specifically tailored to the provisions of the Internal Revenue Code and for options not qualifying as incentive stock options. Employees and consultants of the Company, including officers and directors, were eligible to receive options granted under the 2000 Plan. The shares subject to the options were made available from authorized, but unissued shares. The Board of Directors (&#147;Board&#148;) administered the 2000 Plan. The Board had full authority to
award options under the 2000 Plan, to establish the terms of the option agreements, and to take all other action deemed appropriate for administration of the 2000 Plan. The 2000 Plan was terminated on May 1, 2003 and was replaced by the 2003 Omnibus Stock Option Plan.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-70</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>12. Share-Based Stock Option Plans &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During the year ended June 30, 2006, the Company granted to certain employees and non-employees, 65,000 stock options to purchase common stock at an average exercise price of $2.50. The range of exercise prices of options issued during the year was $1.20 to $3.02. The stock options vest after one year and are exercisable over period of up to five years after vesting and expire at earlier of five years after the vesting date of each option or one month after the termination of employment or service agreement with the Company. The stock options were granted at strike prices, which were set at closing price of the Company&#146;s stock as listed on the NASDAQ Over-the-counter Bulletin Board and Pink Sheets as of the date of grant, except for one grant priced at the higher price of the prior week. During the year ended June 30, 2006, the Company cancelled 35,733 stock options and 96,667 stock options were forfeited that expired or had not
vested at the time of employees and non-employees discontinued service agreements with the Company. The stock option grants during the year ended June 30, 2006 include 60,000 stock options to directors of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During the year ended June 30, 2005, the Company granted to certain employees and non-employees, 360,000 stock options to purchase common stock at an average exercise price of $2.80. The range of exercise prices of options issued during the year was $1.01 to $4.25. The stock options vest over time of up to four years. All are exercisable over period of up to five years after vesting and expire at earlier of five years after the vesting date of each option or one month after the termination of employment or service agreement with the Company. The stock options were granted at strike prices, which were set at closing price of the Company&#146;s stock as listed on the NASDAQ Over-the-counter Bulletin Board and Pink Sheets as of the date of grant. During the year ended June 30, 2005, the Company cancelled 95,000 stock options that expired or had not vested at the time of employees and non-employees discontinued service with the Company and
55,000 stock options were exercised. The stock option grants during the year ended June 30, 2005 include 60,000 stock options to directors of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During the year ended June 30, 2004, the Company granted to certain employees and non-employees, 410,000 stock options to purchase common stock at an average exercise price of $0.77. The range of exercise prices of options issued during the year was $0.24 to $1.01. Certain stock options vest immediately and others vest over time. All are exercisable over period of up to five years after vesting and expire at earlier of five years after the vesting date of each option or one month after the termination of employment or service agreement with the Company. The stock options were granted at strike prices, which were set at closing price of the Company&#146;s stock as listed on the NASDAQ Over-the-counter Bulletin Board and Pink Sheets as of the date of grant. During the year ended June 30, 2004, the Company cancelled 97,750 stock options that expired or had not vested at the time of employees and non-employees discontinued service with the
Company. The stock option grants during the year ended June 30, 2004 include 50,000 stock options to directors of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following table summarizes information about stock option transactions for the years shown:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=196.8></TD><TD width=12.5></TD><TD width=32.5></TD><TD width=12.5></TD><TD width=7.4></TD><TD width=25.5></TD><TD width=12.5></TD><TD width=32.5></TD><TD width=12.5></TD><TD width=7.4></TD><TD width=25.5></TD><TD width=12.5></TD><TD width=32.5></TD><TD width=12.5></TD><TD width=9.15></TD><TD width=23.75></TD></TR>
<TR><TD valign=bottom width=262.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=103.867 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2006</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=103.867 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2005</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=103.867 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30, 2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=262.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Option<BR>
Shares</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Option<BR>
Shares</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Option<BR>
Shares</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD></TR>
<TR><TD valign=bottom width=262.4>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=9.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=34>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=9.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=34>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=12.2>&nbsp;</TD><TD valign=bottom width=31.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=262.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Outstanding at beginning of period&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>636,000</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34><P style="margin:0pt" align=right>2.41</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>426,000</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34><P style="margin:0pt" align=right>1.50</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>113,750</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=12.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=31.667><P style="margin:0pt" align=right>6.05</P>
</TD></TR>
<TR><TD valign=bottom width=262.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options granted</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>65,000</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=34><P style="margin:0pt" align=right>2.50</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>360,000</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=34><P style="margin:0pt" align=right>2.80</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>410,000</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=12.2>&nbsp;</TD><TD valign=bottom width=31.667><P style="margin:0pt" align=right>0.77</P>
</TD></TR>
<TR><TD valign=bottom width=262.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options canceled</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>(35,733</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=34><P style="margin:0pt" align=right>3.21</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>(95,000</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=34><P style="margin:0pt" align=right>0.91</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>(97,750</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=12.2>&nbsp;</TD><TD valign=bottom width=31.667><P style="margin:0pt" align=right>3.74</P>
</TD></TR>
<TR><TD valign=bottom width=262.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options forfeited</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>(96,667</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=34><P style="margin:0pt" align=right>1.72</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=34><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=12.2>&nbsp;</TD><TD valign=bottom width=31.667><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=262.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options exercised</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>(55,000</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=9.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34><P style="margin:0pt" align=right>0.49</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=12.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=31.667><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=262.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Outstanding at end of period</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>568,600</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34><P style="margin:0pt" align=right>2.49</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>636,000</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34><P style="margin:0pt" align=right>2.41</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>426,000</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=12.2><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=31.667><P style="margin:0pt" align=right>1.50</P>
</TD></TR>
<TR><TD valign=bottom width=262.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exercisable at end of period</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>326,600</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34><P style="margin:0pt" align=right>2.45</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>182,000</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34><P style="margin:0pt" align=right>2.68</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>121,250</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=12.2><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=31.667><P style="margin:0pt" align=right>2.96</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The weighted average remaining contractual life of the options outstanding at June 30, 2006, is 6.2 years.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-71</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>12. Share-Based Stock Option Plans &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following table provides information for the stock options granted during the year ended June 30, 2006:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=329.65></TD><TD width=12.55></TD><TD width=29.95></TD><TD width=12.55></TD><TD width=7.4></TD><TD width=25.55></TD><TD width=12.55></TD><TD width=7.75></TD><TD width=30.05></TD></TR>
<TR><TD valign=bottom width=439.533>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.933><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Number</B></P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.933 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Exercise<BR>
Average<BR>
Price</B></P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Fair Value</B></P>
</TD></TR>
<TR><TD valign=bottom width=439.533>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=39.933>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=9.867>&nbsp;</TD><TD valign=bottom width=34.067>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=10.333>&nbsp;</TD><TD valign=bottom width=40.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=439.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options exercise price equal to stock price</P>
</TD><TD valign=top width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=39.933><P style="margin:0pt" align=right>55,000</P>
</TD><TD valign=top width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.067><P style="margin:0pt" align=right>2.40</P>
</TD><TD valign=top width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=40.067><P style="margin:0pt" align=right>1.90</P>
</TD></TR>
<TR><TD valign=bottom width=439.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options exercise price exceeds the stock price&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=39.933><P style="margin:0pt" align=right>10,000</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=9.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.067><P style="margin:0pt" align=right>3.02</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=10.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=40.067><P style="margin:0pt" align=right>2.15</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following table provides additional information for stock options outstanding at June 30, 2006:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=6.3></TD><TD width=21.2></TD><TD width=15.1></TD><TD width=6.15></TD><TD width=27.35></TD><TD width=15.05></TD><TD width=39.2></TD><TD width=15.05></TD><TD width=7.2></TD><TD width=32.5></TD><TD width=15.05></TD><TD width=50.1></TD><TD width=15.05></TD><TD width=39.2></TD><TD width=15.05></TD><TD width=7.2></TD><TD width=32.55></TD><TD width=15.05></TD><TD width=39.2></TD><TD width=15.05></TD><TD width=8.8></TD><TD width=30.6></TD></TR>
<TR><TD valign=bottom width=101.467 colspan=5>&nbsp;</TD><TD valign=top width=20.067 rowspan=3>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=212.133 colspan=6><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Outstanding</B></P>
</TD><TD valign=top width=20.067 rowspan=3>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=125.333 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exercisable</B></P>
</TD><TD valign=top width=20.067 rowspan=3>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=124.867 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Unexercisable</B></P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=101.467 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Range</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Number</B></P>
</TD><TD valign=top width=20.067 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.933 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD><TD valign=top width=20.067 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.8 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Contractual<BR>
Life</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Number</B></P>
</TD><TD valign=top width=20.067 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Number</B></P>
</TD><TD valign=top width=20.067 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.533 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>From</B></P>
</TD><TD valign=top width=20.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=44.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>To</B></P>
</TD></TR>
<TR><TD valign=bottom width=8.4>&nbsp;</TD><TD valign=bottom width=28.267>&nbsp;</TD><TD valign=top width=20.133>&nbsp;</TD><TD valign=bottom width=8.2>&nbsp;</TD><TD valign=bottom width=36.467>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=66.8>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6>&nbsp;</TD><TD valign=bottom width=43.4>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=11.733>&nbsp;</TD><TD valign=bottom width=40.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=8.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">$</P>
</TD><TD valign=bottom width=28.267><P style="margin:0pt" align=right>0.30</P>
</TD><TD valign=top width=20.133><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=8.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.467><P style="margin:0pt" align=right>0.33</P>
</TD><TD valign=top width=20.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>35,000</P>
</TD><TD valign=top width=20.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>0.31</P>
</TD><TD valign=top width=20.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=66.8><P style="margin:0pt" align=right>5.5</P>
</TD><TD valign=top width=20.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>28,750</P>
</TD><TD valign=top width=20.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=9.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.4><P style="margin:0pt" align=right>0.31</P>
</TD><TD valign=top width=20.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>6,250</P>
</TD><TD valign=top width=20.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=11.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=40.8><P style="margin:0pt" align=right>0.30</P>
</TD></TR>
<TR><TD valign=bottom width=8.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">$</P>
</TD><TD valign=bottom width=28.267><P style="margin:0pt" align=right>1.00</P>
</TD><TD valign=top width=20.133>&nbsp;</TD><TD valign=bottom width=8.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.467><P style="margin:0pt" align=right>2.20</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>282,500</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>1.25</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=66.8><P style="margin:0pt" align=right>5.9</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>170,500</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.4><P style="margin:0pt" align=right>1.32</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>112,000</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=11.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=40.8><P style="margin:0pt" align=right>1.15</P>
</TD></TR>
<TR><TD valign=bottom width=8.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">$</P>
</TD><TD valign=bottom width=28.267><P style="margin:0pt" align=right>2.75</P>
</TD><TD valign=top width=20.133>&nbsp;</TD><TD valign=bottom width=8.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.467><P style="margin:0pt" align=right>5.00</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>240,000</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>3.81</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=66.8><P style="margin:0pt" align=right>6.8</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>116,250</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.4><P style="margin:0pt" align=right>3.68</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=52.267><P style="margin:0pt" align=right>123,750</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=11.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=40.8><P style="margin:0pt" align=right>3.93</P>
</TD></TR>
<TR><TD valign=bottom width=8.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">$</P>
</TD><TD valign=bottom width=28.267><P style="margin:0pt" align=right>8.75</P>
</TD><TD valign=top width=20.133>&nbsp;</TD><TD valign=bottom width=8.2><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.467><P style="margin:0pt" align=right>20.00</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267><P style="margin:0pt" align=right>11,100</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>12.40</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=66.8><P style="margin:0pt" align=right>2.6</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267><P style="margin:0pt" align=right>11,100</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.4><P style="margin:0pt" align=right>12.40</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=11.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=40.8><P style="margin:0pt" align=right>0.00</P>
</TD></TR>
<TR><TD valign=bottom width=8.4>&nbsp;</TD><TD valign=bottom width=28.267>&nbsp;</TD><TD valign=top width=20.133>&nbsp;</TD><TD valign=bottom width=8.2>&nbsp;</TD><TD valign=bottom width=36.467>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267><P style="margin:0pt" align=right>568,600</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=66.8>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267><P style="margin:0pt" align=right>326,600</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=9.6>&nbsp;</TD><TD valign=bottom width=43.4>&nbsp;</TD><TD valign=top width=20.067>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.267><P style="margin:0pt" align=right>242,000</P>
</TD><TD valign=top width=20.067>&nbsp;</TD><TD valign=bottom width=11.733>&nbsp;</TD><TD valign=bottom width=40.8>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">As of June 30, 2006, 2005 and 2004, the Company had reserved shares of common stock for the following purposes:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=241.75></TD><TD width=16.65></TD><TD width=58.7></TD><TD width=16.65></TD><TD width=58.7></TD><TD width=16.75></TD><TD width=58.8></TD></TR>
<TR><TD valign=bottom width=322.333>&nbsp;</TD><TD valign=top width=22.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2006</B></P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2005</B></P>
</TD><TD valign=top width=22.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30, 2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=322.333>&nbsp;</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267>&nbsp;</TD><TD valign=top width=22.333>&nbsp;</TD><TD valign=bottom width=78.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=322.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Options&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=22.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>568,600</P>
</TD><TD valign=top width=22.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>636,000</P>
</TD><TD valign=top width=22.333><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=78.4><P style="margin:0pt" align=right>426,000</P>
</TD></TR>
<TR><TD valign=bottom width=322.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Warrants</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>120,000</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>132,500</P>
</TD><TD valign=top width=22.333>&nbsp;</TD><TD valign=bottom width=78.4><P style="margin:0pt" align=right>189,063</P>
</TD></TR>
<TR><TD valign=bottom width=322.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series A Convertible Preferred Stock</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=top width=22.333>&nbsp;</TD><TD valign=bottom width=78.4><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=322.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series B Convertible Preferred Stock</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>1,719,802</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>1,719,802</P>
</TD><TD valign=top width=22.333>&nbsp;</TD><TD valign=bottom width=78.4><P style="margin:0pt" align=right>1,700,000</P>
</TD></TR>
<TR><TD valign=bottom width=322.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series D Convertible Preferred Stock</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>1,666,667</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD valign=bottom width=78.267><P style="margin:0pt" align=right>1,666,667</P>
</TD><TD valign=top width=22.333>&nbsp;</TD><TD valign=bottom width=78.4><P style="margin:0pt" align=right>1,666,667</P>
</TD></TR>
<TR><TD valign=bottom width=322.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series E Convertible Preferred Stock</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>416,667</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>416,667</P>
</TD><TD valign=top width=22.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=78.4><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=322.333><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Total</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>4,491,736</P>
</TD><TD valign=top width=22.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=78.267><P style="margin:0pt" align=right>4,571,636</P>
</TD><TD valign=top width=22.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=78.4><P style="margin:0pt" align=right>3,981,730</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt"><I>Pro forma</I> information regarding net income (loss) and income (loss) per share is required by SFAS 123R, and is to be determined as if the Company had accounted for its employee stock options granted under the fair value method pursuant to SFAS 123R, rather than the intrinsic method pursuant to APB 25. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following range of assumptions for 2006, 2005 and 2004:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=267.45></TD><TD width=14.5></TD><TD width=50.55></TD><TD width=14.5></TD><TD width=56.05></TD><TD width=14.5></TD><TD width=50.45></TD></TR>
<TR><TD valign=bottom width=356.6>&nbsp;</TD><TD valign=top width=19.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=356.6>&nbsp;</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=67.4>&nbsp;</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=74.733>&nbsp;</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=67.267>&nbsp;</TD></TR>
<TR><TD valign=bottom width=356.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Risk free interest rate&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=19.333><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=67.4><P style="margin:0pt" align=center>3.8 &#150; 5.1%</P>
</TD><TD valign=top width=19.333><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=74.733><P style="margin:0pt" align=center>2.6 &#150; 3.7%</P>
</TD><TD valign=top width=19.333><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=67.267><P style="margin:0pt" align=center>1 &#150; 2%</P>
</TD></TR>
<TR><TD valign=bottom width=356.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Dividends</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=67.4><P style="margin:0pt" align=center>&#151;</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=74.733><P style="margin:0pt" align=center>&#151;</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=67.267><P style="margin:0pt" align=center>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=356.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Volatility factor</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=67.4><P style="margin:0pt" align=center>246%</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=74.733><P style="margin:0pt" align=center>250 &#150; 275%</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=67.267><P style="margin:0pt" align=center>275%</P>
</TD></TR>
<TR><TD valign=bottom width=356.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Expected life</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=67.4><P style="margin:0pt" align=center>1 &#150; 4 years</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=74.733><P style="margin:0pt" align=center>1 &#150; 4 years</P>
</TD><TD valign=top width=19.333>&nbsp;</TD><TD valign=bottom width=67.267><P style="margin:0pt" align=center>1 &#150; 3 years</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-72</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>12. Share-Based Stock Option Plans &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">For purpose of <I>pro forma</I> disclosures, the estimated fair value of the options is amortized to expense over the options&#146; vesting period. The Company&#146;s pro-forma information for years ending June 30, 2006, 2005 and 2004 as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=343.95></TD><TD width=12.5></TD><TD width=5></TD><TD width=25.9></TD><TD width=15.85></TD><TD width=5></TD><TD width=20.9></TD><TD width=15.85></TD><TD width=5></TD><TD width=18.05></TD></TR>
<TR><TD valign=bottom width=458.6>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=41.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=30.733 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=458.6>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=148.733 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss) applicable to common shares, as reported</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.533><P style="margin:0pt" align=right>(2,489</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=27.867><P style="margin:0pt" align=right>(616</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=24.067><P style="margin:0pt" align=right>465</P>
</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Add: Stock-based employee compensation included in reported net income (loss)</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=34.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=27.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=24.067><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less: Total stock-based employee compensation expense determined under Black-Scholes option pricing model, net of tax effects</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=27.867><P style="margin:0pt" align=right>247</P>
</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=24.067><P style="margin:0pt" align=right>21</P>
</TD></TR>
<TR><TD valign=bottom width=458.6>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=34.533>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=27.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><I>Pro forma</I> net income (loss)</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34.533><P style="margin:0pt" align=right>(2,489</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=27.867><P style="margin:0pt" align=right>(863</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=24.067><P style="margin:0pt" align=right>444</P>
</TD></TR>
<TR><TD valign=bottom width=458.6>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=34.533>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=27.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Earnings (loss) per share &#150; as reported:</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=34.533>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=27.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.533><P style="margin:0pt" align=right>(0.52</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=27.867><P style="margin:0pt" align=right>(0.13</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=24.067><P style="margin:0pt" align=right>0.11</P>
</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Diluted</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.533><P style="margin:0pt" align=right>(0.52</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=27.867><P style="margin:0pt" align=right>(0.13</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=24.067><P style="margin:0pt" align=right>0.06</P>
</TD></TR>
<TR><TD valign=bottom width=458.6>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=34.533>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=27.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Earnings (loss) per share &#150; <I>pro forma</I>:</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=34.533>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=27.867>&nbsp;</TD><TD valign=bottom width=21.133>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.533><P style="margin:0pt" align=right>(0.52</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=27.867><P style="margin:0pt" align=right>(0.19</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=24.067><P style="margin:0pt" align=right>0.10</P>
</TD></TR>
<TR><TD valign=bottom width=458.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Diluted</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.533><P style="margin:0pt" align=right>(0.52</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=27.867><P style="margin:0pt" align=right>(0.19</P>
</TD><TD valign=bottom width=21.133><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=24.067><P style="margin:0pt" align=right>0.05</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>13. Commitments and Contingencies</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Leases</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The Company leases office space in Beverly Hills under two operating lease agreements, one of which expiries in September 2012, the other in July 2010. Future minimum rental payments required under the above leases as of June 30, 2006 are as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=235.9></TD><TD width=12.5></TD><TD width=5></TD><TD width=40></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=314.533><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Years ending June 30,</B></P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=314.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=314.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2007</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>302,000</P>
</TD></TR>
<TR><TD valign=bottom width=314.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2008</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>324,000</P>
</TD></TR>
<TR><TD valign=bottom width=314.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2009</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>331,000</P>
</TD></TR>
<TR><TD valign=bottom width=314.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2010</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>339,000</P>
</TD></TR>
<TR><TD valign=bottom width=314.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2011 and beyond&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>577,000</P>
</TD></TR>
<TR><TD valign=bottom width=314.533>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>1,873,000</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Rent expense including parking fees and storage for all leases for the years ended June 30, 2006, 2005 and 2004 was $322,000; $274,000 and $386,000, respectively.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Guaranteed Liquidity and Buy Back</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company provides a Guaranteed Liquidity and Buy Back at Grade warranty (the &#147;Guarantee&#148;) to its retail rare coin customers. Retail rare coin sales amounted to $13,281,000; $12,807,000 and $7,345,000 for years ended June 30, 2006, 2005 and 2004 respectively. The policy grants the customer the opportunity to sell their coins back to the Company at the prevailing market &#147;bid&#148; (below the current wholesale price). The Company determines the &#147;bid&#148; price based on the prevailing market price at which the Company believes it could readily liquidate the coin. The &#147;bid&#148; price may be substantially below what the customer originally paid for the coin.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-73</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>13. Commitments and Contingencies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The values of the rare coins sold to retail customers continually fluctuate. Furthermore, retail customers continually resell or trade coins purchased from the Company with third parties. Once retail customers resell the rare coins to third parties, the Guarantee is void. Lastly, the Company has had minimal historical experience with customers exercising the Guarantee. As a result, it is not possible for the Company to determine the potential repurchase obligation pursuant to the Guarantee that it may be subject to as a result of previous sales of retail rare coins.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Profit Sharing Plans</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company had a 401(k) profit sharing plan covering all employees who have met certain service requirements. Through December 31, 2002, employees were allowed to make contributions to the plan of up to 15% of their salary. The Company was required to make nondiscretionary matching contributions of 3% of eligible employees&#146; salaries. Effective January 1, 2003, no further contributions by employees were permitted as all of the Company&#146;s employees became co-employees of Administaff, a professional employer organization. The Company terminated the plan effective January 1, 2004. The Company had failed to make timely nondiscretionary matching contributions, caught up prior to the plan termination, but may be subject to penalties. The amount of the potential penalties, if any, is indeterminable at this time.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Legal Proceedings</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Superior Galleries, Inc. was sued by Heritage Capital Corporation (&#147;Heritage&#148;), a competitor of ours, in connection with our employment of Larry Abbott, a former employee of Heritage. The petition was filed on June 3, 2005 in the Dallas County District Court in Texas. The parties to this case included Heritage, Superior Galleries, Inc. and Mr. Abbott. In this case, Heritage sued Mr. Abbott for breach of his employment agreement with that company, following his resignation in May 2005. This lawsuit has been completely settled in accordance with a settlement agreement dated March 27, 2006, at no cost to the Company, other than its own legal costs, estimated to be $50,000.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Superior Galleries, Inc. was being sued by Elaine and Dean Sanders in connection with a loan made to them against 32 coins placed on consignment on June 26, 2004. Fourteen of the coins were sold, and the proceeds from this sale of approximately $186,750 were insufficient to repay the loan of $359,471 that the Company made to the Sanders. The plaintiffs subsequently paid an additional $155,000 in December 2005 with respect to the loan, but now allege that the Company violated its agreement with them relating to the sale of the coins. The Company strongly denies that it violated the agreement or that it acted improperly in any way. The complaint was filed on June 6, 2006 in the U.S. District Court for Central California and seeks undefined dollar amounts, accrued interest and reimbursement of plaintiffs&#146; legal costs.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In April 2004 the Company sued its former Chief Financial Officer, Malingham Shrinivas, in Los Angeles Superior Court for breach of contract, fraud and conspiracy. In that lawsuit, the Company alleged that he fraudulently arranged to receive more salary than he was entitled to, to pay personal expenses using Company funds, and to pay third party vendors with Company funds for services which were not rendered. In July 2004 Mr. Shrinivas filed a counterclaim in this litigation, claiming that he was terminated without just cause and was therefore entitled to $58,250 in severance pay. Although the case had been scheduled for trial in August 2006, prior to that time the case was stayed by order of the Superior Court because the Court had been advised that criminal charges against Mr. Shrinivas related to this matter were imminent. Those criminal charges were subsequently filed, and therefore further proceedings in connection with the civil
case continue to be stayed. The Company believes that Mr. Shrinivas was terminated with cause and that he is therefore not entitled to any severance pay. If and when the stay of our civil case is terminated, the Company intends to vigorously pursue its claims and defend Mr. Shrinivas&#146; claims for severance pay.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-74</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>13. Commitments and Contingencies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company may from time to time be involved in various claims, lawsuits, disputes with third parties, actions involving allegations of discrimination, or breach of contract actions incidental to the operation of its business. Except as set forth above, the Company is not currently involved in any such litigation which it believes could have a material adverse effect on its financial condition or results of operations, liquidity or cash flows.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>State Sales and Use Taxes</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company does not collect sales and use taxes for interstate sales. Management believes that the Company&#146;s sales to interstate customers are generally tax-exempt due to varying state exemptions relative to the definitions of being engaged in business in particular states and the lack of current internet taxation. While the Company has not been contacted by any state authorities seeking to enforce sales or use tax regulations, there is no assurance that the Company will not be contacted by authorities in the future with inquiries relative to compliance with current statutes, nor is there any assurance that future statutes will not be enacted that affect the sales and use aspects of the Company&#146;s business.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>14. Related Party Transactions</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On January 31, 2003, the Company entered into a consulting agreement with Stanford Group Company, and affiliate of SIBL, a principal stockholder of the Company to provide financial and advisory services for a three year period commencing on April 1, 2003. The annual fee for such services is $60,000 and is payable on a quarterly basis. The agreement was not extended beyond the April 1, 2006 expiration date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On October 23, 2003, the Company&#146;s Board of Directors approved the sale of Superior&#146;s remaining fine art inventory to the Company&#146;s chief executive officer (&#147;CEO&#148;) and a principal stockholder, who is also an independent dealer of fine art, for $350,000. The Company solicited bids from third parties and the bid from the CEO was the highest. The Company realized a gross profit of $16,000 on sale of the art inventory to the CEO. The sale was paid in full by reductions of notes payable to the CEO.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On May 28, 2004, the Company&#146;s Board of Directors approved a short-term sub-lease of a portion of Superior&#146;s vacant Newport Beach facility to the CEO. The lease term was from June 1, 2004 through September 30, 2004 and provided for a monthly rental payment of $4,000. The sub-lease terminated concurrently with the Company&#146;s master lease of the Newport Beach facility on September 30, 2004.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On May 18, 2005 the Company entered into a Primary Supplier Agreement with Stanford Coins &amp; Bullion, Inc. (&#147;Stanford C&amp;B&#148;), which is an affiliate of a principal shareholder, SIBL. Under this arrangement, which has a term of six months commencing June 1, 2005, Stanford C&amp;B is required to provide Superior with a preferential right to source coins on a wholesale basis for that company. Stanford C&amp;B will pay a flat 7% over Superior&#146;s bid for all rare coins and 3.5% for all generic coins. Superior will provide marketing services for Stanford C&amp;B, including providing information on possible sales leads and making Superior&#146;s inventory of coins available on Stanford C&amp;B&#146;s web site. For Stanford C&amp;B&#146;s customers that sell coins through Superior&#146;s auctions, Superior will pay Stanford C&amp;B a fee of 6%, and will pay their sales person a commission of 2%. Although the agreement was not
extended on the December 1, 2005 expiration date, the two parties continue to operate under the terms of the prior agreement. During the year ended June 30, 2006 Stanford C&amp;B purchased $2,276,946 of rare coins from Superior.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July 5, 2006, the Company entered into a consulting arrangement with the former Chief Financial Officer, Paul Biberkraut, who is also a member of the Board of Directors. Under this arrangement, Mr. Biberkraut will assist management with the activities involved in the proposed Merger with DGSE. Superior is paying $4,000 per month under this arrangement until the Merger closes.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">See also notes 2, 6, 7, 8 and 11 for discussion of additional transactions with related parties.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-75</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>15. Selected Quarterly Financial Data</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following data present unaudited quarterly financial information for each of the eight quarters beginning with September 30, 2004 and ending on June 30, 2006. The information has been derived from our unaudited quarterly financial statements, which have been prepared by us on a basis consistent with our audited financial statements appearing elsewhere in this Form 10-K. The financial information set forth below includes all necessary adjustments, consisting only of normal recurring adjustments that management considers necessary for a fair presentation of the unaudited quarterly results. The following data should be read in conjunction with &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; included in this report.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=221.9></TD><TD width=12.6></TD><TD width=5></TD><TD width=43.4></TD><TD width=12.6></TD><TD width=5></TD><TD width=29.65></TD><TD width=12.65></TD><TD width=5.05></TD><TD width=27.7></TD><TD width=12.65></TD><TD width=5.05></TD><TD width=26></TD><TD width=12.65></TD><TD width=5.05></TD><TD width=27.7></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=295.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.533 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
June 30,<BR>
2006</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=242.333 colspan=12><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Fiscal Quarter Ended</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30,<BR>
2006</B></P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Mar. 31,<BR>
2006</B></P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=41.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Dec. 31,<BR>
2005</B></P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Sept. 30,<BR>
2005</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="margin:0pt"><B>Statements of Operations Data</B></P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=306.867 colspan=14><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands, except per share data)</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total revenue</P>
</TD><TD valign=bottom width=16.8><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>46,317</P>
</TD><TD valign=bottom width=16.8><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>9,972</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>15,067</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>9,626</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>11,653</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cost of sales</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>38,393</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>8,527</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>12,085</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>8,440</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>9,342</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Gross profit</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>7,924</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>1,445</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>2,982</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>1,186</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>2,311</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Selling, general and administrative expenses&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>9,792</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>2,921</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>2,404</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>2,166</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>2,301</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Operating income (loss)</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>(1,868</P>
</TD><TD valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>(1,476</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>578</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>(980</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>10</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other income (expense)</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(669</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(240</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(177</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(137</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(114</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income (loss) from before income tax provision</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>(2,537</P>
</TD><TD valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>(1,716)</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>401</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>(1,117</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>(104</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income tax provision (benefit)</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss) before extraordinary gain</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(2,539</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(1,717</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>401</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(1,117</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(105</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Extraordinary Gain from extinguished debt</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>50</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>50</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(2,489</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(1,717</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>451</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(1,117</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(105</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss) per common share:</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">from net income (loss), basic</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(0.52</P>
</TD><TD valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(0.36</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>0.09</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(0.23</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(0.02</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">from net income (loss), fully diluted</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(0.52</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(0.36</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>0.05</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(0.23</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(0.02</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Weighted average shares outstanding:</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>4,817</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>4,808</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>4,820</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>4,820</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>4,820</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Fully diluted</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>4,817</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>4,808</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>8,977</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>4,820</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>4,820</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year&nbsp;Ended<BR>
June 30,<BR>
2005</B></P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=225.533 colspan=11><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Fiscal Quarter Ended</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June 30,<BR>
2005</B></P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Mar. 31,<BR>
2005</B></P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=41.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Dec. 31,<BR>
2005</B></P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Sept. 30,<BR>
2004</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=306.867 colspan=14><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands, except per share data)</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Statements of Operations Data</B></P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total revenue</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>39,535</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>10,205</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>11,658</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>8,403</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>9,269</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cost of sales</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>32,027</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>8,364</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>9,661</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>6,787</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>7,215</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Gross profit</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>7,508</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>1,841</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>1,997</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>1,616</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>2,054</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Selling, general and administrative expenses</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>7,708</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>2,114</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>2,098</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>1,642</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>1,854</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Operating income (loss)</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>(200</P>
</TD><TD valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>(273</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>(101</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>(26</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>200</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other income (expense)</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(415</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(135</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(102</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(104</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(74</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income (loss) from before income tax provision</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>(615</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>(408</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>(203</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>(130</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>126</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Income tax provision (benefit)</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(616</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(408</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(203</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(130</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>125</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss) per common share:</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">from net income (loss), basic</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(0.13</P>
</TD><TD valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(0.09</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(0.04</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(0.03</P>
</TD><TD valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>0.03</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">from net income (loss), fully diluted</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=57.867><P style="margin:0pt" align=right>(0.13</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.8><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=39.533><P style="margin:0pt" align=right>(0.09</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>(0.04</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=34.667><P style="margin:0pt" align=right>(0.03</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=16.867><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=36.933><P style="margin:0pt" align=right>0.02</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Weighted average shares outstanding:</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867>&nbsp;</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667>&nbsp;</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Basic</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>4,627</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>4,743</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>4,685</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>4,510</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>4,497</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Fully diluted</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=57.867><P style="margin:0pt" align=right>4,627</P>
</TD><TD valign=bottom width=16.8>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=39.533><P style="margin:0pt" align=right>4,743</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>4,685</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=34.667><P style="margin:0pt" align=right>4,510</P>
</TD><TD valign=bottom width=16.867>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>8,170</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="line-height:11pt; margin:5.35pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-76</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="line-height:11pt; margin:6.65pt; page-break-before:always"><BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=221.9></TD><TD width=12.6></TD><TD width=5></TD><TD width=43.4></TD><TD width=12.6></TD><TD width=5></TD><TD width=29.65></TD><TD width=12.65></TD><TD width=5.05></TD><TD width=27.7></TD><TD width=12.65></TD><TD width=5.05></TD><TD width=26></TD><TD width=12.65></TD><TD width=5.05></TD><TD width=27.7></TD><TD width=3.35></TD></TR>
</TABLE>
<P style="margin:0pt" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTES TO FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>16. Extraordinary Gain</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On March 31, 2006, the Company repaid the balance of its line of credit from a private lender of $1,900,000 by applying the accounts receivable from the sale of $1,000,000 of rare coins to the lender, a payment of $850,000 in cash and the application of a $50,000 discount for early payment. The $50,000 discount was classified as an extraordinary gain on the Statement of Operations.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>17. Subsequent Events</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">After the fiscal year ended June 30, 2006, on July 17, 2006, the Company announced a proposed Merger with DGSE Companies, Inc. As a condition to the Merger, the Company&#146;s lender, Stanford Financial Group, will convert $5,500,000 in debt outstanding under its Commercial LOC described in Note 6 into common stock of the Company. In addition, in connection with the Merger a Stanford affiliate will provide a new secured credit facility of $11,500,000 to the combined company. Also in connection with the proposed Merger, the Company will restructure the outstanding indebtedness to its Chief Executive Officer, Mr. DiGenova, as described in Note 8. Under the terms of the revised promissory note, the principal amount of the note shall be set to the current outstanding principal amount of $500,000, the maturity date of the note will be extended to December 31, 2007, payable in five equal quarterly installments commencing September 30, 2006,
and the interest rate shall be set to the prime rate plus one percent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">After the fiscal year ended June 30, 2006, on August 3, 2006, the Company paid off three demand notes payable to a private lender totaling $650,000 as described in Note 9, which bore interest at 12% per annum and were secured by specific inventory, as described in a Form 8-K filed by the Company August 9, 2006.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-77</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">To the Board of Directors<BR>
Superior Galleries, Inc.<BR>
Beverly Hills, California</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our audits as of June 30, 2006 and 2005 and for each of the three years in the period ended June 30, 2006 were conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule II is presented for purposes of complying with the Securities and Exchange Commission&#146;s rules and is not a part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">/s/ SINGER LEWAK GREENBAUM &amp; GOLDSTEIN LLP</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Los Angeles, California<BR>
September 21, 2006</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>F-78</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>SCHEDULE II<BR>
Allowance for Doubtful Accounts and Inventory Reserves</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=251.9></TD><TD width=12.9></TD><TD width=9.25></TD><TD width=27.7></TD><TD width=12.9></TD><TD width=39.7></TD><TD width=12.9></TD><TD width=41.3></TD><TD width=16.4></TD><TD width=10.75></TD><TD width=32.3></TD></TR>
<TR><TD valign=bottom width=335.867>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Balance at<BR>
Beginning<BR>
of Year</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=52.933><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Charged to<BR>
Expenses/<BR>
Against<BR>
Revenue</B></P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=55.067><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Application<BR>
Against<BR>
Assets</B></P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Balance at<BR>
End of Year</B></P>
</TD></TR>
<TR><TD valign=bottom width=335.867>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=270.933 colspan=9><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(in thousands)</P>
</TD></TR>
<TR><TD valign=bottom width=335.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Allowance for doubtful accounts:</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=12.333>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=52.933>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=14.333>&nbsp;</TD><TD valign=bottom width=43.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=335.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Year ended June 30, 2004&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=12.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>271</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=52.933><P style="margin:0pt" align=right>20</P>
</TD><TD valign=bottom width=17.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(32</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.067><P style="margin:0pt" align=right>259</P>
</TD></TR>
<TR><TD valign=bottom width=335.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Year ended June 30, 2005</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=12.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>259</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=52.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(137</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=14.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.067><P style="margin:0pt" align=right>122</P>
</TD></TR>
<TR><TD valign=bottom width=335.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Year ended June 30, 2006</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=12.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>122</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=52.933><P style="margin:0pt" align=right>241</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=14.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.067><P style="margin:0pt" align=right>363</P>
</TD></TR>
<TR><TD valign=bottom width=335.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Inventory reserve:</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=12.333>&nbsp;</TD><TD valign=bottom width=36.933>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=52.933>&nbsp;</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=55.067>&nbsp;</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=14.333>&nbsp;</TD><TD valign=bottom width=43.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=335.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Year ended June 30, 2004</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=12.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>665</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=52.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>(665</P>
</TD><TD valign=bottom width=21.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=14.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.067><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=335.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Year ended June 30, 2005</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=12.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=52.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=14.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.067><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=335.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Year ended June 30, 2006</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=12.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=36.933><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=52.933><P style="margin:0pt" align=right>840</P>
</TD><TD valign=bottom width=17.2>&nbsp;</TD><TD valign=bottom width=55.067><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=21.867>&nbsp;</TD><TD valign=bottom width=14.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.067><P style="margin:0pt" align=right>840</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-79</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><FONT FACE="Times New Roman" COLOR=#000000><B>ANNEX A</B></FONT></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>IMPORTANT NOTICE</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (THE &#147;<B>MERGER AGREEMENT</B>&#148;) CONTAINS CERTAIN REPRESENTATIONS AND WARRANTIES (THE &#147;R<B>EPRESENTATIONS</B>&#148;) BY DGSE COMPANIES, INC. (&#147;<B>DGSE</B>&#148;) AND DGSE MERGER CORP., A WHOLLY-OWNED SUBSIDIARY OF DGSE, IN FAVOR OF SUPERIOR GALLERIES, INC. (&#147;SUPERIOR&#148;), AND BY SUPERIOR IN FAVOR OF DGSE. NO PERSON, OTHER THAN THE PARTIES TO THE MERGER AGREEMENT, ARE ENTITLED TO RELY ON THE REPRESENTATIONS CONTAINED IN THE MERGER AGREEMENT. THE MERGER AGREEMENT IS FILED IN ACCORDANCE WITH THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION AS A MATERIAL PLAN OF ACQUISITION, AND IS INTENDED BY DGSE AND SUPERIOR SOLELY AS A RECORD OF THE AGREEMENT REACHED BY THE PARTIES THERETO. THE FILING OF THE MERGER AGREEMENT IS NOT INTENDED AS A MECHANISM TO UPDATE, SUPERSEDE OR OTHERWISE MODIFY PRIOR DISCLOSURES OF INFORMATION AND RISKS CONCERNING
DGSE AND SUPERIOR WHICH DGSE AND SUPERIOR HAVE MADE TO THEIR RESPECTIVE STOCKHOLDERS.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">INVESTORS AND POTENTIAL INVESTORS SHOULD ALSO BE AWARE THAT THE REPRESENTATIONS ARE QUALIFIED BY INFORMATION IN CONFIDENTIAL DISCLOSURE SCHEDULES THAT DGSE HAS DELIVERED TO SUPERIOR, AND CONFIDENTIAL DISCLOSURE SCHEDULES THAT SUPERIOR HAS DELIVERED TO DGSE (THE &#147;<B>DISCLOSURE SCHEDULES</B>&#148;). THE DISCLOSURE SCHEDULES CONTAIN INFORMATION THAT MODIFIES, QUALIFIES AND CREATES EXCEPTIONS TO THE REPRESENTATIONS.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">INVESTORS AND POTENTIAL INVESTORS &nbsp;SHOULD &nbsp;ALSO BE AWARE THAT &nbsp;CERTAIN REPRESENTATIONS MADE IN THE MERGER AGREEMENT ARE NOT INTENDED TO BE AFFIRMATIVE REPRESENTATIONS OF FACTS, SITUATIONS OR CIRCUMSTANCES, BUT ARE INSTEAD DESIGNED AND INTENDED TO ALLOCATE CERTAIN RISKS BETWEEN DGSE AND ITS WHOLLY-OWNED SUBSIDIARY, ON THE ONE HAND, AND SUPERIOR AND ITS STOCKHOLDERS, ON THE OTHER HAND. THE USE OF REPRESENTATIONS AND WARRANTIES TO ALLOCATE RISK IS A STANDARD DEVICE IN MERGER AGREEMENTS.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">ACCORDINGLY, STOCKHOLDERS, INVESTORS AND POTENTIAL &nbsp;INVESTORS SHOULD NOT RELY ON THE REPRESENTATIONS AS AFFIRMATIONS OR CHARACTERIZATIONS OF INFORMATION CONCERNING DGSE OR SPACEDEV AS OF THE DATE OF THE MERGER AGREEMENT, OR AS OF ANY OTHER DATE.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:60pt; margin-bottom:6.65pt; padding-bottom:3pt; page-break-before:always; border-bottom:12pt double #000000" align=right><BR></P>
<P style="margin-top:60pt; margin-bottom:0pt" align=center><B>AMENDED AND RESTATED<BR>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION</B></P>
<P style="margin-top:20pt; margin-bottom:0pt" align=center><B>by and among</B></P>
<P style="margin-top:20pt; margin-bottom:0pt" align=center><B>DGSE COMPANIES, INC.</B></P>
<P style="margin-top:20pt; margin-bottom:0pt" align=center><B>DGSE MERGER CORP.</B></P>
<P style="margin-top:20pt; margin-bottom:0pt" align=center><B>SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:20pt; margin-bottom:0pt" align=center><B>and</B></P>
<P style="margin-top:20pt; margin-bottom:0pt" align=center><B>STANFORD INTERNATIONAL BANK, LTD.,<BR>
as Stockholder Agent</B></P>
<P style="margin-top:13.35pt; margin-bottom:60pt" align=center><B>__________________<BR>
<BR>
January 6, 2007<BR>
__________________</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-bottom:3pt; border-bottom:12pt double #000000"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; page-break-before:always" align=center><B>TABLE OF CONTENTS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=434.1></TD><TD width=13.85></TD><TD width=20.05></TD></TR>
<TR><TD valign=bottom width=578.8>&nbsp;</TD><TD valign=top width=18.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=26.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Page</B></P>
</TD></TR>
<TR><TD valign=bottom width=578.8>&nbsp;</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article I. Defined Terms; Construction </B></P>
</TD><TD valign=top width=18.467><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>2</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 1.1 Certain Definitions </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>2</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 1.2 Other Definitions </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 1.3 Construction. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article II. The Merger</B> </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 2.1 The Merger </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 2.2 The Closing </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 2.3 Effective Time </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 2.4 Effect of the Merger </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 2.5 Certificate of Incorporation; Bylaws </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 2.6 Directors and Officers </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>14</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article III. Conversion of Securities; Exchange of Certificates </B></P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>14</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.1 Conversion of Securities </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>14</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.2 Capitalization Adjustments to Shares. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>14</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.3 Allocation and Distribution of Merger Consideration. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>14</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.4 Surrender of Certificates; Payment </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>15</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.5 Withholding Rights. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>16</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.6 Share Transfer Books </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>16</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.7 Company Options </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>16</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.8 Unvested Company Shares </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>18</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.9 Company Warrants. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>18</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.10 Appraisal Rights </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.11 Taking of Necessary Action; Further Action. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.12 Tax Consequences. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.13 Accounting Treatment. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.14 Escrow Agreement; Escrow Account. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 3.15 Transfer Of Contingent Rights. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>20</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article IV. Company Representations and Warranties </B></P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>20</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.1 Organization and Qualification; Subsidiaries </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>20</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.2 Certificate of Incorporation and Bylaws; Corporate Books and Records</P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>21</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.3 Capitalization </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>21</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.4 Authority </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>21</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.5 No Conflict; Required Filings and Consents </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>23</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.6 Permits; Compliance With Law </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>24</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.7 SEC Filings; Financial Statements </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>25</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.8 Disclosure Documents </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>26</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.9 Absence of Certain Changes or Events </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>27</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.10 Employee Benefit Plans </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>28</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.11 Customers </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>31</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.12 Contracts </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>31</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.13 Litigation </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>33</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.14 Environmental Matters </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>34</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.15 Intellectual Property </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>34</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.16 Taxes </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>36</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.17 Insurance </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>38</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.18 Opinion of Financial Advisor </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>38</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.19 Brokers </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>38</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.20 Properties </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>38</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.21 Interested Party Transactions </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>38</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.22 Export and Import Laws </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>39</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.23 Pseudo-Foreign Corporation. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>39</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 4.24 Representations Complete.</P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>39</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>i</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=434.1></TD><TD width=13.85></TD><TD width=20.05></TD></TR>
<TR><TD valign=bottom width=578.8>&nbsp;</TD><TD valign=top width=18.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=26.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Page</B></P>
</TD></TR>
<TR><TD valign=bottom width=578.8>&nbsp;</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article V. Representations and Warranties of Parent and Merger Sub </B></P>
</TD><TD valign=top width=18.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>39</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.1 Organization and Qualification; Subsidiaries </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>39</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.2 Certificate of Incorporation and Bylaws; Corporate Books and Records </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>40</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.3 Capitalization </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>40</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.4 Authority </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>41</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.5 No Conflict; Required Filings and Consents </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>42</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.6 Permits; Compliance With Law </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>42</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.7 SEC Filings; Financial Statements </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>43</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.8 Disclosure Documents </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>44</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.9 Absence of Certain Changes or Events </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>45</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.10 Employee Benefit Plans </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>45</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.11 Customers </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>49</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.12 Contracts </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>49</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.13 Litigation </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>51</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.14 Environmental Matters </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>51</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.15 Intellectual Property </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>51</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.16 Taxes </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>54</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.17 Insurance </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>55</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.18 Opinion of Financial Advisor </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>55</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.19 Brokers </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>55</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.20 Properties </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>55</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.21 Interested Party Transactions </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>56</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.22 Export and Import Laws </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>56</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.23 Capitalization, Ownership and Prior Activities of Merger Sub </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>56</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.24 Interested Stockholders. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>56</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 5.25 Representations Complete. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>56</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article VI. Covenants</B> </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>56</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.1 SEC Reports; Preparation of Form S-4 and Proxy Statement </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>56</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.2 Parent Stockholders Meeting. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>58</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.3 Company Stockholders Meeting. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>59</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.4 Access to Information; Confidentiality </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>59</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.5 Notice of Acquisition Proposals </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>60</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.6 Affiliate Letters. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>60</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.7 Certain Notices </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>60</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.8 Public Announcements </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.9 Certain Litigation. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.10 Employees </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.11 Termination of Benefit Plans </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>62</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.12 Parent Board. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>62</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.13 Company Board </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>62</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.14 Tax Matters. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>62</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.15 Third Party Consents </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>62</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.16 Best Efforts </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>63</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.17 Refinancings. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>63</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 6.18 Indemnification </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>63</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article VII. Closing Conditions</B> </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>64</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 7.1 Conditions to Obligations of Each Party Under This Agreement </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>64</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 7.2 Additional Conditions to Obligations of Parent and Merger Sub </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>65</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 7.3 Additional Conditions to Obligations of the Company </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>65</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article VIII. Survival of Representations, Warranties and Covenants; Indemnification</B> </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>66</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.1 Survival of Representations, Warranties and Covenants. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>66</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.2 Indemnification; Closing Balance Sheet; Escrow Account. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>67</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.3 Limitation on Indemnification. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>68</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.4 Indemnification Procedures. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>68</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.5 Stockholder Agent. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>70</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>ii</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always"><BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=434.1></TD><TD width=13.85></TD><TD width=20.05></TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=434.1></TD><TD width=13.85></TD><TD width=20.05></TD></TR>
<TR><TD valign=bottom width=578.8>&nbsp;</TD><TD valign=top width=18.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=26.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Page</B></P>
</TD></TR>
<TR><TD valign=bottom width=578.8>&nbsp;</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.6 Resolution of Conflicts. </P>
</TD><TD valign=top width=18.467><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>72</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.7 No Contribution. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>73</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.8 Fraud; Willful Misrepresentation. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>73</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.9 Exclusive Remedies.</P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>73</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 8.10 Purchase Price Adjustment. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>73</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article IX. Termination, Amendment and Waiver </B></P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>73</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 9.1 Termination </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>73</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 9.2 Effect of Termination </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>74</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 9.3 Amendment </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>74</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 9.4 Waiver </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>74</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 9.5 Fees and Expenses </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>74</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>Article X. General Provisions</B> </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>74</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.1 Notices </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>75</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.2 Headings </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>76</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.3 Severability </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>76</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.4 Entire Agreement </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>76</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.5 Assignment </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>76</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.6 Parties in Interest </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>76</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.7 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>76</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.8 Disclosure </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>77</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.9 Counterparts </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>77</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.10 Facsimile Execution. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>77</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.11 Remedies Cumulative </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>77</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.12 Specific Performance. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>77</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.13 Time. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>77</P>
</TD></TR>
<TR><TD valign=bottom width=578.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Section 10.14 Certain Taxes. </P>
</TD><TD valign=top width=18.467>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=right>78</P>
</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>iii</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; page-break-before:always" align=center><B>TABLE OF EXHIBITS AND SCHEDULES</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=150.05></TD><TD width=12.55></TD><TD width=305.4></TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit A</P>
</TD><TD valign=top width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Certificate of Merger</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit B</P>
</TD><TD valign=top width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Letter of Transmittal</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit C</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Escrow Agreement</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit D</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Amended and Restated Commercial Loan and Security Agreement</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit E</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Warrant</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit F</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Note Exchange Agreement</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit G</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Stanford Termination and Release Agreement</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit H</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Registration Rights Agreement</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit I</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Corporate Governance Agreement</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="margin-top:1.65pt; margin-bottom:-12pt; padding-left:6pt; text-indent:-6pt">Exhibit J</P>
<P style="margin:0pt"><BR></P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Stanford Officer&#146;s Certificate</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit K</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Company Legal Opinion</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit L</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Stanford Legal Opinion</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit M</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Parent Officers&#146; Certificate</P>
</TD></TR>
<TR><TD valign=bottom width=200.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exhibit N</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=bottom width=407.2><P style="margin:0pt">Form of Parent Legal Opinion</P>
</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR></P>
<P style="margin-top:0pt; margin-bottom:6.65pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>iv</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; page-break-before:always" align=center><B>INDEX OF DEFINED TERMS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=187.2></TD><TD width=14.05></TD><TD width=24.6></TD><TD width=24.35></TD><TD width=187.2></TD><TD width=14.05></TD><TD width=16.55></TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">401(k) Plan</P>
</TD><TD valign=bottom width=18.733><P style="line-height:11pt; margin:0pt">&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>62</P>
</TD><TD valign=bottom width=32.467><P style="line-height:11pt; margin:0pt">&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Stock Option Plan</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">A Warrants</P>
</TD><TD valign=bottom width=18.733><P style="line-height:11pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>63</P>
</TD><TD valign=bottom width=32.467><P style="line-height:11pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Stockholder Approval</P>
</TD><TD valign=top width=18.733><P style="line-height:11pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>24</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Acquisition Proposal</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Stockholders Meeting</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>24</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Actions</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Subsidiaries</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>20</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Actual Knowledge</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Subsidiary</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>20</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Affiliate</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8>&nbsp;</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Warrant</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Affiliate Letter</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company-Owned IP</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>34</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Agreement</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>60</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Confidentiality Agreement</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>60</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Amend</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Consent</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Amended and Restated Stanford LOC</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Continuing Employees</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Applicable Time</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>63</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Contract</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">B Warrants</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>2</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Control</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Balance Sheet Correction</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>63</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">controlled by</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Basket Amount</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>67</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Conversion Agreements</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Beneficial Owner</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>67</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">D&amp;O Insurance</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>63</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Beneficial Ownership</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Defending Party</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>72</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Beneficially Own</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">DGCL</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>1</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Beneficially Owning</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">DiGenova</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Best Efforts</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">DiGenova Warrant</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Blue Sky Laws</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Dissenting Shares</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Board Recommendation</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Dissenting Stockholders</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Breach</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Effective Time</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Business Day</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Employment Agreements</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Capitalization Adjustment</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Encumber</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Certificate of Merger</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>13</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Encumbrance</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Certificates</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Entity</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Claim Notice</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>67</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Environment</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Closing</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>13</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Environmental Claims</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Closing Company Common Shares</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Environmental Laws</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Closing Date</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>13</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Environmental Release</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">COBRA</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>29</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Environmentally Released</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Code</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Equity Interest</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Commitment</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">ERISA</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">ERISA Affiliate</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Affiliate</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>60</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Escrow Account</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Balance Sheet</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Escrow Agent</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Balance Sheet Date</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>3</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Escrow Agreement</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>20</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Benefit Plans</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>28</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Escrow Assets</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>70</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Board</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Escrow Period</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Board Recommendation</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Escrow Stock</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>19</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Bylaws</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>21</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Escrow Termination Date</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Certificate of Incorporation</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>21</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Event</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Common Share</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Exchange Act</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Common Stock</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Exchange Agent</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>15</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Disclosure Schedules</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>20</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Exchange Ratio</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>15</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Financial Advisor</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>38</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Exemption Conditions</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>23</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Financial Statements</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>25</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Expenses</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Company Group</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>36</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Facilities</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Information</P>
</TD><TD valign=top width=18.733><P style="line-height:11pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Forbearance Agreement</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>73</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Insider</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>22</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Foreign Plan</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>29</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company IP</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>34</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Form S-4</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Material Contract</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>31</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">GAAP</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Option</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Governmental Entity</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:11pt; margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Permits</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>24</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Governmental Permit</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Preferred Shares</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>21</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Group</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company Products</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>34</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Hazardous Materials</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="margin:0pt" align=right>6</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:11pt; margin:0pt">Company SEC Reports</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:11pt; margin:0pt" align=right>4</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Indebtedness</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="margin:0pt" align=right>6</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR>
<BR></P>
<P style="margin:0pt" align=center>v</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=187.2></TD><TD width=14.05></TD><TD width=24.6></TD><TD width=24.35></TD><TD width=187.2></TD><TD width=14.05></TD><TD width=16.55></TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Indemnified Parties</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>67</P>
</TD><TD valign=bottom width=32.467><P style="line-height:10pt; margin:0pt">&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Permits</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>42</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Indemnifying Parties</P>
</TD><TD valign=bottom width=18.733><P style="line-height:10pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>67</P>
</TD><TD valign=bottom width=32.467><P style="line-height:10pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Products</P>
</TD><TD valign=top width=18.733><P style="line-height:10pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>51</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Independent Committee</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>6</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent SEC Reports</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Insured Parties</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>63</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Stock Option Plan</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Intellectual Property</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Stockholder Approval</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>41</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Interim Company Board</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>62</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Stockholders Meeting</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>41</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">IRS</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Subsidiaries</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>39</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">JAMS</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>72</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Subsidiary</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>39</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Key Employee</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Warrant</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Knowledge</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent-Owned IP</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>51</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Law</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">PCAOB</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Lease</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Person</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Letters of Transmittal</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>15</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Post-Merger Parent Board</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>62</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Liability</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Principal Market</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Liable</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Property</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Lien</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Prosecuting Party</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>72</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Limited Joinder Agreement</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Proxy Statement</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Lock-Up Agreement</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Registered Intellectual Property</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Losses</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>7</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Registration Rights Agreement</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>82</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Made Available</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Related Agreement</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Management Agreement</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Representative</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Material</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Repurchase Rights</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Material Adverse Effect</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">SEC</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Materially</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">SEC Reports</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Materials of Environmental Concern</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">SEC Rules</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Maximum Amount</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>63</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Securities</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Merger</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Securities Act</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>10</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Merger Sub</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Security Interest</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>11</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Minimum Company Stockholders Equity</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">SFG</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>65</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Minute Books</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>8</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Shared Expenses Agreement</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>74</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">New Option</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>17</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Significant Company Customer</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>31</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Note Exchange Agreement</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>65</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Significant Parent Customer</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>49</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">NPCA</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">SOX</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>11</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Open Source Materials</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Specified Consents</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>24</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Order</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Stanford</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Ordinary Course of Business</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Stanford LOC</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>63</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Organizational Documents</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Stockholder Agent</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Original Agreement</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Stockholder Agent Expense Cap</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>72</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">OTCBB</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Stockholders</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>11</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Other Filings</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Subsidiary</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>11</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Other Merger Filings</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>57</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Superior</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Outside Date</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>73</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Superior Offer</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>11</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Outstanding Company Common Shares</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>23</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Support Agreements</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>11</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt">Parent</P>
</TD><TD valign=bottom width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Surviving Corporation</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Authorized Stock Increase</P>
</TD><TD valign=top width=18.733><P style="line-height:10pt; margin:0pt">&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>57</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">SVCH</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>65</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Balance Sheet</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Tangible Personal Property</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>11</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Balance Sheet Date</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Tax Authority</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>14</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Benefit Plans</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>46</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Tax Return</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Board</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>1</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Taxes</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>11</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Board Recommendation</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Termination and Release Agreement</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>65</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Bylaws</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>40</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Third Party Intellectual Property Rights</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Certificate of Incorporation</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>40</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Transaction</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Common Share</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Transaction Document</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Disclosure Schedules</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>39</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Transfer</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Financial Advisor</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>55</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Transferred</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Financial Statements</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>43</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Transferring</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Group</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>54</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">U.S. Export and Import Laws</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>12</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Information</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">under common control with</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>5</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent IP</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>51</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Unvested Company Shares</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>22</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Material Contract</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>49</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">WARN Act</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067><P style="line-height:10pt; margin:0pt" align=right>31</P>
</TD></TR>
<TR><TD valign=bottom width=249.6><P style="line-height:10pt; margin:0pt">Parent Option</P>
</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=32.8><P style="line-height:10pt; margin:0pt" align=right>9</P>
</TD><TD valign=bottom width=32.467>&nbsp;</TD><TD valign=bottom width=249.6>&nbsp;</TD><TD valign=top width=18.733>&nbsp;</TD><TD valign=bottom width=22.067>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>vi</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>AMENDED AND RESTATED<BR>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION is made and entered into as of January 6, 2007 (together with all schedules and exhibits hereto, this &#147;<B>Agreement</B>&#148;), by and among (i) DGSE Companies, Inc., a Nevada corporation (together with its successors and permitted assigns, &#147;<B>Parent</B>&#148;), (ii) DGSE Merger Corp., a Delaware corporation and a direct wholly-owned subsidiary of Parent (together with its successors and permitted assigns, &#147;<B>Merger Sub</B>&#148;), (iii) Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (together with its successors, the &#147;<B>Company</B>&#148; or &#147;<B>Superior</B>&#148;), and (iv) Stanford International Bank Ltd., a company organized under the laws of Antigua and Barbuda (together with its successors, &#147;<B>Stanford</B>&#148;), as agent, attorney-in-fact and representative for
the stockholders of the Company (together with its successors in such capacity, the &#147;<B>Stockholder Agent</B>&#148;). Stanford is not a signatory to this Agreement but is joining, and becoming a party to, this Agreement in its individual capacity and as Stockholder Agent to the limited extent provided in that certain Limited Joinder Agreement, made and entered into as of even date herewith (the &#147;<B>Limited Joinder Agreement</B>&#148;), by and among the parties hereto (including Stanford).</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>R E C I T A L S</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have approved and declared advisable this Agreement and the merger of Merger Sub with and into the Company (the &#147;<B>Merger</B>&#148;), with the Company being the surviving corporation;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, on July 12, 2006, Parent, Merger Sub and the Company entered into that certain Agreement and Plan of Merger and Reorganization (the &#147;<B>Original Agreement</B>&#148;), and Stanford joined the Original Agreement pursuant to that certain Limited Joinder Agreement, made and entered into as of July 12, 2006, relating to the Merger;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the &#147;Outside Date&#148; (as defined in the Original Agreement) has transpired without the consummation of the Merger;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, since the date of the Original Agreement, the financial statements of the Company have changed in material respects;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the parties hereto desire to amend and restate the Original Agreement and that certain Limited Joinder Agreement, made and entered into as of July 12, 2006, by and among the parties hereto, in its entirety;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the parties hereto wish to state herein their mutual agreements and obligations and to set forth certain requirements with respect to the disposition of Company Common Shares, the issuance of Parent Common Shares, access to information about the Company and the management of the Company;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, in the Merger, one hundred percent (100%) of the issued and outstanding shares of capital stock of the Company will be converted into the right to receive shares of Common Stock of Parent (as set forth in Article III), on the terms and subject to the conditions set forth in this Agreement and in accordance with the General Corporation Law of the State of Delaware (the &#147;<B>DGCL</B>&#148;) and Chapters 78 and 92A of Title 7 of the Nevada Revised Statutes (the &#147;<B>NPCA</B>&#148;); and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Board of Directors of the Company (the &#147;<B>Company Board</B>&#148;) and the Board of Directors of Parent (the &#147;<B>Parent Board</B>&#148;) has each resolved to recommend to its stockholders the adoption and approval of this Agreement and the Merger.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>A G R E E M E N T</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound hereby, the parties hereto hereby agree as follows:</P>
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<P style="margin-top:13.35pt; margin-bottom:0pt; page-break-before:always" align=center><B>ARTICLE I.<BR>
DEFINED TERMS; CONSTRUCTION</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 1.1 <I>Certain Definitions</I>. Unless otherwise expressly provided herein, the following terms, whenever used in this Agreement, shall have the meanings ascribed to them below or in the referenced Sections of this Agreement:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Acquisition Proposal</B>&#148; means, (A) with respect to the Company, any agreement, offer, proposal or indication of interest (other than this Agreement, the Merger or any other offer, proposal or indication of interest by Parent), or any public announcement of intention to enter into any such agreement or of any intention to make any offer, proposal or indication of interest, relating to or involving (i) the purchase from the Company or any Company Subsidiary or any acquisition by any Person of more than a 10% interest (or, with respect to any Person holding more than a 10% interest on the date hereof, of an additional interest) in the total outstanding voting securities of the Company or any Company Subsidiary (other than acquisitions of voting securities of a Company Subsidiary by the Company) or any tender offer or exchange offer that if consummated would result in any Person Beneficially Owning 10% or more of the total
outstanding voting securities of the Company or any Company Subsidiary, (ii) any merger, consolidation, business combination or similar transaction involving the Company or any Company Subsidiary, or (iii) any sale (other than in the Ordinary Course of Business) or disposition of the assets of the Company and the Company Subsidiaries in any single transaction or series of related transactions that constitute or represent 10% or more of the total revenue or operating assets of the Company and the Company Subsidiaries taken as a whole, in each case other than (x) the Merger, (y) the exercise of Company Options, or (z) the conversion or exchange of Company Preferred Shares or Company Indebtedness by Stanford, as contemplated by Article VII; and (B) with respect to Parent, any agreement, offer, proposal or indication of interest (other than this Agreement, the Merger or any other offer, proposal or indication of interest by the Company), or any public announcement of intention to enter into any such
agreement or of any intention to make any offer, proposal or indication of interest, relating to or involving (i) the purchase from the Parent or any Parent Subsidiary or any acquisition by any Person of more than a 10% interest (or, with respect to any Person holding more than a 10% interest on the date hereof, of an additional interest) in the total outstanding voting securities of Parent or any Parent Subsidiary (other than acquisitions of voting securities of a Parent Subsidiary by Parent) or any tender offer or exchange offer that if consummated would result in any Person Beneficially Owning 10% or more of the total outstanding voting securities of Parent or any Parent Subsidiary, (ii) any merger, consolidation, business combination or similar transaction involving the Parent or any Parent Subsidiary, or (iii) any sale (other than in the Ordinary Course of Business) or disposition of the assets of Parent and the Parent Subsidiaries in any single transaction or series of related transactions that
constitute or represent 10% or more of the total revenue or operating assets of Parent and the Parent Subsidiaries taken as a whole, in each case other than the Merger and the exercise of Parent Options.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Actions</B>&#148; means any action, appeal, petition, plea, charge, complaint, claim, suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public, private or otherwise, whether at law or in equity), demand, litigation, arbitration, mediation, hearing, inquiry, investigation, audit or similar event, occurrence, or proceeding, in each case commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Entity, arbitrator or mediator.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Actual Knowledge</B>&#148; means, with respect to a particular fact or other matter, (i) with respect to an individual, that such individual is actually aware of such fact or other matter, and (ii) with respect to an Entity, that any Person who is serving, or who has at any time served, as a director, officer, management-level employee, partner, executor or trustee of such Entity (or, in all cases above, in any similar or equivalent capacity), or any employee of such Entity charged with responsibility for a particular functional or regional area of such Entity&#146;s business or operations, has, or at any time had, Actual Knowledge of such fact or other matter.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Affiliate</B>&#148; shall have the meaning ascribed to such term in Rule 144 promulgated under the Securities Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Amend</B>&#148; means, with respect to any Contract, Law, filing or Organizational Document, to amend, supplement, extend, waive a provision of or otherwise modify such Contract, Law, filing or Organizational Document. The related terms &#147;<B>Amended</B>&#148; and &#147;<B>Amendment</B>&#148; shall have the correlative meanings.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Applicable Time</B>&#148; means (i) with respect to the Form S-4, the time the Form S-4, or any amendment or supplement thereto, is filed with the SEC, the time the Form S-4 becomes effective under the Securities Act and at the Effective Time, (ii) with respect to the Proxy Statement, the date the Proxy Statement, or any amendment or supplement thereto, is first mailed to the stockholders of Parent or the Company, at the times of the Parent </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">Stockholder Meeting and the Company Stockholder Meeting, and at the Effective Time, or (iii) with respect to any Other Filing, the date such Other Filing, or any amendment or supplement thereto, is filed with the applicable Governmental Entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Beneficial Owner</B>&#148; shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act. The related terms &#147;<B>Beneficially Own</B>&#148;, &#147;<B>Beneficially Owning</B>&#148; and &#147;<B>Beneficial Ownership</B>&#148; shall have the correlative meanings.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Best Efforts</B>&#148; means the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to achieve that result as expeditiously and effectively as possible.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Board Recommendation</B>&#148; means the Company Board Recommendation or the Parent Board Recommendation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Blue Sky Laws</B>&#148; means state securities or &#147;blue sky&#148; laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Breach</B>&#148; means (a) any breach of, or inaccuracy in, any representation or warranty, (b) any breach or violation of, default under (including any designated &#147;event of default&#148;), failure to perform, failure to comply with or failure to notify, or noncompliance with, any covenant, agreement or obligation, or (c) any one or more other Events the existence of which, individually or together, whether unconditionally or with the passing of time or the giving of notice, or both, would (i) constitute a breach, violation, default, failure or noncompliance referred to in clauses (a) and (b) next above, (ii) result in the acceleration of, or permit any Person to accelerate, any monetary obligation, (iii) result in the abridgement, modification, acceleration, termination, revocation, rescission, redemption, cancellation or vesting of, or permit any Person to abridge, modify, accelerate, delay, condition, terminate, revoke,
rescind, redeem or cancel, any right, license, liability, benefit, debt, power, authority, privilege or obligation, or (iv) require, or permit any Person to require, the payment of a monetary penalty or liquidated damages.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Business Day</B>&#148; means any day other than (i) a Saturday or Sunday, and (ii) any day on which the SEC shall be closed for business.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Capitalization Adjustment</B>&#148; means, with respect to any class of shares, an adjustment based on any stock split, reverse stock split, combination, consolidation, reorganization or reclassification of, or any stock dividend (including any dividend or distribution of Securities convertible into capital stock) on, such class of shares, the recapitalization of the issuer thereof, or any like change.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Certificates</B>&#148; means, collectively, the stock certificates representing Company Common Shares immediately before the Effective Time.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Closing Company Common Shares</B>&#148; means the Company Common Shares outstanding immediately at the Effective Time, including any Company Common Shares issued or issuable upon the exercise or conversion, before or at the Effective Time, of any Company Options, Company Warrants or other Commitments therefor, including the conversions and exchanges contemplated by the Conversion Agreements and Note Exchange Agreement, but, for avoidance of doubt, excluding Company Common Shares (i) to be cancelled pursuant to Section 3.1(b), or (ii) issuable upon the exercise of any Company Options or Company Warrants being assumed by Parent pursuant to Section 3.7 and Section 3.9, respectively.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Code</B>&#148; means the United States Internal Revenue Code of 1986, as Amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Commitment</B>&#148; means (a) options, warrants, convertible securities, exchangeable securities, subscription rights, purchase or acquisition rights, conversion rights, exchange rights, or other Contracts that require an Entity to issue any of its Equity Interests, (b) any other securities convertible into, exchangeable or exercisable for, or representing the right to subscribe for, in each case with or without consideration, any Equity Interest of an Entity, (c) statutory pre-emptive rights or pre-emptive rights granted under an Entity&#146;s Organizational Documents, (d) rights of first refusal, tag-along rights, co-sale rights, drag-along rights, registration rights, piggyback rights, buy-sell arrangements, or voting agreements, or (e) stock appreciation rights, phantom stock, profit participation, or other similar rights with respect to an Entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company Balance Sheet</B>&#148; means the balance sheet of the Company as of the Company Balance Sheet Date, as previously Made Available to Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company Balance Sheet Date</B>&#148; means September 30, 2006.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">&#147;<B>Company Board Recommendation</B>&#148; means the unanimous recommendation by the Company Board that the Company&#146;s stockholders vote in favor of (i) the adoption and approval of this Agreement and the Merger, and (ii) the Stockholder Agent Appointment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company Common Share</B>&#148; means a share of Company Common Stock.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company Common Stock</B>&#148; means the common stock, par value $0.001 per share, of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company Information</B>&#148; means the statements regarding the Company, its operations, business, directors, officers, Subsidiaries and stockholders contained in the Form S-4, Proxy Statement or Other Filings.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company Option</B>&#148; means any option granted, to the extent not exercised, expired or terminated, to a current or former employee, director, officer or consultant of the Company or any Company Subsidiary, or any predecessor of any of the foregoing, to purchase or otherwise acquire Company Common Shares pursuant to any Company Stock Option Plan.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company SEC Reports</B>&#148; means all SEC Reports filed by the Company with the SEC, including those that the Company may file subsequent to the date hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company Stock Option Plan</B>&#148; means any equity incentive, stock option, stock bonus, stock award or stock purchase plan, program or arrangement, as amended to date, of the Company or any Company Subsidiary, or any predecessor of any of the foregoing, including the Company&#146;s 2003 Omnibus Stock Option Plan and 2000 Omnibus Stock Option Plan.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Company Warrant</B>&#148; means a warrant or similar right to purchase any Company Common Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Consent</B>&#148; means any consent, approval, authorization, permit, ratification, favorable vote, authorization, waiver, or other similar action.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Contract</B>&#148; means any agreement, contract, subcontract, lease, sublease, power of attorney, note, loan, evidence of indebtedness, letter of credit, binding undertaking, covenant not to compete, license, instrument, obligation, binding commitment, binding understanding, indenture, option or warranty; in each case whether oral or written, express or implied.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Control</B>&#148; means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of stock or as trustee or executor, by contract or credit arrangement or otherwise. The related terms &#147;<B>controlled by</B>&#148; and &#147;<B>under common control with</B>&#148; shall have the correlative meanings.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Conversion Agreements</B>&#148; means those certain Conversion Agreements, made and entered into as of the date hereof, by and between the Company, on the one hand, and Stanford or DiGenova, on the other hand.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>DiGenova Warrant</B>&#148; means that certain Warrant, issued by Parent to DiGenova on the date hereof pursuant to that certain Securities Exchange Agreement, dated as of the date hereof, by and between Parent and DiGenova.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Dissenting Stockholders</B>&#148; means stockholders of the Company who have perfected their appraisal rights pursuant to Section 262 of the DGCL, or are otherwise duly exercising dissenters&#146; or appraisal rights under applicable Law, in respect of the Merger.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Employment Agreements</B>&#148; means the executive employment agreements between Parent, on the one hand, and Dr. L.S. Smith or William H. Oyster, on the other hand, previously approved by the Parent Board and Made Available to the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Encumbrance</B>&#148; means, with respect to any Property, any Order, Lien, easement, right of way, encroachment, servitude, right of first option, right of first refusal or similar restriction, drag-along or similar rights, community or other marital property interest, condition, equitable interest, license, encumbrance or other binding restriction of any kind (including restrictions on use, Transfer, receipt of income or exercise of any other attribute or indicia of ownership) on such Property or any interest therein or right thereto, whether directly or indirectly (through one or more intermediary Persons or otherwise), whether voluntarily, involuntarily or by operation of law, and, where applicable, any restriction on voting thereof or receipt of income thereon and any Commitments in respect thereof; </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always"><I>provided</I> that Transfer restrictions under federal securities and Blue Sky Laws and regulations shall be deemed not to be an Encumbrance. The term &#147;<B>Encumber</B>&#148; shall have the correlative meaning.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Entity</B>&#148; means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm, labor organization, unincorporated organization, or other enterprise, association, organization or business entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Environment</B>&#148; means soil, land surface or subsurface strata, surface waters (including navigable waters and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life and any other environmental medium or natural resource.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Environmental Claims</B>&#148; means, with respect to any Person, all accusations, allegations, notices of violation, Encumbrances, claims, demands, suits or causes of action for any damage, arising out of or related to the presence or Release of, or exposure to, any Hazardous Substances at any of such Person&#146;s Facilities, or the material failure by such Person to comply with any applicable Environmental Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Environmental Laws</B>&#148; means any Law that requires or relates to (i) advising appropriate authorities, employees or the public of intended, threatened or actual Environmental Releases of Materials of Environmental Concern, violations of discharge limits or other prohibitions and the commencement of activities, such as resource extraction or construction, that could have significant impact on the Environment, (ii) preventing or reducing to acceptable levels the Environmental Release of Materials of Environmental Concern into the Environment, (iii) reducing the quantities, preventing the Environmental Release or minimizing the hazardous characteristics of wastes that are generated, (iv) assuring that products are designed, formulated, packaged and used so that they do not present unreasonable risks to human health or the Environment when used or disposed of, (v) protecting the Environment, resources, species or ecological
amenities, (vi) reducing to acceptable levels the risks inherent in the transportation of Materials of Environmental Concern, (vii) cleaning up Materials of Environmental Concern that have been Environmentally Released, preventing the threat of Environmental Release or paying the costs of such clean up or prevention, (viii) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets, or (ix) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern or the protection of human health or the Environment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Environmental Release</B>&#148; means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the Environment or into or out of any property. The related term &#147;<B>Environmentally Released</B>&#148; shall have the correlative meaning.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Equity Interest</B>&#148; means (a) with respect to any corporation, any and all shares of capital stock and any Commitments with respect thereto, (b) with respect to any general or limited partnership, limited liability company, trust or similar Entity, any and all units, interests or other partnership/limited liability company interests, and any Commitments with respect thereto, and (c) with respect to any other Entity, any other direct or indirect equity ownership, participation or interest therein and any Commitments with respect thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>ERISA</B>&#148; means the Employee Retirement Income Security Act of 1974, as Amended, and the regulations promulgated thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>ERISA Affiliate</B>&#148; means, with respect to any Person, any Entity or trade or business (whether or not incorporated), other than such Person, that together with such Person is considered under common control and treated as a single employer under Sections 414(b), (c), (m) or (o) of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Event</B>&#148; means any act, omission, occurrence, circumstance, development, change, condition or other event or effect.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Escrow Agent</B>&#148; means the escrow agent appointed by Parent to act as escrow agent under the Escrow Agreement, together with its successors as escrow agent thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Escrow Termination Date</B>&#148; means the last day of the Escrow Period.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Exchange Act</B>&#148; means the Securities Exchange Act of 1934, as Amended, and the rules and regulations promulgated thereunder.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">&#147;<B>Expenses</B>&#148; includes all reasonable out-of-pocket expenses (including all reasonable fees and expenses of legal counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the Transactions, including the preparation, printing, filing and mailing of the Form S-4 and Proxy Statement and the solicitation of stockholder approvals and all other matters related to the Transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Facilities</B>&#148; means (i) plants, offices, manufacturing facilities, stores, warehouses, administration buildings and real property and related facilities, and (ii) with respect to any Person, all Facilities owned, leased, operated or occupied at any time by such Person or any of such Person&#146;s Subsidiaries.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Form S-4</B>&#148; means the registration statement on Form S-4 to be filed by Parent with the SEC in connection with the issuance of the Parent Common Shares constituting the Merger Consideration in the Merger, including the joint proxy statement/prospectus forming a part thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>GAAP</B>&#148; means generally accepted accounting principles for financial reporting, as applied in the United States and in effect from time to time.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Governmental Entity</B>&#148; means any (i) nation, state, county, city, town, borough, village, district or other jurisdiction, (ii) supranational, national, federal, state, local, municipal, foreign or other government, (iii)&nbsp;governmental or quasi-governmental authority of any nature (including any legislature, agency, board, bureau, branch, department, division, commission, instrumentality, court, tribunal, magistrate, justice or other entity exercising governmental or quasi-governmental powers), (iv)&nbsp;multi-national organization or body, (v) any body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, military, regulatory or taxing authority or power, (v)&nbsp;any stock exchange or similar self-regulatory organization or any quasi-governmental or private body exercising any regulatory, taxing or any other governmental or quasi-governmental authority, or (vi)&nbsp;any
official of any of the foregoing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Governmental Permit</B>&#148; means any permit, license, certificate, Consent, clearance, certificate, registration, approval, accreditation, or other similar authorization required by any Law or Governmental Entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Group</B>&#148; has the meaning ascribed to such term in Section 13 of the Exchange Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Hazardous Substances</B>&#148; means all pollutants, contaminants, chemicals, wastes, and any other infectious, toxic or otherwise hazardous substances or materials (whether solids, liquids or gases) subject to regulation, control or remediation under applicable Environmental Laws, including any material, substance or waste which is defined as a &#147;hazardous waste,&#148; &#147;hazardous material,&#148; &#147;hazardous substance,&#148; &#147;extremely hazardous waste,&#148; &#147;restricted hazardous waste,&#148; &#147;contaminant,&#148; &#147;toxic waste&#148; or &#147;toxic substance&#148; under any provision of Environmental Law, and including radioactive materials, petroleum, petroleum products, asbestos, presumed asbestos-containing material or asbestos-containing material, urea formaldehyde and polychlorinated biphenyls.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Indebtedness</B>&#148; means, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, or with respect to deposits or advances of any kind to such Person, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations of such Person upon which interest charges are customarily paid, (iv) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person, (v) all obligations of such Person issued or assumed as the deferred purchase price of Property or services (excluding obligations of such Person to creditors for raw materials, inventory, services and supplies incurred in the ordinary course of such Person&#146;s business), (vi) all capitalized lease obligations of such Person, (vii) all obligations of others secured by any Encumbrance on Property owned or
acquired by such Person, whether or not the obligations secured thereby have been assumed, (viii) all obligations of such Person under interest rate or currency swap transactions (valued at the termination value thereof), (ix) all letters of credit issued for the account of such Person (excluding letters of credit issued for the benefit of suppliers to support accounts payable to suppliers incurred in the ordinary course of business), (x) all obligations of such Person to purchase Securities (or other Property) that arise out of or in connection with the sale of the same or substantially similar Securities or Property, and (xi) all guarantees and arrangements having the economic effect of a guarantee of such Person of any Indebtedness of any other Person.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Independent Committee</B>&#148; has the meaning ascribed to such term in the Management Agreement.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">&#147;<B>Intellectual Property</B>&#148; means any and all worldwide intellectual property and intellectual property rights, including all patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data, proprietary processes and formulae, algorithms, specifications, customer lists and supplier lists; all designs and any registrations and applications therefor; all trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor; Internet domain names and toll-free numbers; all copyrights, copyright registrations and applications therefor; all computer software, including all source code, object code, firmware,
and development tools, game engines, game rules, scripts, voice-overs, characters, images, drawings, graphics, files, records and data; all rights in prototypes; all databases and data collections and all rights therein; all moral and economic rights of authors and inventors; and all other intellectual property of any kind or nature.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>IRS</B>&#148; means the United States Internal Revenue Service and, to the extent relevant, the United States Department of the Treasury.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Key Employee</B>&#148; means, with respect to any Entity, any employee at the vice president level or higher, or who is otherwise material to such Entity and such Entity&#146;s Subsidiaries taken as a whole.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Knowledge</B>&#148; means, with respect to a particular fact or other matter, (a) in the case of an individual, (i) that such individual is actually aware of such fact or other matter, or (ii) a prudent individual could be expected to have discovered or otherwise have become aware of such fact or other matter in the course of conducting a comprehensive investigation concerning the existence of such fact or other matter, and (b) in the case of an Entity, that any Person who is serving, or who has at any time served, as a director, officer, management-level employee, partner, executor or trustee of such Entity (or, in all cases above, in any similar or equivalent capacity), or any employee of such Entity charged with responsibility for a particular functional or regional area of such Entity&#146;s business or operations, has, or at any time had, Knowledge of such fact or other matter.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Law</B>&#148; means any federal, state, local, domestic, foreign, international or multi national law (statutory, common, or otherwise), constitution, treaty, statute, code, order, writ, injunction, decree, award, stipulation, ordinance or administrative doctrine, ordinance, equitable principle, code, rule, regulation, executive order, request, or other similar authority enacted, adopted, promulgated, or applied by any Governmental Entity, each as Amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Lease</B>&#148; means any lease of real or personal property or any lease or rental agreement, license, right to use or installment and conditional sale agreement to which the Company is a party or subject, and any other Contract of the Company pertaining to the leasing or use of any Tangible Personal Property. The related terms &#147;<B>Lease</B>&#148; and &#147;<B>Leased</B>&#148; used as a verb shall have the correlative meanings.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Liabilit</B>y&#148; or &#147;<B>Liable</B>&#148; means any liability or obligation of any kind, character or description, whether known or unknown, absolute or contingent, matured or unmatured, disputed or undisputed, secured or unsecured, conditional or unconditional, accrued or unaccrued, liquidated or unliquidated, vested or unvested, joint or several, due or to become due, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on financial statements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Lien</B>&#148; means, in respect of any Property, any security interest, deed of trust, mortgage, pledge, lien, statutory liens of any kind or nature, hypothecation, charge, claim, lease or other similar interest or right in respect of such Property.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Losses</B>&#148; means, without duplication, all damages, losses (including loss due to business interruption or operation shutdowns, increased costs of operation, the loss of any available tax deduction, and including special, exemplary, punitive or incidental loss or damage), deficiencies, costs of mitigation or avoidance, Liabilities, expenses of whatever nature, costs (including increased costs of business or operations), obligations, fines, interest, penalties, and payments, whether incurred by or issued against a Person, including (i) with respect to environmental liabilities and losses, clean-up, remedial correction and responsive action, and (ii) with respect to any Action or threatened Action, amounts paid in defense, settlement and discovery, costs associated with obtaining injunctive relief, administrative costs and expenses, reasonable fees and expenses of attorneys, expert witnesses, accountants and other
professional advisors, and other out-of-pocket costs of investigation, preparation, and litigation in connection therewith. In computing the amount of Losses, an offset shall be taken into account for tax savings (net of reasonable costs and expenses incurred in obtaining such savings, and taking into account the tax effect of any </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">indemnity to which the Person may be entitled) and for insurance benefits (without duplication of any amounts credited or repaid pursuant to Section 8.1(d)).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Lock-Up Agreement</B>&#148; means that certain Lock-Up Agreement, made and entered into as of the date hereof, by and between DGSE and DiGenova.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Made Available</B>&#148; means (a) in the case of Parent, that either (i) the Company or its Representatives has delivered such materials to Parent or its designated representatives via email or otherwise on or before December 31, 2006 (or such later date as Parent and the Company may agree in writing), or (ii) such material constitutes part of the Parent SEC Reports filed with the SEC prior to the date of this Agreement which are currently available through the SEC&#146;s EDGAR system, and (b) in the case of the Company, that either (i) Parent or its Representatives has delivered such materials to the Company or its designated representatives via email or otherwise on or before December 31, 2006 (or such later date as Parent and the Company may agree in writing), or (ii) such material constitutes part of the Company SEC Reports filed with the SEC prior to the date of this Agreement which are currently available through the
SEC&#146;s EDGAR system.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Management Agreement</B>&#148; means that certain Management Agreement, made and entered into as of the date hereof, by and between Merger Sub and the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Material</B>&#148; or &#147;<B>Materially</B>&#148; means, with respect to any Person and any Event, violation or Breach, any of the foregoing which, alone or in combination with any other Events, violations or Breaches, is reasonably likely to result in or have a Material Adverse Effect, taken as a whole, on such Person and its Subsidiaries, taken as a whole.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Material Adverse Effect</B>&#148; means, with respect to any Person and any Events, that such Events, taken individually or in the aggregate, (i) have had, or are reasonably likely to have, a materially adverse effect on the assets (including intangible assets), Properties, business, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole, or (ii) materially impede or delays, or are reasonably likely materially to impede or delay, the ability of such Person or its Subsidiaries to perform its obligations under this Agreement or any Related Agreements to which it is a signatory, or to consummate the Transactions, in accordance with the terms hereof and thereof and applicable Laws; <I>provided, however</I>, that no such Events to the extent resulting from or arising out of any of the following shall be deemed to constitute, in and of itself, a Material Adverse Effect, nor shall it be
taken into consideration when determining whether there has occurred a Material Adverse Effect: (i) any change in applicable Laws, GAAP, regulations or application or interpretations of such Laws, GAAP or regulations, but only to the extent that such changes do not adversely affect such Person and its Subsidiaries in a disproportionate manner from others in the industry or market generally, (ii) the negotiation, execution, delivery, pendency or announcement of this Agreement, the Related Agreements or the consummation of the Transactions, including any loss of or adverse impact on relationships with employees, customers, suppliers, licensors, licensees, or distributors of such Person or its Subsidiaries as a result thereof, (iii) any Events affecting the industry in which such Person operates generally, but only to the extent that such Events do not adversely affect such Person and its Subsidiaries in a disproportionate manner, (iv) changes in United States or world general political, economic or
capital market conditions, but only to the extent that such changes do not adversely affect such Person and its Subsidiaries in a disproportionate manner, (v) actual or threatened stockholder litigation arising from allegations of breach of fiduciary duty relating to this Agreement or the Related Agreements, including related claims with respect to disclosure of the Merger or this Agreement, or (vi) any delay in the mailing of the Form S-4 or Proxy Statement due to the SEC or Blue Sky Laws review process related thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Materials of Environmental Concern</B>&#148; means chemicals, pollutants, pollution, contaminants, wastes, Hazardous Substances and any other substance that is now or hereafter regulated by any applicable Environmental Law or that is otherwise a danger to health, reproduction or the Environment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Merger Consideration</B>&#148; means 3,700,000 Parent Common Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Minimum Company Stockholders Equity</B>&#148; means negative Three Million One Hundred Twenty-Three Thousand Four Hundred Twenty-Eight Dollars and no cents (-$3,123,428).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Minute Books</B>&#148; means, (i) with respect to any corporation, minute books of such corporation containing records of all proceedings, consents, actions and meetings of the Board of Directors, committees of the Board of Directors, stockholders and committees of stockholders of such corporation, or (ii) with respect to any other Entity, minutes or similar books and records of such Entity containing records of all proceedings, consents, actions and </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">meetings of the equivalent governing bodies, including managing members in the case of a limited liability company or general partners in case of a partnership, and owners of such Entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Order</B>&#148; means any order, ruling, decision, verdict, decree, writ, subpoena, award, judgment, injunction, assessment, or other similar determination or finding by, before, or under the supervision of any Governmental Entity, arbitrator or mediator.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Ordinary Course of Business</B>&#148; means, with respect to any action by any Person, that such action (i) is consistent in nature, scope, quality, frequency and magnitude with the past customs and practices of such Person, to the extent practicable if such Person has a rapidly growing business, and is taken in the ordinary course of the normal, day-to-day operations of such Person, and (ii) does not require authorization by (1) such Person&#146;s board of directors (or any committee thereof), (2) such Person&#146;s stockholders (or by any Person or group of Persons exercising similar authority), or (3) more than one of such Person&#146;s (A) principal executive officer, (B) principal operating officer, (C) principal financial officer, and (D) other officer performing substantially similar functions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Organizational Documents</B>&#148; means, with respect to any Entity, (i) if a corporation, its articles or certificate of incorporation and its bylaws, or (ii) if another type of Entity, any other charter, regulations or similar document, including Contracts, adopted or filed in connection with the creation, formation or organization of such Entity; in each case as Amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>OTCBB</B>&#148; means the OTC Bulletin Board.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Other Filings</B>&#148; means all filings made by, or required to be made by, the Company or Parent, as the case may be, with the SEC in connection with the Transactions, other than the Form S-4 and Proxy Statement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Open Source Materials</B>&#148; means all software or other copyrightable work that is distributed as &#147;free software&#148; or &#147;open source software&#148; or under substantially similar licensing or distribution terms, including any software licensed under a license approved as &#147;Open Source&#148; by the Open Source Initiative, http://www.opensource.org/, or as &#147;Free Software&#148; by The Free Software Foundation, http://www.fsf.org/.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent Balance Sheet</B>&#148; means the balance sheet of Parent as of the Parent Balance Sheet Date, as contained in the Parent SEC Reports.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent Balance Sheet Date</B>&#148; means September 30, 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent Board Recommendation</B>&#148; means the unanimous recommendation by the Parent Board that the Parent&#146;s stockholders vote in favor of (i) the adoption and approval of this Agreement and the Merger, and (ii) the Parent Authorized Stock Increase.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent Common Share</B>&#148; means a share of common stock, par value $0.01 per share, of Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent Information</B>&#148; means the statements regarding Parent, its operations, business, directors, officers, Subsidiaries and stockholders contained in the Form S-4, Proxy Statement or Other Filings.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent Option</B>&#148; means any option granted, to the extent not exercised, expired or terminated, to a current or former employee, director, officer or consultant of Parent or any Parent Subsidiary, or any predecessor of any of the foregoing, to purchase or otherwise acquire Parent Common Shares pursuant to any Parent Stock Option Plan.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent SEC Reports</B>&#148; means all SEC Reports filed by Parent with the SEC, including those that Parent may file subsequent to the date hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent Stock Option Plan</B>&#148; means any equity incentive, stock option, stock bonus, stock award or stock purchase plan, program or arrangement, as amended to date, of Parent or any Parent Subsidiary, or any predecessor of any of the foregoing, including Parent&#146;s Stock Option Plan, effective as of January 1, 2004 and, if approved at Parent&#146;s 2006 annual meeting of its stockholders, Parent&#146;s 2006 Equity Incentive Plan (as such plan is described in Parent&#146;s proxy statement filed with the SEC on April 27, 2006).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Parent Warrant</B>&#148; means a warrant or similar right to purchase any Parent Common Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>PCAOB</B>&#148; means the United States Public Company Accounting Oversight Board.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Person</B>&#148; means any individual, Group, Governmental Entity or Entity.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">&#147;<B>Principal Market</B>&#148; means, with respect to any Entity, the Nasdaq Capital Market, the New York Stock Exchange, the Nasdaq National Market, the American Stock Exchange, the OTCBB or any other national securities exchange registered under Section 6 of the Exchange Act, whichever is at the time the principal trading exchange, market or inter-dealer or automated quotation system for the shares of common stock of such Entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Property</B>&#148; means any present or future, legal or equitable, vested or contingent right to or interest in any fixture, real property, personal property or any other property or asset, including goods, leases, securities (whether or not certificated), commercial paper, financial assets, commodities, accounts, equipment, chattel paper, derivatives, instruments, money, claims, licenses, Contracts, Intellectual Property, royalties and general intangibles, and any proceeds of any of the foregoing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Proxy Statement</B>&#148; means the proxy materials constituting part of the joint proxy state-ment/pro-spectus forming part of the Form S-4 or otherwise communicated to Parent or Company stockholders in connection with the Merger or relating to the Company Stockholders Meeting or the Parent Stockholders Meeting.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Registered Intellectual Property</B>&#148; means, with respect to any Person, all United States, international and foreign (i) patents and patent applications (including provisional applications), (ii) registered trademarks or service marks, applications to register trademarks or service marks, intent-to-use applications, or other registrations or applications related to trademarks or service marks, (iii) registered Internet domain names or toll-free numbers, and (iv) registered copyrights and applications for copyright registration, in each case of clauses (i) through (iv) next preceding, that is owned by, registered or filed in the name of, such Person or any Subsidiary of such Person.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Related Agreements</B>&#148; means the Confidentiality Agreement, the Shared Expenses Agreement, the Escrow Agreement, the Limited Joinder Agreement, the Certificate of Merger, the Employment Agreements, the A Warrants, the B Warrants, the DiGenova Warrant, the Registration Rights Agreement, the Termination and Release Agreements, the Management Agreement, the Conversion Agreements, the Note Exchange Agreement, the Securities Exchange Agreement, the Support Agreements, the Lock-Up Agreement, the Consulting Agreement, the amendment to the Stanford LOC dated the date hereof, the Forbearance Agreement, the Amended and Restated Stanford LOC, and any other agreement delivered on the date hereof or at or in connection with the Closing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Representatives</B>&#148; means, with respect to any Person, such Person&#146;s officers, directors, employees, managers, consultants, contractors, agents, investment bankers, brokers, agents, and other financial, banking and legal advisors or other representatives.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Repurchase Rights</B>&#148; means, with respect to any Entity, outstanding rights held by such Entity to repurchase or redeem Equity Interests in such Entity, or similar restrictions in such Entity&#146;s favor with respect to any of its Equity Interests.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>SEC</B>&#148; means the United States Securities and Exchange Commission.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>SEC Reports</B>&#148; means any forms, statements, schedules, requests, reports and documents (including items incorporated by reference) required or authorized to be filed with the SEC pursuant to the Securities Act or the Exchange Act or the rule and regulations promulgated by the SEC thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>SEC Rules</B>&#148; means the rules and regulations promulgated by the SEC under the Securities Act, the Exchange Act or SOX.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Securities Act</B>&#148; means the Securities Act of 1933, as Amended, and the rules and regulations promulgated thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Securities</B>&#148; means any stock, capital stock or similar security, shares, partnership (general or limited) interests, membership or limited liability company interests or units, interests in a joint venture, voting trust certificates, certificates of interest or participation in any profit sharing agreement or arrangement or business trust, voting trust certificate, investment contract, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as &#147;securities&#148;, or any certificates of interest or participations in, temporary or interim certificates for, receipt for, guarantees of, warrants or rights to subscribe to, purchase or otherwise acquire, or any other Commitments, puts or other options, futures, or certificate of deposit for, any of the foregoing.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">&#147;<B>Security Interest</B>&#148; means any Lien, except for (i) liens for taxes, assessments, governmental charges, or claims that are being contested in good faith by appropriate Actions promptly instituted and diligently conducted and only to the extent that a reserve or other appropriate provision, if any, has been made on the face of the Company Financial Statements in an amount equal to the Liability for which the lien is asserted, (ii) statutory liens of landlords and warehousemen&#146;s, carriers&#146;, mechanics&#146;, suppliers&#146;, materialmen&#146;s, repairmen&#146;s or other like liens (including contractual landlords&#146; liens) arising in the Ordinary Course of Business and with respect to amounts not yet delinquent, or with respect to amounts being contested in good faith by appropriate proceedings, and (iii) liens incurred or deposits made in the Ordinary Course of Business in connection
with workers&#146; compensation, unemployment insurance and other similar types of social security.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>SOX</B>&#148; means the Sarbanes-Oxley Act of 2002, as Amended, and the rules and regulations promulgated thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Stockholders</B>&#148; means all of the stockholders of the Company from time to time, other than stockholders who do not hold any Company Common Shares other than Dissenting Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Subsidiary</B>&#148; means, with respect to any Person, (a) any corporation in which a controlling interest in the total voting power of all classes of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors of such corporation is owned by such Person directly or through one or more other Subsidiaries of such Person, and (b) any Person other than a corporation of which at least a controlling interest of the Equity Interests (however designated) entitled (without regard to the occurrence of any contingency) to vote in the election of the governing body, partners, managers, or others that will control the management of such Entity is owned by such Person directly or through one or more other Subsidiaries of such Person.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Superior Offer</B>&#148; means, with respect to the party receiving an offer, any <I>bona fide</I> written offer, not solicited after the date of this Agreement by the party or on behalf of the party by any of its Representatives, made by a Person to acquire, directly or indirectly, pursuant to a tender offer, exchange offer, merger, consolidation or other business combination (including by means of a tender offer followed promptly by a back-end merger), all or substantially all of the assets of the party receiving the offer or all of the total outstanding voting securities of such party and as a result of which (i) Equity Interests held by stockholders of such party immediately preceding such transaction would represent or be converted into less than 50% of the Equity Interests in the surviving or resulting Entity of such transaction or any direct or indirect parent or Subsidiary thereof, or (ii) such third party acquiring,
directly or indirectly, all or substantially all of the assets of the party receiving the offer and such party&#146;s Subsidiaries, taken as a whole, in each case for consideration consisting exclusively of cash or publicly-traded equity securities, on terms that such party&#146;s Board of Directors has in good faith determined (after consulting with such party&#146;s legal counsel and financial advisors), to be more favorable to its stockholders than the terms of the Merger and taking into consideration whether such offer is reasonably capable of being consummated, and whether financing to the extent required by the Person making such offer, is then fully committed and available, and is not contingent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Support Agreements</B>&#148; means those certain Support Agreements, made and entered into as of the date hereof, by and between certain stockholders of the Company and Parent, and by and between Dr. L.S. Smith and the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Tangible Personal Property</B>&#148; means, with respect to any Person, all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, vehicles and other items of tangible personal property (other than inventories) of every kind owned or leased by such Person, wherever located and whether or not carried on such Person&#146;s books.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Taxes</B>&#148; means (i) all taxes, levies, assessments, duties, imposts or other like assessments, charges or fees (including estimated taxes, charges and fees), including income, profits, corporations, advance corporation, gross receipts, transfer, excise, property, sales, use value-added, ad valorem, license, capital, wage, employment, payroll, withholding, social security, severance, occupation, import, custom, stamp, alternative, add-on minimum, environmental, franchise or other governmental taxes or charges, imposed by any Governmental Entity responsible for the imposition of any such tax (each, a &#147;<B>Tax Authority</B>&#148;), including any interest, penalties or additions to tax applicable or related thereto, (ii) all liability for the payment of any amounts of the type described in clause (i) as the result of being (or ceasing to be) a member of an affiliated, consolidated, combined or unitary group (or being
included (or required to be included) in any Tax Return related thereto), and (iii) all liability for the payment of any </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">amounts as a result of an express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other person with respect to the payment of any amounts of the type described in clause (i) or clause (ii).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Tax Return</B>&#148; means any report, return, statement, declaration, claim for refund, information return or other written information (including any related or supporting schedules, statements or information and amended returns) filed or required to be filed in connection with any Taxes, including the administration of any Laws, regulations or administrative requirements relating to any Taxes.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Third Party Intellectual Property Rights</B>&#148; means, with respect to any Person, any Intellectual Property owned by, or exclusively licensed by, another Person (other than a Subsidiary of such first Person).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Transaction Documents</B>&#148; means this Agreement, the Related Agreements and any certificates, instruments, proxies or documents delivered or to be delivered pursuant to or in connection with this Agreement, any Related Agreement or any Transaction.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Transactions</B>&#148; means all of the transactions contemplated by this Agreement, including the Merger.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Transfer</B>&#148; means, with respect to any Property, to sell, deed, dividend, distribute (including upon liquidation or distribution), exchange, convey, consign, negotiate, gift, devise, bequeath, pass by intestate succession, assign, issue, or otherwise alienate, transfer or dispose of such Property or any interest therein or right thereto, whether directly or indirectly (through another Person or otherwise), whether voluntarily, involuntarily or by operation of law, and whether with or without consideration. The related terms &#147;<B>Transferred</B>&#148; and &#147;<B>Transferring</B>&#148; shall have the correlative meanings.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>U.S. Export and Import Laws</B>&#148; means all United States export and import Laws and controls, including the Arms Export Control Act (22 U.S.C. &#167; 2778), the International Traffic in Arms Regulations (ITAR) (22 C.F.R. Subchapter M), the Export Administration Act of 1979, as amended (50 U.S.C. &#167;&#167; 2401-2420), the Export Administration Regulations (EAR) (15 C.F.R. 730-774), and all other laws and regulations of the United States Government regulating the provision of services to non-U.S. parties or the export and import of articles or information from and to the United States of America and non-U.S. parties.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 1.2 <I>Other Definitions</I>. All other capitalized terms used in this Agreement and not defined in Section 1.1 shall have the meanings ascribed to such terms elsewhere in this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 1.3 <I>Construction</I>. The parties hereto have participated jointly in the negotiation and drafting of this Agreement with the assistance of legal counsel, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party because of the authorship of any provision of this Agreement. The parties intend that each representation, warranty and covenant contained herein shall have independent significance. If any party has Breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating
to a similar subject matter (regardless of the relative levels of specificity) which the party has not breached shall not detract from or mitigate the fact that the party is in Breach of the first representation, warranty, or covenant. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) all references in this Agreement to designated &#147;Articles,&#148; &#147;Sections&#148; and other subdivisions, or to designated &#147;Exhibits,&#148; &#147;Schedules&#148; or &#147;Appendices,&#148; are to the designated Articles, Sections and other subdivisions of, or the designated Exhibits, Schedules or Appendices to, this Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) references to any Person includes such Person&#146;s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) references to any agreement, document or instrument means such agreement, document or instrument as Amended and in effect from time to time in accordance with the terms thereof, and shall be deemed to refer as well to all addenda, annexes, appendices, exhibits, schedules and other attachments thereto;</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(d) reference to any Law means such Law as Amended, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Law means that provision of such Law from time to time in effect and constituting the substantive Amendment, codification, replacement or reenactment of such section or other provision;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) references to &#147;dollars&#148; or &#147;cash&#148;, and the &#147;$&#148; symbol, are references to the lawful money of the United States of America;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) with respect to the determination of any period of time, &#147;from&#148; means &#147;from and including&#148; and &#147;to&#148; means &#147;to but excluding&#148;;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) the words &#147;include,&#148; &#147;includes,&#148; and &#147;including&#148; shall be deemed to be followed by &#147;without limitation&#148;;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) the term &#147;or&#148; shall not be exclusive;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) pronouns in masculine, feminine, and neuter genders shall be construed to include any other gender;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) whenever the singular number is used, if required by the context, the same shall include the plural, and vice versa;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) the words &#147;this Agreement,&#148; &#147;herein,&#148; &#147;hereof,&#148; &#147;hereby,&#148; &#147;hereunder,&#148; and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) all accounting terms shall be interpreted, and all accounting determinations hereunder shall be made, in accordance with GAAP.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ARTICLE II.<BR>
THE MERGER</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 2.1 <I>The Merger</I>. Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub, at the Effective Time, shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (together with its successors, the &#147;<B>Surviving Corporation</B>&#148;) and as a wholly-owned subsidiary of Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 2.2 <I>The Closing</I>. The closing of the Merger (the &#147;<B>Closing</B>&#148;) shall take place (i) on the second Business Day after the satisfaction or waiver of each of the conditions set forth in Article VII, or (ii) at such other time as Parent and the Company shall agree in writing (the date of the Closing, the &#147;<B>Closing Date</B>&#148;). The Closing shall take place at the offices of Sheppard, Mullin, Richter &amp; Hampton LLP, 12275 El Camino Real, Suite 200, San Diego, California 92130-2006, or at such other location as Parent and the Company agree in writing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 2.3 <I>Effective Time</I>. On the Closing Date, or on such other date as may be mutually agreed by Parent and the Company, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger in substantially the form of <I>Exhibit A</I> (the &#147;<B>Certificate of Merger</B>&#148;) with the Office of the Secretary of State of the State of Delaware, executed and otherwise filed in accordance with the relevant provisions of the DGCL (the date and time of such filing, or if another date and time is specified in the Certificate of Merger, such specified date and time, the &#147;<B>Effective Time</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 2.4 <I>Effect of the Merger</I>. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the Property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all Indebtedness, Liabilities and duties of the Company and Merger Sub shall become the Indebtedness, Liabilities and duties of the Surviving Corporation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 2.5 <I>Certificate of Incorporation; Bylaws</I>. The certificate of incorporation and bylaws of Merger Sub as in effect immediately prior to the Effective Time shall constitute the certificate of incorporation and bylaws of the Surviving Corporation at and after the Effective Time; <I>provided, however</I>, that (i) Article I of the certificate of </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">incorporation of the Surviving Corporation will be amended at the Effective Time to read &#147;The name of the corporation is Superior Galleries, Inc.&#148; (or as Parent and the Company may otherwise agree prior to the filing of the Certificate of Merger), and (ii) at the election of Parent, such election to be made in Parent&#146;s sole discretion and effected by delivery of a notice to the Company on or before the Closing Date, Article IV of the certificate of incorporation of the Surviving Corporation will be amended at the Effective Time to read &#147;The total number of shares of capital stock which the corporation shall have authority to issue is 6,000,000 shares of common stock, $0.0001 par value per share.&#148;; in each case until thereafter amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 2.6 <I>Directors and Officers</I>. Unless otherwise determined by Parent prior to the Effective Time, the directors and officers of Merger Sub immediately prior to the Effective Time shall be the sole directors and officers of the Surviving Corporation effective as of the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their successors are duly elected or appointed and qualified or until their earlier death, resignation or removal.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ARTICLE III.<BR>
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.1 <I>Conversion of Securities</I>. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Company Common Shares</I>. Each Closing Company Common Share issued and outstanding immediately prior to the Effective Time (exclusive of Dissenting Shares referred to in Section 3.10) shall be automatically be cancelled and retired and shall cease to exist, and the holder of a stock certificate that, immediately prior to the Effective Time, represented issued and outstanding Closing Company Common Shares shall cease to have any rights with respect thereto, except the right to receive, upon the surrender of such certificates (or delivery of the affidavit and bond, if any, specified in Section 3.4(i)) and upon the terms and subject to the conditions set forth in this Article III and elsewhere in this Agreement, 0.2731 Parent Common Shares for each Company Common Share (the &#147;<B>Exchange Ratio</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Cancellation of Certain Shares</I>. Each Company Common Share held immediately prior to the Effective Time by the Company, Parent, Merger Sub or any Subsidiary of the Company, Parent or Merger Sub, and each share of any class of capital stock of the Company other than the Company Common Stock (including each series of preferred stock of the Company), shall be automatically cancelled and retired and shall cease to exist, without any conversion thereof or consideration therefor, and no payment shall be made with respect thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Capital Stock of Merger Sub</I>. Each share of capital stock of Merger Sub that is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without further action on the part of the sole stockholder of Merger Sub, be converted into and become (i) if Article IV of the certificate of incorporation of the Surviving Corporation is amended at the Effective Time as provided in clause (ii) in the proviso in Section 2.5, five thousand, or (ii) otherwise, one; in either case, validly issued, fully paid and non-assessable share(s) of common stock of the Surviving Corporation (and the shares of Surviving Corporation into which the shares of Merger Sub capital stock are so converted shall be the only shares of the Surviving Corporation&#146;s capital stock that are issued and outstanding immediately after the Effective Time). Each certificate evidencing ownership of shares of Merger
Sub common stock will evidence ownership of such shares of common stock of the Surviving Corporation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.2 <I>Capitalization Adjustments to Shares</I>. In the event of any Capitalization Adjustment with respect to the Company Common Shares or Parent Common Shares occurring after the date of this Agreement and prior to the Effective Time, or with respect to Parent Common Shares being held in the Escrow Account pursuant to the Escrow Agreement after the Effective Time for so long as held therein, all references in this Agreement to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such Capitalization Adjustment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.3 <I>Allocation and Distribution of Merger Consideration</I>. Subject to Section 3.1(b), Section 3.5, Section 3.14 and other provisions of this Article III, the Merger Consideration shall be allocated among all pre-Closing Stockholders <I>pro rata</I> according to the respective number of Closing Company Common Shares held by each such </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">stockholder. Parent (and, to the extent applicable, the Stockholder Agent) shall deliver the Merger Consideration to the Exchange Agent for distribution to such stockholders, provided that Parent may retain any consideration in respect of any Dissenting Stockholders for distribution pursuant to Section 3.10 or for paying any settlement, award or judgment of any Actions relating to such stockholder&#146;s Dissenting Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.4 <I>Surrender of Certificates; Payment</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Exchange Procedures.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) Promptly after the Effective Time, Parent shall instruct the Exchange Agent to mail to each holder of record of Closing Company Common Shares (i) a letter of transmittal, substantially in the form of <I>Exhibit B</I> (collectively, the &#147;<B>Letters of Transmittal</B>&#148;), and (ii) instructions for use in effecting surrender by such holder of its Certificates to the Exchange Agent in exchange for the Merger Consideration.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) The holder of each Certificate, upon the surrender of such Certificate by such holder to the Exchange Agent (or the delivery of the affidavit and bond, if any, specified in Section 3.4(i)), together with a Letter of Transmittal duly completed and validly executed by such holder in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, shall, subject to Section 3.4(e) and Section 3.14, be entitled to receive in exchange for such Certificate a certificate representing the number of Parent Common Shares for which the Company Common Shares theretofore represented by such Certificate may be exchanged pursuant to Section 3.1, and such surrendered Certificate shall forthwith thereafter be cancelled and retired.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) Each Certificate shall be deemed at all times from and after the Effective Time to represent only the right to receive, upon exchange as contemplated in this Section 3.4, the Merger Consideration to which the holder of the Company Common Shares formerly represented by such Certificate is entitled to receive in the Merger.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Distributions With Respect to Unexchanged Shares</I>. No dividends or other distributions declared or made after the Effective Time with respect to Parent Common Shares with a record date thirty or more days after the Effective Time but prior to the surrender of a Certificate (or the delivery of the affidavit and bond, if any, specified in Section 3.4(i)) will be paid or due to the holder of such Certificate in respect of the Parent Common Shares exchangeable therefor.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Transfers of Ownership</I>. In the event of a transfer of ownership of Company Common Shares that is not registered on the transfer records of the Company, the Merger Consideration payable hereunder with respect to such Company Common Shares may be paid to a Person other than the Person in whose name the Certificate so surrendered is registered, but only if (i) such Certificate shall be properly endorsed and otherwise be in proper form for transfer, and (ii) that the Person requesting such exchange shall have paid to Parent or any agent designated by it any transfer or other taxes required by reason of the issuance of a certificate for Parent Common Shares in any name other than that of the registered holder of the Certificates surrendered, or established to the satisfaction of Parent or any agent designated by it that such tax has been paid or is not payable.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Exchange Agent</I>. Prior to the Effective Time, Parent or a direct or indirect Subsidiary of Parent shall make available to Registrar &amp; Transfer Company (or such other transfer agent which Parent may appoint to act as the exchange agent hereunder from time to time), as exchange agent hereunder (in such capacity, together with its successors in such capacity, the &#147;<B>Exchange Agent</B>&#148;), for distribution by the Exchange Agent in accordance with this Article III, certificates representing Parent Common Shares to deliver to the holders of outstanding Company Common Shares (other than any Company Common Shares to be canceled pursuant to Section 3.1(b) and Dissenting Shares referred to in Section 3.10), as the aggregate Merger Consideration payable to such holders pursuant to Section 3.1 in exchange for such Company Common Shares. Parent shall deliver irrevocable instructions to the Exchange Agent to
cause the Exchange Agent to deliver the Merger Consideration contemplated to be issued pursuant to Section 3.1 as promptly as reasonably practicable upon receipt of the documents, including Letters of Transmittal and Certificates, described above. Upon surrender of a Certificate to the Exchange Agent for exchange, together with a duly executed Letter of Transmittal and such other documents as may be reasonably required by the Exchange Agent, the Exchange Agent shall (i) deliver to the holder of such Certificate a certificate representing the number of Parent Common Shares that such holder has the right to receive as Merger Consideration pursuant to this Article III, and (ii) deliver to the Escrow Agent </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">under the Escrow Agreement on behalf of such holder a certificate in the name of the Escrow Agent with respect to the portion of the Escrow Shares that such holder has placed in escrow pursuant to this Article III.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <I>No Fractional Shares</I>. No certificate or scrip representing fractional Parent Common Shares shall be issued upon the surrender of certificates formerly representing Company Common Shares or otherwise in the Merger, and in lieu thereof, any fractional Parent Common Share shall be rounded up to the nearest whole Parent Common Share; <I>provided</I> that, prior to applying the sentence next preceding with respect to any holder of Company Common Shares, all Company Common Shares held by such holder shall be aggregated, taking into account all certificates formerly representing Company Common Shares delivered by such holder and the aggregate number of Company Common Shares represented thereby, and after giving effect to the exercise of any Company Options or Company Warrants to be exercised by such holder in connection with the Closing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) <I>Further Rights in Company Common Shares</I>. All Merger Consideration issued and paid upon conversion of the Company Common Shares in accordance with the terms hereof shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to such Company Common Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) <I>Unclaimed Merger Consideration</I>. The Exchange Agent shall upon demand promptly return any portion of the Merger Consideration that remains undistributed six months after the Effective Time, and any holders of Company Common Shares immediately prior to the Effective Time who have not theretofore complied with this Article III shall thereafter look only to Parent (subject to applicable abandoned property, escheat and similar Laws) for the Merger Consideration. Notwithstanding anything to the contrary contained herein, if any Certificate has not been surrendered within three years of the Effective Time, subject to applicable Law, any amounts payable in respect of such Certificate shall, to the extent permitted by applicable Laws, become the property of the Parent, free and clear of all claims or interests of any Person previously entitled thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) <I>No Liability</I>. None of Parent, the Company, Merger Sub or the Surviving Corporation shall be liable to any Person for any Merger Consideration delivered to a public official pursuant to any abandoned property, escheat or similar Law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) <I>Lost Certificates</I>. If any Certificate shall have been lost, stolen or destroyed, upon (i) the making of an affidavit of that fact by holder thereof claiming such Certificate to be lost, stolen or destroyed, and (ii) if required by Parent or the Exchange Agent in their respective discretion, the posting by such holder of a bond, in such reasonable amount as Parent or the Exchange Agent may direct, as indemnity against any claim that may be made against it with respect to such Certificate; the Exchange Agent or Parent, as applicable, shall deliver to such holder the appropriate Merger Consideration in exchange for the Company Common Shares represented by such lost, stolen or destroyed Certificate.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.5 <I>Withholding Rights</I>. Each of Parent, Merger Sub, the Surviving Corporation and the Exchange Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of Company Common Shares or Company Options such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of a Tax Law, or pursuant to other applicable Orders. To the extent that amounts are so withheld from the Merger Consideration, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Common Shares or Company Options in respect of whom such deduction and withholding was made.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.6 <I>Share Transfer Books</I>. At the Effective Time, the share transfer books of the Company shall be closed, and, thereafter, there shall be no further registration of Transfers of Company Common Shares theretofore outstanding on the records of the Company. From and after the Effective Time, the holders of certificates representing Company Common Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Company Common Shares, except as otherwise provided herein or by applicable Laws. On and after the Effective Time, any certificates presented to the Exchange Agent or Parent for any reason shall be cancelled and retired, and the holder thereof shall only have the right to receive the Merger Consideration, without interest, upon the terms and subject to the conditions hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.7 <I>Company Options</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Before the Effective Time, the Company shall take all action necessary such that each Company Option that is outstanding and unexercised immediately prior to the Effective Time and that is not surrendered to Parent </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">as provided in Section 3.7(b) within 30 days of the Closing Date shall be cancelled. As soon as practicable following the date hereof, the Company Board (or, if appropriate, any committee thereof administering the Company Stock Option Plans) shall adopt such resolutions or take such other actions as may be required to effect the provisions of this Section 3.7, including making the appropriate election under Section 8.3 of the Company&#146;s 2003 Omnibus Stock Option Plan or 2000 Omnibus Stock Option Plan. The Company shall use its Best Efforts to prevent the acceleration of any Company Option in connection with the Merger or other Transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) After the Effective Time, promptly upon the surrender by the optionee for exchange of a Company Option granted pursuant to any Company Stock Option Plan, Parent shall grant the optionee thereof a new option (each, a &#147;<B>New Option</B>&#148;) under a Parent Stock Option Plan to purchase Parent Common Shares subject to, and exercisable upon, the terms and conditions of the Contracts evidencing such Company Option previously Made Available to Parent, except:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) from and after the Effective Time, Parent and the Parent Board or the Compensation Committee of the Parent Board, as the case may be, shall be substituted for the Company and the Company Subsidiaries and their respective Boards of Directors and committees thereof for the purpose of administering the terms and conditions of the substituted New Option;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) all references to the Company (or any Company Subsidiary) shall be replaced by references to Parent;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) all references to the Company (or any Company Subsidiary) or its state of incorporation, address and similar information shall be replaced by references to Parent and its state of incorporation, address and other corresponding information;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(4) all references to Company Common Shares shall be replaced by references to Parent Common Shares;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(5) the number of Parent Common Shares subject to the substituted New Option shall equal the <I>product</I> of the number of Company Common Shares subject to the surrendered Company Option <I>times</I> the Exchange Ratio (with such product being rounded to the nearest whole number of Parent Common Shares);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(6) the exercise price per Parent Common Share under the substituted New Option shall be equal to the <I>quotient </I>of exercise price per Company Common Share under the surrendered Company Option <I>divided by</I> the Exchange Ratio (with such exercise price not to be less than the par value per Parent Common Share); and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(7) any other changes required by Section 3.7(c) shall be made.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Upon such surrender of a Company Option and the grant of a New Option, such Company Option shall terminate and be of no further force or effect.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) The adjustments provided in this Section 3.7 with respect to any Company Options that are &#147;incentive stock options&#148; (as defined in Section 422 of the Code) shall be effected in a manner that complies with Code Section 424(a). Except as otherwise provided in this Section 3.7, the duration and other terms of each substituted New Option shall, to the extent permitted by Law and otherwise reasonably practicable, be the same as the corresponding surrendered Company Option (taking into account any changes thereto, including acceleration thereof, provided for in the Company Stock Option Plan by reason of this Agreement or the Transactions).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Prior to the Effective Time, the Board of Directors of Parent, or an appropriate committee of non-employee directors thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the assumption of the Company Options held by Company Insiders pursuant to Section 3.7(a) shall be an exempt transaction for purposes of Section 16 of the Exchange Act by any officer or director of the Company who becomes subject to the provisions of Section 16 of the Exchange Act in respect of Parent (a &#147;<B>Company Insider</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) The Company and Parent shall take all commercially reasonable actions that are necessary in order to effect the foregoing provisions of this Section 3.7 as of the Effective Time.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(f) The total number of Parent Common Shares issuable under all Parent Stock Option Plans immediately after the Effective Time shall not exceed 2,450,000.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.8 <I>Unvested Company Shares</I>. Parent Common Shares delivered as Merger Consideration pursuant to this Article III in exchange for Company Common Shares that immediately prior to the Effective Time were restricted, not fully vested or subject to Repurchase Rights (&#147;<B>Unvested Company Shares</B>&#148;) shall be subject to the same terms, conditions, restrictions, vesting arrangements or Repurchase Rights, including rights to dividends and voting rights, that were applicable to such Unvested Company Shares immediately prior to or at the Effective Time (and, except as set forth in Section 3.8 of the Company Disclosure Schedules, no vesting, acceleration, or lapse of Repurchase Rights, shall occur with respect to such Unvested Company Shares by reason of the Merger), and, notwithstanding any other provision of this Article III, Parent shall be entitled to place or have placed appropriate legends or other restrictions on
the certificates representing such Parent Common Shares or to delay the delivery or release of such Parent Common Shares to the holder of such Unvested Company Shares. By virtue of this Agreement, all outstanding Repurchase Rights with respect to Unvested Company Shares that the Company may hold immediately prior to the Effective Time shall be assigned to Parent in the Merger and shall thereafter be exercisable by Parent upon the same terms and subject to the same conditions that were in effect immediately prior to the Effective Time, except that Repurchase Rights may be exercised by Parent for each Unvested Company Share by paying to the former holder thereof the repurchase price in effect for such Unvested Company Share immediately prior to the Effective Time divided by the Exchange Ratio and retaining the Parent Common Shares for which such Unvested Company Share may have otherwise been exchanged. Following the Effective Time, no Unvested Company Share, or right thereto, may be Encumbered or
Transferred by any Person, other than Parent, or be taken or reached by any legal or equitable process in satisfaction of any Indebtedness or other Liability of such Person, prior to the distribution to such Person of the Parent Common Shares exchangeable therefor in accordance with this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.9 <I>Company Warrants</I>. At the Effective Time, each then-outstanding Company Warrant disclosed in Section 4.3(d) of the Company Disclosure Schedules shall be assumed by Parent (and the Company covenants and agrees to Amend each Company Warrant to provide for such assumption if necessary to ensure that no Commitment to acquire any Company Common Shares or any other Equity Interests of the Company will remain outstanding after the Effective Time), subject to, and exercisable upon, the same terms and conditions as under the applicable Company Warrant (as Amended and made available to Parent prior to the date hereof), except:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) all references to the Company shall be replaced by references to Parent;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) all references to the Company or its state of incorporation, address and similar information shall be replaced by references to Parent and its state of incorporation, address and other corresponding information;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) all references to Company Common Shares shall be replaced by references to Parent Common Shares;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(4) the number of Parent Common Shares subject to the Company Warrant, as assumed, shall equal the <I>product</I> of the number of Company Common Shares subject to such Company Warrant <I>times</I> the Exchange Ratio (with such product being rounded to the nearest whole number of Parent Common Shares);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(5) the exercise price per Parent Common Share under the Company Warrant, as assumed, shall be equal to the <I>quotient</I> of exercise price per Company Common Share under such Company Warrant <I>divided</I> by the Exchange Ratio (with such exercise price not to be less than the par value per Parent Common Share); and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(6) the anti-dilution provisions, if any, of such Company Warrant shall not apply to, and the exercise price of such Company Warrant shall not be effected by, the issuance of the Merger Consideration.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Upon surrender of a Company Warrant to Parent for exchange, Parent shall issue to the registered holder thereof a new warrant of like tenor, subject to the changes and other provisions specified in this Section 3.9.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.10 <I>Appraisal Rights</I>. Notwithstanding anything in this Agreement to the contrary, Company Common Shares that are outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Company Common Shares in accordance with Section 262 of the DGCL (&#147;<B>Dissenting Shares</B>&#148;) shall not be cancelled and retired or be </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">exchangeable for the Merger Consideration and will be paid for by the Surviving Corporation in accordance with Section 262 of the DGCL; <I>provided, however</I>, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal and payment under the DGCL, the right of such holder to such appraisal of its Company Common Shares shall cease, and such Company Common Shares shall be deemed cancelled and retired as of the Effective Time and the holder thereof shall have the right to receive the Merger Consideration as provided in this Article III. The Company shall give Parent (i) prompt notice of any written demands (or purported demands) for appraisal received by the Company with respect to shares of capital stock of the Company, withdrawals (or attempted withdrawals) of such demands, and any other written instruments served pursuant to Section 262 of the DGCL or other applicable Law and
received by the Company relating to stockholder appraisal rights, and (ii) the opportunity to direct, in its reasonable business judgment, all negotiations and proceedings with respect to exercise of such appraisal rights. The Company shall not, except with Parent&#146;s prior written consent, (1) voluntarily make any payment with respect to any demands for appraisal for Dissenting Shares, (2) offer to settle, or settle, any such demands, (3) waive any failure to timely deliver a written demand for appraisal in accordance with the DGCL, or (4) agree to do any of the foregoing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.11 <I>Taking of Necessary Action; Further Action</I>. If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title, and possession to all Contracts, Property, rights, privileges and powers of the Company and Merger Sub, the officers and directors of the Company, Parent and Merger Sub are fully authorized in the name of their respective corporations or otherwise to take, and the Company and Parent shall cause them to take, all such lawful and necessary action.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.12 <I>Tax Consequences</I>. For federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section 368 of the Code. Nothing in this Section 3.12 shall be interpreted as requiring any change in the amount or kind of Merger Consideration payable to any Company stockholder in connection with the Merger.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.13 <I>Accounting Treatment</I>. For accounting purposes, the Merger is intended to be treated as a &#147;purchase.&#148;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.14 <I>Escrow Agreement; Escrow Account</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) At the Closing, Parent shall deliver to the Escrow Agent, on behalf of the pre-Merger stockholders of the Company, stock certificates evidencing a number of shares equal to 15% of (i) the number of Parent Common Shares issuable at Closing pursuant to Section 3.1(a), and (ii) the total number of Parent Common Shares for which the DiGenova Warrant may be exercised (collectively, the &#147;<B>Escrow Stock</B>&#148;); <I>provided, however</I>, that Parent may deduct from the Escrow Stock the amount, if any, owing to Parent at the time of the Closing pursuant to Section 8.2(b), using the cash value per share set forth in the sentence next succeeding. Parent shall cause the Escrow Agent to deposit the Escrow Stock into an escrow account with the Escrow Agent (the &#147;<B>Escrow Account</B>&#148;) for the purpose of securing the indemnification obligations set forth in Article VIII, with each Parent Common Shares being
valued at $2.67 per share, subject to equitable adjustment in the event of any post-Closing Capitalization Adjustment of Parent Common Shares. The Escrow Agent shall maintain the Escrow Account for such purposes until the date one calendar year after the Effective Time (the &#147;<B>Escrow Period</B>&#148;); <I>provided, however</I>, that in the event any Indemnified Parties have made any claims under Article VIII prior to the end of the Escrow Period, the Escrow Period and the release of any Escrow Assets shall be tolled, and a number of Parent Common Shares having an aggregate value up to the sum of the maximum aggregate amount of such claims shall remain in the Escrow Account as security and not be released to the pre-Merger Stockholders and Silvano DiGenova (&#147;<B>DiGenova</B>&#148;), until all such claims shall have been fully and finally resolved and settled, as provided in the Escrow Agreement. The Escrow Account shall be subject to the terms and provisions of Section 8.2 and the Escrow
Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Releases of Escrow Stock from the Escrow Account shall be subject to the terms and conditions of an Escrow Agreement substantially in the form of Exhibit C (with such amendments thereto as DGSE and the Escrow Agent may agree with the consent of the Stockholder Agent, such consent not to be unreasonably withheld, conditioned or delayed, the &#147;<B>Escrow Agreement</B>&#148;) and Section 3.4(e).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) In the event that this Agreement is adopted by the stockholders of the Company, then all such stockholders shall, without further act of any such stockholder, be deemed to have consented to and approved (i) the terms and conditions of the Escrow Agreement, (ii) the use of the Escrow Account as collateral to secure </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">the rights of the Indemnified Parties under Article VIII, and (iii) the appointment by the Stockholders receiving Parent Common Shares in the Merger of the Stockholder Agent as their exclusive agent, attorney-in-fact and representative for and on behalf of each such Person (other than holders of Dissenting Shares) under this Agreement and the Escrow Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) In the event of any inconsistency between this Agreement and the Escrow Agreement regarding the powers, authorities, rights, duties, obligations or liabilities of the Escrow Agent, the terms and provisions of the Escrow Agreement shall control.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3.15 <I>Transfer Of Contingent Rights</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Merger Consideration and the interests in the Escrow Account, and the provisions of this Article III and the Escrow Agreement related thereto, are intended solely for the benefit of the Persons who immediately prior to the Effective Time were Stockholders. Without limiting the generality of Section 10.5, except as expressly provided in Section 3.15(b), no Person may sell, assign or otherwise Transfer (whether in connection with any sale, assignment or other Transfer of any Parent Common Shares or otherwise) to any other Person (i) any interest in any Merger Consideration not distributed to such first Person, including any interest in the Escrow Account, or in any portion thereof, or (ii) any right to participate, in whole or in part, in the distribution of any Merger Consideration or to obtain any proceeds or shares from the Escrow Account pursuant to Section 3.14 or the Escrow Agreement; and any attempt to do
so shall be null and void <I>ab initio</I> and of no force or effect. In no event shall the right to receive contingent shares be evidenced by a negotiable instrument or certificated security, or be readily marketable.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Notwithstanding Section 3.15(a) and Section 10.5, an interest in Merger Consideration may be assigned or Transferred involuntarily pursuant to bequest, the laws of intestate succession or the order of a court in connection with a settlement of property rights incident to divorce.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ARTICLE IV.<BR>
COMPANY REPRESENTATIONS AND WARRANTIES</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company represents and warrants to Parent and Merger Sub that the statements contained in this Article IV are true, correct and complete as of the date of this Agreement, except as set forth, with respect to any specific Section or subsection in this Article IV, in the corresponding section or subsection of the schedules the Company has delivered to Parent concurrently with the execution and delivery hereof (the &#147;<B>Company Disclosure Schedules</B>&#148;) as follows (it being understood that the disclosure of any matter or item in the Company Disclosure Schedules shall not be deemed to constitute an acknowledgement that such matter or item is required to be disclosed therein or is material to a representation or warranty set forth in this Agreement and shall not be used as a basis for interpreting the terms &#147;material,&#148; &#147;materially,&#148; &#147;materiality&#148; or &#147;Material Adverse Effect&#148; or any word
or phrase of similar import, and does not mean that such matter or item would, with any other matter or item, have or be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on the Company):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.1 <I>Organization and Qualification; Subsidiaries</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Subsidiary of the Company (each a &#147;<B>Company Subsidiary</B>&#148; and, collectively, the &#147;<B>Company Subsidiaries</B>&#148;) has been duly organized, and is validly existing and in good standing, under the laws of the jurisdiction of its incorporation or organization, as the case may be. Each of the Company and each Company Subsidiary has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted and as currently proposed by it to be conducted. Each of the Company and each Company Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature
of its business makes such qualification, licensing or good standing necessary other than in such jurisdictions where the failure to be so qualified individually or in the aggregate would not have a Material Adverse Effect on the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Section 4.1(b) of the Company Disclosure Schedules sets forth a true, correct and complete list of all of the Company Subsidiaries and the jurisdictions of their organization. Except as set forth on Section 4.1(b) of the Company Disclosure Schedules, none of the Company and the Company Subsidiaries holds an Equity Interest in any other Entity. The Company directly, or indirectly through the ownership of a Company Subsidiary, is the </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">owner of all of the issued and outstanding Equity Interests in each Company Subsidiary, and all such Equity Interests are duly authorized, validly issued, fully paid and nonassessable. Except as set forth in Section 4.1(b) of the Company Disclosure Schedules, all of the issued and outstanding Equity Interests of each Company Subsidiary are owned directly by the Company, or indirectly through the ownership of a Company Subsidiary, free and clear of all Encumbrances and are not subject to any preemptive right or right of first refusal created by Law or the Organizational Documents of such Company Subsidiary or any Contract to which such Company Subsidiary is a party or by which it is bound. There are no outstanding Commitments or other Contracts of any character relating to the issued or unissued Equity Interests or other Securities of any Company Subsidiary, or otherwise obligating the Company or any Company
Subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire or sell any such Equity Interests or Securities.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.2 <I>Certificate of Incorporation and Bylaws; Corporate Books and Records</I>. The Company has Made Available to Parent a true, correct and complete copy of the Company&#146;s Certificate of Incorporation, as Amended (the &#147;<B>Company Certificate of Incorporation</B>&#148;), and the Company&#146;s Bylaws, as Amended (the &#147;<B>Company Bylaws</B>&#148;), in each case as now in effect. The Company has Made Available to Parent a true, correct and complete copy of the Organizational Documents of each Company Subsidiary, in each case as Amended and now in effect. Neither the Company nor any Company Subsidiary is in material violation of any of the provisions of its Organizational Documents. Except as set forth in Section 4.2 of the Company Disclosure Schedules, (i) true, correct and complete copies of all Minute Books of the Company and the Company Subsidiaries have been Made Available to Parent, and (ii) the Minute Books of
the Company and each Company Subsidiary Made Available to Parent contain accurate summaries of all meetings of directors and stockholders (or equivalent managers and owners) or actions by written consent of the directors and stockholders (or equivalent managers and owners) of the Company and the respective Company Subsidiaries through the date of this Agreement or the Closing Date, as the case may be.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.3 <I>Capitalization</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; padding-left:18pt; text-indent:18pt">(a) The authorized capital shares of the Company consist of 20,000,000 Company Common Shares and 10,000,000 shares of preferred stock, par value $0.001 per share (the &#147;<B>Company Preferred Shares</B>&#148;). As of December 31, 2006, 4,808,280 Company Common Shares (other than treasury shares) were issued and outstanding, all of which are validly issued and fully paid, nonassessable and free of preemptive rights (excluding shares held in the treasury of the Company). As of the Closing Date (after giving effect to the conversions pursuant to Stanford&#146;s Conversion Agreement), no Company Preferred Shares will be issued and outstanding. As of December 31, 2006, the following (and only the following) Company Preferred Shares were (i) authorized and (ii) issued and outstanding (all of which issued and outstanding shares were validly issued and are fully paid, nonassessable and free of preemptive rights,
excluding shares held in the treasury of the Company):</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=19.2></TD><TD width=265.1></TD><TD width=13.65></TD><TD width=67.1></TD><TD width=13.65></TD><TD width=89.3></TD></TR>
<TR><TD valign=top width=25.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=353.467><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Designation of Series of Company Preferred Shares</B></P>
</TD><TD valign=top width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=89.467><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares of <BR>
Series Authorized</B></P>
</TD><TD valign=top width=18.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=119.067><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares of Series<BR>
Issued and Outstanding <BR>
on Date Hereof</B></P>
</TD></TR>
<TR><TD valign=top width=25.6>&nbsp;</TD><TD valign=bottom width=353.467>&nbsp;</TD><TD valign=top width=18.2>&nbsp;</TD><TD valign=bottom width=89.467>&nbsp;</TD><TD valign=top width=18.2>&nbsp;</TD><TD valign=bottom width=119.067>&nbsp;</TD></TR>
<TR><TD valign=top width=25.6><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=353.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series A $5.00 Redeemable 8% Convertible Preferred Stock</P>
</TD><TD valign=top width=18.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=89.467><P style="margin:0pt" align=right>125,000</P>
</TD><TD valign=top width=18.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=119.067><P style="margin:0pt" align=right>0</P>
</TD></TR>
<TR><TD valign=top width=25.6>&nbsp;</TD><TD valign=bottom width=353.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series B $1.00 Convertible Preferred Stock</P>
</TD><TD valign=top width=18.2>&nbsp;</TD><TD valign=bottom width=89.467><P style="margin:0pt" align=right>3,400,000</P>
</TD><TD valign=top width=18.2>&nbsp;</TD><TD valign=bottom width=119.067><P style="margin:0pt" align=right>3,400,000</P>
</TD></TR>
<TR><TD valign=top width=25.6>&nbsp;</TD><TD valign=bottom width=353.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series D $1.00 Convertible Preferred Stock</P>
</TD><TD valign=top width=18.2>&nbsp;</TD><TD valign=bottom width=89.467><P style="margin:0pt" align=right>2,000,000</P>
</TD><TD valign=top width=18.2>&nbsp;</TD><TD valign=bottom width=119.067><P style="margin:0pt" align=right>2,000,000</P>
</TD></TR>
<TR><TD valign=top width=25.6>&nbsp;</TD><TD valign=bottom width=353.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Series E $1.00 Convertible Preferred Stock</P>
</TD><TD valign=top width=18.2>&nbsp;</TD><TD valign=bottom width=89.467><P style="margin:0pt" align=right>2,500,000</P>
</TD><TD valign=top width=18.2>&nbsp;</TD><TD valign=bottom width=119.067><P style="margin:0pt" align=right>2,500,000</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Except for the Company Common Shares reserved for issuance as set forth in this Section 4.3 or in Section 4.3 of the Company Disclosure Schedules, there are no Commitments or other rights or Contracts obligating the Company or any Company Subsidiary to issue or sell any Equity Interests, or Securities convertible into or exchangeable for Equity Interests, in the Company or any Company Subsidiary. Since the Company Balance Sheet Date, the Company has not issued any Equity Interests, or Securities convertible into or exchangeable for such Equity Interests, other than those Company Common Shares reserved for issuance as set forth in this Section 4.3 or in Section 4.3 of the Company Disclosure Schedules. All issued and outstanding Company Common Shares and all outstanding Company Options were issued, and all repurchases of Company Common Shares were made, in material compliance with all applicable Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) As of December 31, 2006, the Company has reserved 1,145,000 Company Common Shares for issuance to employees, non-employee directors and consultants pursuant to the Company Stock Option Plans, of which </P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>21</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">356,250 shares are subject to outstanding and unexercised Company Options and 788,750 shares remain available for issuance thereunder, and 3,000 Company Common Shares for Company Options granted outside the Company Stock Option Plans. As of December 31, 2006, no outstanding Company Common Shares were subject to Repurchase Rights. Section 4.3(c)(1) of the Company Disclosure Schedules identifies (i) the name and full address of each Person who held Company Options or Company Common Shares subject to a Repurchase Right as of December 31, 2006, (ii) the particular Company Stock Option Plan pursuant to which such Company Option was granted or such Company Common Shares were issued, (iii) the date on which such Company Option was granted or such Company Common Shares were issued, (iv) the exercise or base price of such Company Option or the repurchase price of such Company Common Shares, (v) the number of Company
Common Shares subject to such Company Option or Repurchase Right or value covered thereby, (vi) the number of Company Common Shares as to which such Company Option had vested (or such Repurchase Right had lapsed) at such date, (vii) the applicable vesting schedule for such Company Option or such Company Common Shares and whether the exercisability or vesting of such Company Option, or lapsing of the Repurchase Right, will be accelerated or affected in any way by the Merger or the transactions contemplated hereby (whether alone or in combination with any other event or condition, such as termination of employment), (viii) the date on which such Company Option or Repurchase Right expires, and (ix) in the case of shares subject to a Repurchase Right, the material terms of any promissory note delivered in payment of the purchase price for such Company Common Shares (including limitations on recourse). All Company Options are nonqualified options under the Code. Section 4.3(c)(2) of the Company Disclosure
Schedules sets forth a true, correct and complete list of all holders of outstanding Company Options that are held by Persons that are not employees of the Company or any Company Subsidiary (including non-employee directors, consultants, advisory board members, vendors, service providers or other similar Persons). All of the Company Common Shares subject to issuance under the Company Stock Option Plans, upon issuance prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. The terms of each of the Company Stock Option Plans and the applicable stock option agreements permit (or, pursuant to action taken or to be taken by the Company prior to the Closing Date, will permit) the assumption by Parent of all outstanding Company Options, whether vested or unvested, as provided in this Agreement, without the consent or approval of the holders of
such securities or any other party. True, correct and complete copies of each of the Company Stock Option Plans and the standard form of all agreements and instruments relating to or issued under each Company Stock Option Plan and all agreements and instruments relating to or issued under the Company Stock Option Plans or Company Options that differ in any material respect from such standard form agreements (it being understood that any extension of the term, acceleration of vesting or reduction in the exercise price shall be deemed material) have been Made Available to Parent, and such agreements and instruments have not been Amended since being Made Available to Parent, and there are no agreements, understandings or commitments to Amend such agreements or instruments in any case from those Made Available to Parent. Each Company Option (i) has been granted in accordance with the terms of the applicable Company Stock Option Plan, (ii) has been granted with an exercise price at least equal to the fair
market value of the Company Common Shares on the grant date, and (iii) has a grant date that is the date the option would be considered granted for tax, corporate law and under generally accepted accounting principles (that is, no Company Option has been backdated).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Section 4.3(d) of the Company Disclosure Schedules sets forth all outstanding Company Warrants and other Commitments (other than Company Options disclosed in Section 4.3(c) of the Company Disclosure Schedules). The Company has Made Available to Parent complete and correct copies of all Company Warrants and Contracts governing such other Commitments, in each case as Amended to date. At the Effective Time, no Company Options, Company Warrants or other Commitments to acquire any Equity Interests of the Company shall be outstanding, except for (i) Company Options disclosed in Section 4.3(c) of the Company Disclosure Schedules and to be assumed by Parent pursuant to Section 3.7, and (ii) Company Warrants disclosed in Section 4.3(d) of the Company Disclosure Schedules and to be assumed by Parent pursuant to Section 3.9.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Section 4.3(e) of the Company Disclosure Schedules sets forth all outstanding Contractual obligations of the Company or any Company Subsidiary (i) restricting the transfer of, (ii) affecting the voting rights of, (iii)&nbsp;requiring the repurchase, redemption or disposition of, or (iv) granting any preemptive or anti-dilutive right with respect to; any Company Common Shares or any other Equity Interests in the Company or any Company Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) After giving effect to the conversion of Preferred Shares pursuant to the Conversion Agreements on the date hereof, (i) as of the date hereof and (ii) if each of the Exemption Conditions is then satisfied, as of the </P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>22</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">record date for the determination of the stockholders of the Company entitled to vote at the Company Stockholders Meeting; not more than 25 percent of the Outstanding Company Common Shares is or will be, as the case may be, held by Persons who have addresses within the State of California according to the records of the Company or its transfer agent. If each of the Exemption Conditions are satisfied as of such record date, the exchange of the Merger Consideration for the outstanding shares of capital stock of the Company will be exempt from the qualification requirements of the California Securities Law of 1968, as amended, by virtue of the exemption provided by Section 25103(c) thereof. &#147;<B>Outstanding Company Common Shares</B>&#148; means, as of the date of determination, the total number of outstanding Company Common Shares and Company Common Shares subject to outstanding Company Options, minus the sum
of (1) any Company Common Shares held to the knowledge of the Company in the names of broker-dealers or nominees of broker-dealers, and (2) any Company Common Shares and such Company Options controlled by any one Person who controls directly or indirectly 50 percent or more of the outstanding Company Common Shares. &#147;<B>Exemption Conditions</B>&#148; means, as of a date of determination, each of the following conditions: (A) no Equity Interests (other than Company Common Shares issued upon the exercise of Company Options outstanding on the date hereof), or Commitments to acquire Equity Interests, in the Company shall have been issued or redeemed after the date hereof and prior to or on such date of determination, (B) between the date hereof and such date of determination, no stockholder of the Company shall have acquired direct or indirect control of additional Company Common Shares, such that such stockholder then controls directly or indirectly 50% or more of the outstanding Company Common
Shares, and (C) the sum of (1) the number of Company Common Shares or Company Options to acquire Company Common Shares held on the date hereof by Persons who have addresses without the State of California and which prior to or on such date of determination shall have become held by Persons who have addresses within the State of California (including by means of a change of address of record of any such a Person or upon the exercise of any such Company Option), plus (2) the quotient of (x) the number of Company Common Shares held on the date hereof by Persons who have addresses without the State of California which are then held to the knowledge of the Company in the names of broker-dealers or nominees of broker-dealers, divided by (y) four; shall be less than 100,000.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.4 <I>Authority</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and each Related Agreement to which it is a signatory, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby (other than, on the date hereof, the Company Stockholder Approval), including the filing of the Certificate of Merger pursuant to the DGCL. The execution and delivery of this Agreement and each Related Agreement to which it is a signatory by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including said filing of the Certificate of Merger, have been duly and validly authorized by all necessary corporate action (other than, on the date hereof, the Company Stockholder Approval). Assuming the due authorization, execution and delivery by Parent and Merger Sub of this Agreement, this Agreement and
each Related Agreement to which the Company is a signatory has been duly authorized and validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms, subject only to the effect, if any, of (i) applicable bankruptcy and other similar Laws affecting the rights of creditors generally, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. The Company Board has unanimously (A) approved and declared advisable this Agreement, each Related Agreement to which the Company is a signatory, the Merger and the other Transactions applicable to it, (B) determined that this Agreement and each Related Agreement to which it is a signatory and the terms and conditions of the Merger and other Transactions are fair to, advisable and in the best interests of the Company and its stockholders, and (C) directed that the adoption of this Agreement and
the approval of this Agreement, the Merger, and the Stockholder Agent Appointment be submitted to the Company&#146;s stockholders for approval at a meeting of such stockholders and recommended that all of the Company&#146;s stockholders adopt and approve this Agreement and approve the Merger, and the Stockholder Agent Appointment; <I>provided, however</I>, that after the date hereof the Company Board acting in good faith may withdraw its recommendation. The affirmative vote of the holders of a majority of the voting power of all Company Common Shares and Company Preferred Shares issued and outstanding on the record date set for the meeting of the Company&#146;s stockholders to adopt and approve this Agreement and approve the Merger (the &#147;<B>Company Stockholders Meeting</B>&#148;) is the only vote of the holders of capital stock of the Company necessary to adopt this Agreement under applicable Law and the Company&#146;s Organizational Documents (the &#147;<B>Company Stockholder
Approval</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>23</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(b) Assuming the representation set forth in Section 5.24 is true and correct, the Company has taken all appropriate actions so that the restrictions on &#147;business combinations&#148; contained in Section 203 of the DGCL will not apply with respect to or as a result of this Agreement, the Related Agreements and the transactions contemplated hereby and thereby, including the Merger, without any further action on the part of the Company&#146;s stockholders or the Company Board.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.5 <I>No Conflict; Required Filings and Consents</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The execution and delivery of this Agreement and the Related Agreements to which the Company is a signatory by the Company do not, and the performance of this Agreement and such Related Agreements by the Company will not, (i) conflict with or violate any provision of the Organizational Documents of the Company or any Company Subsidiary, (ii) subject to obtaining the Company Stockholder Approval and assuming that all Consents described in Section 4.5(b) have been obtained and all filings and notifications described in Section 4.5(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company or any Company Subsidiary, or by which any Property of the Company or any Company Subsidiary is bound or affected, (iii) result in the creation of any Encumbrance on any of the Properties of the Company or any Company Subsidiary, or (iv) require any
Consent under, or result in any Breach of, any Company Material Contract or Company Permit, in each case except as set forth in Section 4.5 of the Company Disclosure Schedules.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The execution and delivery of this Agreement and the Related Agreements to which the Company is a signatory by the Company do not, and the performance of this Agreement and such Related Agreements by the Company and then consummation of the Transactions will not, require any Consent of, or filing with or notification to, any Governmental Entity, except under or in relation to (i) the Exchange Act, (ii) the Securities Act, (iii) any applicable Blue Sky Laws, (iv) the rules and regulations of Parent&#146;s Principal Market, (v) the filing and recordation of the Certificate of Merger as required by the DGCL (together with the Consents, filings and notifications enumerated in clauses (i) through (iv) next preceding, the &#147;<B>Specified Consents</B>&#148;), and (vi)&nbsp;such other Consents and filings with or notifications to Governmental Entities the failures of which to make or obtain, individually or in the
aggregate, would not have a Material Adverse Effect on the Company or Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.6 <I>Permits; Compliance With Law</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Each of the Company and each Company Subsidiary is in possession of all material Governmental Permits, and has made all material filings, applications and registrations with any Governmental Entity, in each case that are necessary for the Company and each Company Subsidiary to own, lease or operate its Properties, or to carry on its respective businesses substantially in the manner described in the Company SEC Reports filed prior to the date hereof or the Closing Date, as the case may be, and substantially as it is being conducted as of the date hereof (the &#147;<B>Company Permits</B>&#148;), and all such Company Permits are valid and in full force and effect, except where the failure to have, or the suspension or cancellation of, or failure to be valid or in full force and effect of, any of the Company Permits would not, individually or in the aggregate, reasonably be expected to (i)&nbsp;prevent or materially
delay consummation of the Merger or any other transactions contemplated by this Agreement, (ii) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or any Related Agreement to which it is a signatory, or (iii) have a Material Adverse Effect on the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) None of the Company and the Company Subsidiaries is in conflict with, or in default or violation of, (A) in any material respect, any Law applicable to the Company or any Company Subsidiary or by which any Property of the Company or any Company Subsidiary is bound or affected, or (B) any Company Permit, except, with respect to clause (A) next preceding, for any such conflicts, defaults or violations that would not, individually or in the aggregate, reasonably be expected to (i) prevent or materially delay consummation of the Merger or any other transactions contemplated by this Agreement, (ii) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or any Related Agreement to which it is a signatory, or (iii) have a Material Adverse Effect on the Company. None of the Company Permits will be terminated or impaired or will become terminable, in whole
or in part, as a result of the transactions contemplated by this Agreement or any Related Agreement to which it is a signatory.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Neither the Company nor any Company Subsidiary has, within the last three years, received any warning, notice, notice of violation or probable violation, notice of revocation or other communication from or on behalf of any Governmental Entity, alleging (x) any conflict with, or default or violation of, any Company </P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>24</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">Permit, or (y) that the Company or any Company Subsidiary requires any Company Permit for its business as currently conducted that is not currently held by it. Except as set forth in Section 4.6 of the Company Disclosure Schedules, to the Company&#146;s Actual Knowledge, no investigation or inquiry by any Governmental Entity with respect to the Company or any Company Subsidiary is pending or threatened, in each case with respect to any alleged or claimed violation of Law applicable to the Company or any Company Subsidiary or by which any Property of the Company or any Company Subsidiary is bound or affected.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Neither the Company nor any of the Company Subsidiaries, nor to the Company&#146;s Actual Knowledge, any director, officer, Affiliate or employee thereof, has on behalf of or with respect to the Company engaged in any conduct constituting a violation of the Foreign Corrupt Practices Act of 1977, as amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.7 <I>SEC Filings; Financial Statements</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Company has filed all SEC Reports required under applicable Law to be filed by it with the SEC since the effective date of the filing of the initial Form 10-SB by the Company. All of the Company SEC Reports have been Made Available to Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) As of their respective dates, each Company SEC Report (i) complied as to form in all material respects with the requirements of the Securities Act, the Exchange Act and the SEC Rules applicable to such Company SEC Report, and (ii) did not at the time it was filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected (A) in the case of a Company SEC Report filed prior to the date of this Agreement that was amended or superseded prior to the date of this Agreement, by the filing of such amending or superseding Company SEC Report, and (B) in the case of a Company SEC Report filed after the date of this Agreement that is amended or superseded prior to the Effective Time, by the filing of such amending
or superseding Company SEC Report. None of the Company Subsidiaries is required to file any SEC Reports with the SEC.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) As of their respective dates, each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports, including the statement of stockholders&#146; equity, (all of the foregoing, the &#147;<B>Company Financial Statements</B>&#148;) (i) complied as to form in all material respects with the SEC Rules applicable thereto, (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q, Form 8-K or any successor form under the Exchange Act), and (iii) fairly presented in all material respects the consolidated financial position of the Company and the Company Subsidiaries as at the respective dates thereof and the consolidated results of Company&#146;s and the
Company Subsidiaries&#146; operations and cash flows for the periods indicated in accordance with GAAP, except that the unaudited interim financial statements may not contain footnotes and were or are subject to normal and recurring year-end adjustments in accordance with GAAP. Neither the Company nor any Company Subsidiary has any liabilities (absolute, accrued, contingent or otherwise) required under GAAP to be set forth on a balance sheet that are, individually or in the aggregate, material to the business, results of operations or financial condition of the Company and the Company Subsidiaries taken as a whole, except for (A) liabilities incurred since the Company Balance Sheet Date in the Ordinary Course of Business which are of the type that typically recur and which do not result from any Breach of Contract, tort or default or violation of any Law, (B) those specifically set forth or specifically and adequately reserved against in the Company Balance Sheet, and (C) the fees and expenses of
investment bankers, attorneys and accountants incurred in connection with this Agreement and the Transactions accruing after the Company Balance Sheet Date. Except as reflected in the Company Financial Statements, neither the Company nor any Company Subsidiary is a party to any material off-balance sheet arrangements (as defined in Item 303 of Regulation S-K promulgated by the SEC). The Company has not had any disagreement with any of its auditors regarding accounting matters or policies during any of its past three full fiscal years or to date during the current fiscal year. The books and records of the Company and each Company Subsidiary have been maintained, and are being maintained, in all material respects in accordance with applicable legal and accounting requirements, and the Company Financial Statements are consistent in all material respects with such books and records.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) No investigation by the SEC with respect to the Company or any Company Subsidiary is pending or, to the Knowledge of the Company, threatened.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>25</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(e) The Company has established and maintains &#147;disclosure controls and procedures&#148; (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) that are reasonably designed to ensure that material information (both financial and non-financial) relating to the Company and the Company Subsidiaries required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is communicated to the Company&#146;s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and the principal financial officer of the Company required by Section 302 of SOX, with respect to such reports. For purposes of this Section 4.7(e), &#147;principal executive officer&#148; and
&#147;principal financial officer&#148; shall have the meanings ascribed to such terms in SOX. Each of the principal executive officer and the principal financial officer of the Company (or each former principal executive officer and each former principal financial officer of the Company, as applicable) has made all certifications required by Sections 302 and 906 of SOX and the rules and regulations promulgated by the SEC thereunder with respect to the Company SEC Reports.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) The Company maintains a system of internal accounting controls designed to provide reasonable assurance that (i) transactions are executed in accordance with management&#146;s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management&#146;s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has Made Available to Parent accurate and complete copies of all material policies, manuals and other documents promulgating such internal accounting controls. Except as set forth in Section 4.7(f) of the Company Disclosure Schedules, to the Company&#146;s
Knowledge, there are no &#147;material weaknesses&#148; (as defined by the PCAOB) and there are no series of multiple &#147;significant deficiencies&#148; (as defined by the PCAOB) that are reasonably likely to collectively represent a &#147;material weakness&#148; in the design or operation of the Company&#146;s internal controls and procedures, and to the Company&#146;s Knowledge, there are no significant deficiencies in the design or operation of the Company&#146;s internal controls and procedures. To the Company&#146;s Knowledge, since the date of the filing of its initial Form 10-SB, there has been no fraud that involves management or other employees who have a significant role in the Company&#146;s internal controls and procedures.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) To the Company&#146;s Knowledge, Singer Lewak Greenbaum &amp; Goldstein LLP, which has expressed its opinion with respect to the Company Financial Statements as of June 30, 2004, June 30, 2005 and June 30, 2006 and for each of the Company&#146;s fiscal years in the three-year period ended June 30, 2006, and included in the Company SEC Reports (including the related notes), is &#147;independent&#148; with respect to the Company and the Company Subsidiaries within the meaning of Regulation S-X and, together with the Company&#146;s prior independent public accounting firm Haskell &amp; White LLP, has been &#147;independent&#148; within such meaning at all times since January 1, 2002. The Company has made such disclosure of non-audit services performed by Singer Lewak Greenbaum &amp; Goldstein LLP or Haskell &amp; White LLP in its proxy statements with respect to its annual meetings of its stockholders as is required
under the Exchange Act, Securities Act and SEC Rules, and all such non-audit services have been approved in advance by the audit committee of the Company Board. The Company is in compliance with the applicable criteria for continued listing of the Company Common Shares on the OTCBB.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.8 <I>Disclosure Documents</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Company Information included in, or incorporated by reference into, the Form S-4, Proxy Statement and any Other Filings, and any amendments or supplements thereto, will, at the Applicable Times, comply as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act, the SEC Rules and other applicable Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The information supplied or to be supplied by or on behalf of the Company or any of its officers, directors or stockholders for inclusion or use, or incorporation by reference, in (i) the Form S-4, (ii) the Proxy Statement, or (iii) any other document (including any report filed by the Company or Parent under the Exchange Act) filed with any Governmental Entity in connection with the Transactions, or in each case any amendment or supplement thereto; in each case do not and will not, at the Applicable Times, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein regarding the Company Information, in light of the circumstances under which they are made, not misleading. The Company Information provides all information relating to the Company or its operations, </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">business, directors, officers, Subsidiaries and stockholders required to be provided by the provisions of the Securities Act, the Exchange Act and the SEC Rules, including form S-4 and Regulation 14A.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Notwithstanding the foregoing provisions of this Section 4.8, the Company makes no representation or warranty, and assumes no responsibility, with respect to statements made or incorporated by reference in the Form S-4, the Proxy Statement or any Other Filings, or in each case any amendment or supplement thereto, supplied by Parent (other than Company Information so supplied) for inclusion or incorporation by reference therein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.9 <I>Absence of Certain Changes or Events</I>. Since the Company Balance Sheet Date, except as specifically disclosed in the Company SEC Reports filed thereafter or as set forth in Section 4.9 of the Company Disclosure Schedules, the Company and each Company Subsidiary has conducted its business only in the Ordinary Course of Business and, since such date:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) no Events have caused a Material Adverse Effect on the Company;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) there has not been any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, Securities or Property) in respect of, any of the Company&#146;s Equity Interests, or any purchase, redemption or other acquisition by the Company of any of the Company&#146;s Equity Interests or any other Securities of the Company or any Commitments for any such Equity Interests of Securities, other than repurchases from employees or consultants following their termination pursuant to the terms of existing Repurchase Rights;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) there has not been any Capitalization Adjustment of any of the Company&#146;s Equity Interests;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) there has not been any increase in compensation or fringe benefits paid or payable to any of the officers, directors or managers or employees of the Company or any Company Subsidiary at the vice president or director level or higher, or who earn base salary of more than $75,000 per year, or any payment by the Company or any of the Company Subsidiaries of any bonus to any of their officers, directors or managers or employees at the vice president or director level or higher, or who earn base salary of more than $75,000 per year, or any granting by the Company or any of the Company Subsidiaries of any increase in severance or termination pay, or any entry by the Company or any of the Company Subsidiaries into, or material Amendment of, any currently effective employment, severance, termination or indemnification agreement or any agreement the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the nature of any Transactions, or any subsequent event, other than increases in the Ordinary Course of Business in base salary and target bonuses for employees who are not officers of the Company, in an amount that does not exceed 50% of such base salary, in connection with periodic compensation or performance reviews or for ordinary course severance and release agreements as made in connection with the termination of employment that do not provide severance in excess of the Company&#146;s standard policies;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) there has not been any change by the Company or any of the Company Subsidiaries in its accounting methods, principles or practices (including any material change in depreciation or amortization policies or rates or revenue recognition policies), except as required by concurrent changes in GAAP;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) there has not been any sale, transfer, or other disposition of any Company IP Rights or any other Properties by the Company or any of the Company Subsidiaries, except in the Ordinary Course of Business;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) neither the Company nor any Company Subsidiary has made any loan, advance or capital contribution to, or investment in, any Person, including any director, officer or Affiliate of the Company, other than (i) loans, advances or capital contributions to or investments in wholly-owned Subsidiaries or Entities that became wholly-owned Subsidiaries made in the Ordinary Course of Business, (ii) investments made in accordance with the Company&#146;s investment guidelines, a copy of which has been Made Available to Parent, in the Ordinary Course of Business, (iii) routine travel and entertainment expense advances in the Ordinary Course of Business and in accordance with the Company&#146;s travel and expense policy, a copy of which has been Made Available to Parent, and (iv) loans and advances to third party customers made in the Ordinary Course of Business;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) there has not been any material change with respect to the management or other key personnel of the Company, any termination of employment of any such employees or a material number of employees, or any </P>
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<P style="margin:0pt" align=center>27</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">material labor dispute or material claim of unfair labor practices involving the Company or any Company Subsidiary; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) neither the Company nor any Company Subsidiary has agreed, whether in writing or otherwise, to take any action described in this Section 4.9.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.10 <I>Employee Benefit Plans</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Section 4.10(a) of the Company Disclosure Schedules lists as of the date of this Agreement, with respect to the Company and the Company Subsidiaries and their respective ERISA Affiliates, (i) all employee benefit plans within the meaning of Section 3(3) of ERISA, (ii) each loan from the Company, any Company Subsidiary or any such ERISA Affiliate to an employee in excess of $10,000, (iii) all stock option, stock purchase, phantom stock, stock appreciation right, supplemental retirement, severance, salary continuation, sabbatical, employee relocation, cafeteria benefit (Section 125 of the Code), dependent care (Section 129 of the Code), life insurance or accident insurance plans, programs or arrangements, (iv) all bonus, pension, profit sharing, savings, retirement, deferred compensation or incentive plans, programs or arrangements, whether written or oral, qualified or nonqualified, funded or unfunded, currently
effective or terminated, (v) other fringe or employee benefit plans, programs or arrangements that apply to senior management and that do not generally apply to all employees, and (vi) any employment or service agreements (except for offer letters providing for at-will employment that do not provide for severance, acceleration or post-termination benefits), compensation agreements or severance agreements, written or otherwise, for the benefit of, or relating to, any present or former director, officer, employee, or consultant (<I>provided</I> that, for (1) former and current consultants, and (2)&nbsp;former directors, officers and employees; such arrangements need only be listed if unsatisfied obligations of the Company or any Company Subsidiary of greater than $10,000 remain thereunder) of the Company or any Company Subsidiary (all of the foregoing described in clauses (i) through (vi) next preceding, collectively, the &#147;<B>Company Benefit Plans</B>&#148;). The Company has no liability with
respect to any plan, arrangement or practice of the type described in the preceding sentence other than the Company Benefit Plans. The Company has not, since July 30, 2002, extended credit, arranged for the extension of credit, or renewed, modified or forgiven an extension of credit made prior to such date, in the form of a personal loan to or for any person who was, at any time since such date, an officer or director of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Prior to the date of this Agreement, the Company has Made Available to Parent a true, correct and complete copy of each Company Benefit Plan and all current and prior related plan documents (including adoption agreements, vendor contracts and administrative services agreements, trust documents, insurance policies or contracts (including policies relating to fiduciary liability insurance covering the fiduciaries of such Company Benefit Plans), bonds required by ERISA, employee booklets, summary plan descriptions and other authorizing documents, summaries of material modifications and any material written employee communications relating thereto) and has, with respect to each Company Benefit Plan that is subject to ERISA reporting requirements, Made Available to Parent true, correct and complete copies of the Form 5500 reports filed for the last three plan years (including all audits, financial statements, schedules
and attachments thereto, where applicable). Any Company Benefit Plan intended to be qualified under Section 401(a) of the Code has (i)&nbsp;obtained from the IRS a current favorable determination letter as to its qualified status under the Code and as to the exemption from tax under the provisions of Code Section 501(a) of each trust created thereunder, or (ii)&nbsp;has been established under a standardized master and prototype or volume submitter plan for which a favorable Internal Revenue Service advisory letter or opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer. The Company has also Made Available to Parent a true, correct and complete copy of the most recent such Internal Revenue Service determination letter, advisory letter or opinion letter issued with respect to each Company Benefit Plan, and, to the Company&#146;s Knowledge, nothing has occurred since the issuance of each such letter that could reasonably be expected to cause the loss of the
tax-qualified status of any Company Benefit Plan subject to Section 401(a) of the Code. The Company has also Made Available to Parent all registration statements and prospectuses and investment policy statements prepared in connection with each Company Benefit Plan, where applicable. All individuals who, pursuant to the terms of any Company Benefit Plan, are entitled to participate in such Company Benefit Plan, are currently participating in such Company Benefit Plan or have been offered an opportunity to do so. None of the Company and the Company Subsidiaries and their respective ERISA Affiliates sponsors or maintains any self-funded employee benefit plan, including any plan to which a stop-loss policy applies.</P>
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<P style="margin:0pt" align=center>28</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(c) None of the Company Benefit Plans promises or provides retiree medical or other retiree welfare benefits to any person other than as required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as Amended (&#147;<B>COBRA</B>&#148;), or applicable state law. There has been no prohibited transaction (within the meaning of Section 406 of ERISA and Section 4975 of the Code) with respect to any Company Benefit Plan that is not exempt under Section 408 of ERISA. To the Company&#146;s Actual Knowledge, each Company Benefit Plan has been administered in accordance with its terms and in compliance with the requirements prescribed by applicable Law (including ERISA and the Code), and the Company and the Company Subsidiaries, and their respective ERISA Affiliates, each has performed all obligations required to be performed by it under, is not in any material respect in default under or
in violation of, and has no Actual Knowledge of any material default or in violation by any other party to, any of the Company Benefit Plans. None of the Company and the Company Subsidiaries and their respective ERISA Affiliates is subject to any liability or penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any of the Company Benefit Plans. All contributions required to be made by the Company or any Company Subsidiary or any of their respective ERISA Affiliates to any Company Benefit Plan have been made on or before their due dates and, to the extent required by GAAP, all amounts have been accrued for the current plan year (and no further contributions will be due or will have accrued thereunder as of the Closing Date, other than contributions accrued in the Ordinary Course of Business after the Company Balance Sheet Date as a result of the operations of the Company and the Company Subsidiaries after the Company Balance Sheet Date). In addition, with respect to
each Company Benefit Plan intended to include a Code Section 401(k) arrangement, the Company and each Company Subsidiary and their respective ERISA Affiliates have at all times made timely deposits of employee salary reduction contributions and participant loan repayments, as determined pursuant to regulations issued by the United States Department of Labor. No Company Benefit Plan that is an employee welfare benefit plan as defined in Section 3(1) of ERISA is a self-insured plan. No Company Benefit Plan is covered by, and none of the Company and the Company Subsidiaries and their respective ERISA Affiliates has incurred or expects to incur any liability under Title IV of ERISA or Section 412 of the Code. With respect to each Company Benefit Plan subject to ERISA as either an employee pension benefit plan within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of Section 3(1) of ERISA, the Company has prepared in good faith and timely filed all requisite
governmental reports (which were true, correct and complete as of the date filed), including any required audit reports, and has properly and timely filed and distributed or posted all notices and reports to employees required to be filed, distributed or posted with respect to each such Company Benefit Plan. No Action has been brought, or to the Actual Knowledge of the Company or any Company Subsidiary, is threatened, against the Company or any Company Subsidiary or with respect to any such Company Benefit Plan, including any audit or inquiry by the IRS or United States Department of Labor.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) None of the Company and the Company Subsidiaries and their respective ERISA Affiliates is a party to, or has made any contribution to or otherwise incurred any obligation under, any &#147;multiemployer plan&#148; as such term is defined in Section 3(37) of ERISA or any &#147;multiple employer plan&#148; as such term is defined in Section 413(c) of the Code. There has been no termination or partial termination of any Company Benefit Plan within the meaning of Section 411(d)(3) of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Each compensation and benefit plan required by Law or applicable custom or rule of the relevant jurisdiction to be maintained or contributed to outside of the United States (each such plan, a &#147;<B>Foreign Plan</B>&#148;) by the Company or any Company Subsidiary is listed in Section 4.10(e) of the Company Disclosure Schedules, except for plans maintained by Governmental Entities. As regards each such Foreign Plan, (i) such Foreign Plan is in compliance with the provisions of the laws of each jurisdiction in which such Foreign Plan is maintained, to the extent those laws are applicable to such Foreign Plan, (ii) the Company and each Company Subsidiary, and each of their respective ERISA Affiliates, has complied with all applicable reporting and notice requirements, and such Foreign Plan has obtained from the Governmental Entity having jurisdiction with respect to such Foreign Plan any required determinations, if
any, that such Foreign Plan is in compliance with the laws of the relevant jurisdiction if such determinations are required in order to give effect to such Foreign Plan, and (iii) such Foreign Plan has been administered in accordance with its terms and applicable Law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Section 4.10(f) of the Company Disclosure Schedules lists each person who the Company reasonably believes is, with respect to the Company or any Company Subsidiary or any of their respective ERISA Affiliates, a &#147;disqualified individual&#148; (within the meaning of Section 280G of the Code and the regulations promulgated thereunder) determined as of the date hereof.</P>
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<P style="margin:0pt" align=center>29</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(g) Section 4.10(g) of the Company Disclosure Schedules lists as of the date of this Agreement each employee of the Company or any Company Subsidiary who is not fully available to perform work because of disability or other leave and also lists, with respect to each such employee, the basis of such disability or leave and the anticipated date of return to full service.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) Except as set forth in Section 4.10(h) of the Company Disclosure Schedules, none of the execution and delivery of this Agreement or the consummation of the Transactions (or the Transactions in combination with any subsequent transactions or events, other than transactions or events initiated solely by Parent) will (i) result in any employee, director or consultant of the Company or any Company Subsidiary becoming entitled to any deferred compensation, bonus or severance pay or materially increase or otherwise enhance any benefits otherwise payable by the Company or any Company Subsidiary, (ii) result in the acceleration of the time of payment or vesting, or an increase in the amount of any compensation due to any employee, director or consultant of the Company or any Company Subsidiary, except as may be required under Section 411(d)(3) of the Code, (iii) result in forgiveness in whole or in part of any outstanding
loans made by the Company or any Company Subsidiary to any of their employees, directors or consultants, or (iv) result in a payment that would be considered an &#147;excess parachute payment&#148; and treated as nondeductible under Section 280G of the Code or subject to the excise Tax under Section 4999 of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) To the Company&#146;s Knowledge, the Company has neither granted, nor is a party to, any Contract that grants any compensation, equity award, or bonus, that fails to comply in good faith with the provisions of Section 409A of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) Each of the Company and the Company Subsidiaries is in compliance in all material respects with all currently applicable Laws respecting employment, discrimination in employment, terms and conditions of employment, worker classification (including the proper classification of workers as independent contractors and consultants), wages, hours and occupational safety and health and employment practices, including the Immigration Reform and Control Act. The Company and each Company Subsidiary has paid in full to all employees, independent contractors and consultants all wages, salaries, commissions, bonuses, benefits, and other compensation due to or on behalf of such employees, independent contractors or consultants. Neither the Company nor any Company Subsidiary is liable for any payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation benefits, social security or
other benefits or obligations for employees (other than routine payments to be made in the Ordinary Course of Business). There are no controversies pending or, to the Actual Knowledge of the Company, threatened, between the Company or any Company Subsidiary and any of their respective employees, which controversies have or could reasonably be expected to result in an Action before any Governmental Entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) Neither the Company nor any of the Company Subsidiaries has any obligation to pay any amount or provide any benefit to any former employee or officer, other than obligations (i) for which the Company has established a reserve for such amount on the Company Balance Sheet in accordance with GAAP, and (ii)&nbsp;pursuant to Contracts entered into after the Company Balance Sheet Date and disclosed on Section 4.10(k) of the Company Disclosure Schedules. Neither the Company nor any Company Subsidiary is a party to or bound by any collective bargaining agreement or other labor union contract, no collective bargaining agreement is being negotiated by the Company or any Company Subsidiary and neither the Company nor any Company Subsidiary has any duty to bargain with any labor organization. There is no pending demand for recognition or any other request or demand from a labor organization for representative status with
respect to any person employed by the Company or any Company Subsidiary. The Company has no Actual Knowledge of any activities or proceedings of any labor union to organize the employees of the Company or any Company Subsidiary. There is no labor dispute, strike or group work stoppage against the Company or any Company Subsidiary pending or to the Actual Knowledge of the Company threatened that may interfere with the respective business activities of the Company or any Company Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) To the Knowledge of the Company, no employee of the Company or any Company Subsidiary is in violation of any term of any employment agreement, patent disclosure agreement, non-competition agreement, or any restrictive covenant to a former employer relating to the right of any such employee to be employed by the Company or any Company Subsidiary because of the nature of the business conducted or presently proposed to be conducted by the Company or any Company Subsidiary or to the use of trade secrets or proprietary information of others. No Key Employee of the Company or any Company Subsidiary has given notice of termination or resignation to the Company or any Company Subsidiary, nor does the Company otherwise have </P>
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<P style="margin:0pt" align=center>30</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">Actual Knowledge that any such Key Employee intends to terminate his or her employment with the Company or any Company Subsidiary. The employment of each of the employees of the Company or any Company Subsidiary is &#147;at will&#148; and the Company and each Company Subsidiary does not have any obligation to provide any particular form or period of notice prior to terminating the employment of any of their respective employees, and the employment of each employee of the Company and each Company Subsidiary may be terminated without prior notice and without financial liability to the Company or any Company Subsidiary (other than as provided under applicable Law or as set forth in Section 4.10(a) of the Company Disclosure Schedule).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(m) The Company has Made Available to Parent a true, correct and complete list of the names of all current officers, directors, consultants and employees of the Company and each Company Subsidiary showing each such person&#146;s name, position, rate of annual remuneration, status as exempt/non-exempt and bonuses for the current fiscal year and the most recently completed fiscal year.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(n) The Company has Made Available to Parent, with respect to the Company and the Company Subsidiaries, true, correct and complete copies of each of the following: (i) all forms of offer letters, (ii) all forms of employment agreements and severance agreements, (iii) all forms of services agreements and forms of agreements with current and former consultants or advisory board members, (iv) all forms of confidentiality, non-competition or invention agreements by and between current and former employees, consultants or others and the Company or any Company Subsidiary (and a true, correct and complete list of employees, consultants or others not subject thereto), (v) all management organization charts, (vi) all agreements or insurance policies providing for the indemnification of any officers or directors of the Company or any Company Subsidiary, (vii)&nbsp;a summary of the Company&#146;s standard severance policy,
(viii) a summary of outstanding liability for termination payments and benefits to current and former directors, officers, employees and consultants of the Company or any Company Subsidiary, and (ix) a schedule of bonus commitments made to employees of the Company or any Company Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(o) The Company and each Company Subsidiary is in compliance in all material respects with the Worker Adjustment Retraining Notification Act of 1988, as Amended (&#147;<B>WARN Act</B>&#148;), or any similar Law. In the past two years (i) the Company has not effectuated a &#147;plant closing&#148; (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a &#147;mass layoff&#148; (as defined in the WARN Act) affecting any site of employment or facility of the Company of any Company Subsidiary, and (iii) the Company has not been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation. The Company has not caused any of its employees to suffer an &#147;employment
loss&#148; (as defined in the WARN Act) during the 90-day period prior to the date of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.11 <I>Customers</I>. Neither the Company nor any of the Company Subsidiaries has any outstanding material dispute concerning its goods or services with any coin or jewelry dealer, auction house, third party website, independent sales agent or other customer, retailer or distributor who, in the twelve months ending September 30, 2006, was one of the 20 largest sources of consolidated revenue for the Company and the Company Subsidiaries, based on amounts paid or payable during such periods (each, a &#147;<B>Significant Company Customer</B>&#148;). Each Significant Company Customer is listed on Section 4.11 of the Company Disclosure Schedules. Neither the Company nor any of the Company Subsidiaries has received any written notice from any Significant Company Customer that such Person (i) will not continue as a customer or distributor of the Company or any Company Subsidiary after the Merger, (ii) intends to terminate or
materially modify existing Contracts or relationships with the Company or any Company Subsidiary, or (iii) intends to materially reduce the amount of business conducted with the Company and the Company Subsidiaries.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.12 <I>Contracts</I>. Section 4.12 of the Company Disclosure Schedules specifically identifies (by the applicable subsection set forth below in this Section 4.12) each Company Material Contract (other than this Agreement or any Related Agreement). The term &#147;<B>Company Material Contract</B>&#148; shall include each of the following Contracts to which the Company or any Company Subsidiary is a party to or by which the Company or any Company Subsidiary is bound (in each case, other than this Agreement or any Related Agreement):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) any Contract with any Significant Company Customer;</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(b) any Contract generating, or that is reasonably likely to generate, more than 5% of revenues for the Company and the Company Subsidiaries over the twelve month period from the date of this Agreement, other than those set forth on Section 4.12(j) of the Company Disclosure Schedules;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) any Contract with any director, officer, employee or consultant that would require the Company or any Company Subsidiary to make any payments in connection with the Merger, or upon termination of employment, but excluding any Contract (i) that is terminable at-will or, in the case of consultants, with 30 or fewer days of notice by the Company or any of the Company Subsidiaries without cost, liability or financial obligations (other than accrued regular compensation and benefits through the date of termination, including any such notice period), or (ii) under which the Company and the Company Subsidiaries collectively have paid or are obligated to pay less than $10,000;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) any Contract for indemnification (other than standard indemnification provisions in Contracts entered into by the Company or any Company Subsidiary in the Ordinary Course of Business) or any guaranty;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) any Contract containing any covenant limiting in any respect the right of the Company or any of the Company Subsidiaries to (i) engage, participate or compete in any line of business, market or geographic area, (ii) develop, market or distribute products or services, (iii) conduct business with any Person, (iv) solicit the employment of, or hire, any Person, or (v) compete with any Person; or granting any exclusive sales, distribution, marketing or other exclusive rights, rights of first refusal, &#147;most favored nation&#148; rights, rights of first negotiation or other exclusive rights or similar terms to any Person, but in each case excluding Contracts containing limitations that (A) are not material to the Company or any Company Subsidiary, and (B) do not limit the ability of the Company or any Company Subsidiary to develop or market additional products or services;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) any Lease for real or personal property in which the amount of payments that the Company or any of the Company Subsidiaries is required to make on an annual basis exceeds $25,000;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) any Contract pursuant to the express terms of which the Company or any of the Company Subsidiaries is currently obligated to pay in excess of $25,000 (or, in the case of a Contract for the purchase of inventory made in the Ordinary Course of Business, $50,000) in any one year period that is not terminable by the Company or the Company Subsidiaries without penalty upon notice of ninety (90) days or less;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) any Contract currently in force relating to the disposition or acquisition by the Company or any of the Company Subsidiaries after the date hereof of (i) assets with a book value exceeding $25,000 (or, in the case of the sale of inventory made in the Ordinary Course of Business, $50,000) , or (ii) Equity Interests in an Entity;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) any Contract pursuant to which the Company or any Company Subsidiary is a licensor of Intellectual Property or agrees to Encumber, not assert, Transfer or sell rights in or with respect to any Intellectual Property, except for distribution contracts with retail outlets, independent sales agents, other distributors and end users entered into by the Company or any Company Subsidiary in the Ordinary Course of Business;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) any joint venture Contract or any other Contract that involves a sharing of revenues in excess of $10,000, or involves a sharing of profits, cash flows, expenses or losses, with other Persons, or the payment of royalties to any other Person, other than Contracts identified in Section 4.12(a) of the applicable Company Disclosure Schedule;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) any Contract currently required to be filed as an exhibit pursuant to Item 601(b)(10) of Regulation S-K promulgated under the Securities Act, other than those currently on file with the SEC (including any Amendments to Contracts filed as of the Company Balance Sheet Date that are required to be filed);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) any Contract containing a &#147;standstill&#148; provision with respect to any Equity Interests of the Company;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(m) any Contract in effect on the date of this Agreement, including any Company Stock Option Plan, relating to the sale, issuance, grant, exercise, award, purchase, repurchase or redemption of any Company Common Shares or any other Equity Interests or Securities of the Company or any of the Company Subsidiaries, or any Commitments to purchase or otherwise acquire any such Company Common Shares, Equity Interests or Securities, except for the Company Stock Option Plans, the Company Options and Company Warrants disclosed in Section 4.3 of the applicable Company Disclosure Schedule;</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(n) any Contract under which the Company or any Company Subsidiary is obligated to provide consulting services, development services, professional services or support services (other than maintenance and support customer contracts on the Company&#146;s standard, unmodified forms), in each case excluding (i) Contracts that are terminable by the Company or Company Subsidiary on notice of thirty (30) days or less without penalty in excess of $25,000, individually or in the aggregate, and without any ongoing material obligations, and (ii)&nbsp;Contracts that generated less than $25,000 in revenue to the Company during the 12 months preceding the date of this Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(o) any Contract with any investment banker, broker, advisor or similar Person, or any accountant, legal counsel or other Person retained by the Company, in connection with this Agreement and the Transactions, other than (i) the Company Engagement Letter, and (ii) Contracts with service providers entered into in the Company&#146;s Ordinary Course of Business with fees to be paid based on the provider&#146;s customary hourly rates;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(p) any Contract pursuant to which the Company or any of the Company Subsidiaries has acquired a business or Entity, or assets of a business or Entity, whether by way of merger, consolidation, purchase of stock, purchase of assets, license or otherwise, or any Contract pursuant to which it has any material ownership interest in any other Entity (other than the Company Subsidiaries), in either case which was entered into within the three years preceding the date hereof or under which any Liabilities exist;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(q) all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments pursuant to which any Indebtedness of the Company or any of the Company Subsidiaries in an aggregate principal amount in excess of $25,000 is outstanding or may be incurred on the terms thereof, and the respective principal amounts currently outstanding thereunder as of the date hereof; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(r) any other Contract not listed in subsections (a)-(q) next preceding that individually provides for payments to or by the Company or any Company Subsidiary in excess of $50,000, or pursuant to which the Company or any Company Subsidiary have been paid, or expects to be paid, more than $50,000 in any consecutive 12-month period, or that individually provides for payments by the Company or any Company Subsidiary in excess of $50,000 or is otherwise material to the Company or the Company Subsidiaries or their respective businesses, operations, financial condition, properties or assets (other than employee offer letters in the Ordinary Course of Business).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Except as set forth on Section 4.12 of the Company Disclosure Schedules, all Company Material Contracts are in written form. The Company has Made Available to Parent true, correct and complete copies of each Company Material Contract, as Amended to date. Each Company Material Contract is (i) valid and binding on the Company and each Company Subsidiary party thereto and, to the Company&#146;s Knowledge, each other party thereto, and (ii) in full force and effect. The Company and each Company Subsidiary has in all material respects performed all material obligations required to be performed by it to the date hereof under each Company Material Contract and, to the Company&#146;s Knowledge, each other party to each Company Material Contract has in all material respects performed all obligations required to be performed by it under such Company Material Contract. As of the date hereof, none of the Company and the Company Subsidiaries has Knowledge of, or has
received notice from the other contracting party of, any actual or alleged material Breach of any Company Material Contract. There exists no Breach with respect to the Company or any Company Subsidiary or, to the Knowledge of the Company, with respect to any other contracting party, which, with the giving of notice or the lapse of time or both, would reasonably be expected to constitute a material Breach of such Company Material Contract.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.13 <I>Litigation</I>. Except as set forth in Section 4.13 of the Company Disclosure Schedules, (i) there is no Action pending or, to the Company&#146;s Actual Knowledge, threatened against the Company or any Company Subsidiary or, to the Company&#146;s Actual Knowledge, for which the Company or any Company Subsidiary is obligated to indemnify a third party, (ii) none of the Company and the Company Subsidiaries is subject to any outstanding Order, and (iii) to the Company&#146;s Knowledge, there has been no refusal to indemnify or denial of indemnification and no intention to refuse indemnification, by any third party in connection with any past, pending or threatened Action with respect to which the Company or any Company Subsidiary is or may be entitled to indemnification from any third party. Except as set forth in Section 4.13 of the Company Disclosure Schedules, neither the Company nor any Company Subsidiary has any Action
pending against any other Person. There has not been since June 30, 2005, nor are there currently, any internal investigations or inquiries being conducted by the Company, the Company Board (or any committee thereof) or any third party at the request of any of the foregoing </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">concerning any financial, accounting, tax, conflict of interest, illegal activity, fraudulent or deceptive conduct, violation of Company policy or other misfeasance or malfeasance issues.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Section 4.14 <I>Environmental Matters</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Company and each Company Subsidiary is in material compliance with all Environmental Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Neither the Company nor any Company Subsidiary has received notification regarding any existing or potential Environmental Claims against the Company or any Company Subsidiary, nor have any of them received any written notification of any allegation of any actual or potential responsibility for, or any Action regarding, (i) any violation of Environmental Laws, or (ii) any Environmental Release or threatened Environmental Release at any Facilities of any Materials of Environmental Concern generated or transported by the Company or any Company Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) There has been no Environmental Release at any Facilities of the Company or any Company Subsidiary of any Materials of Environmental Concern in quantities that could trigger the need for investigation or remediation pursuant to any Environmental Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.15 <I>Intellectual Property</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Unless otherwise expressly provided herein, the following terms, whenever used in this Agreement, shall have the meanings ascribed to them in this Section 4.15(a):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) &#147;<B>Company IP</B>&#148; means (i) all Intellectual Property used in the conduct of the business of the Company or any Company Subsidiary as currently conducted by the Company and the Company Subsidiaries, and (ii) all other Company-Owned IP.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) &#147;<B>Company-Owned IP</B>&#148; means all Intellectual Property owned by the Company or any Company Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) &#147;<B>Company Products</B>&#148; means, collectively, (i) all products and services that are currently being published, marketed, licensed, sold, leased, auctioned, distributed or performed, or offered for publication, licensing, sale, lease, distribution or performance or at auction, by or on behalf of the Company or any Company Subsidiary, and (ii) all products or services currently under development by the Company or any Company Subsidiary or that the Company or any of the Company Subsidiaries are Contractually obligated to develop.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The Company and the Company Subsidiaries (i) own and have independently developed or acquired, or (ii) have the valid right or license (exclusive or non-exclusive, as applicable) to, all Company IP. The Company IP is sufficient for the conduct of the business of the Company and the Company Subsidiaries as currently conducted and to the Company&#146;s Knowledge as currently proposed to be conducted by the Company or any Company Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Neither the Company nor any of the Company Subsidiaries has (i) transferred ownership of any material Company-Owned IP to any third party, (ii) knowingly permitted any material Company-Owned IP to enter the public domain, or (iii) permitted any material Company Registered Intellectual Property or application therefor to lapse (other than through the expiration of Registered Intellectual Property at the end of its maximum statutory term or the abandonment of trademarks or service marks in the Ordinary Course of Business using reasonable business judgment).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Except as set forth in Section 4.15(d) of the Company Disclosure Schedules, the Company and the Company Subsidiaries own and have good and exclusive title to all Company-Owned IP and all Company Registered Intellectual Property, free and clear of any Encumbrances. Except as set forth in Section 4.15(d) of the Company Disclosure Schedules, the right, license and interest of the Company and the Company Subsidiaries in and to all Third Party Intellectual Property Rights licensed by the Company or a Company Subsidiary are free and clear of all Encumbrances (excluding restrictions contained in the applicable license agreements with such third parties).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Except as set forth in Section 4.15(e) of the Company Disclosure Schedules, none of the execution and delivery or effectiveness of this Agreement, the consummation of the Transactions and the performance by the Company of its obligations under this Agreement or the Related Agreements to which it is a signatory, will </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">cause the forfeiture or termination of, or give rise to a right of forfeiture or termination of, any Company-Owned IP, or impair the right of the Company, any Company Subsidiary or Parent to use, possess, sell or license any Company-Owned IP or any portion thereof. After the Closing, all Company-Owned IP will be fully transferable, alienable or licensable by the Surviving Corporation without restriction and without payment of any kind to any third party subject to any existing license and distribution agreements with third parties.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Section 4.15(f) of the Company Disclosure Schedule lists all Company Registered Intellectual Property, and for each item of such Registered Intellectual Property, (i) the jurisdictions in which such Registered Intellectual Property has been issued or registered or in which any application for such issuance and registration has been filed, and (ii) the legal counsel (if any) assisting in the initial registration or the maintenance of such Registered Intellectual Property.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Each item of Company Registered Intellectual Property is subsisting (or, in the case of applications, applied for), all registration, maintenance and renewal fees currently due in connection with such Registered Intellectual Property have been or will be timely paid, and all documents, recordations and certificates in connection with such Registered Intellectual Property currently required to be filed have been or will be timely submitted to the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of prosecuting, maintaining and perfecting such Registered Intellectual Property and recording the Company&#146;s and the Company Subsidiaries&#146; ownership interests therein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) Except as set forth in Section 4.15(h) of the Company Disclosure Schedules, to the Company&#146;s Actual Knowledge, there is no unauthorized use, unauthorized disclosure, infringement or misappropriation of any Company-Owned IP by any third party, including any employee or former employee of the Company or any Company Subsidiary. Except as set forth in Section 4.15(h) of the Company Disclosure Schedules, neither the Company nor any Company Subsidiary has initiated any lawsuit, mediation or arbitration for infringement or misappropriation of any Intellectual Property.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) Except as set forth in Section 4.15(i) of the Company Disclosure Schedules, neither the Company nor any Company Subsidiary has (i) been sued in any Action (or received any written notice or, to the Actual Knowledge of the Company, threat) that involves a claim of infringement or misappropriation of any Third Party Intellectual Property Right or which contests the validity, ownership or right of the Company or any Company Subsidiary to exercise any Intellectual Property right, or (ii) received any written communication that puts the Company or any Company Subsidiary on notice of or involves an offer to license or grant any Third Party Intellectual Property Right or immunities in respect thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) The operation of the business of the Company and the Company Subsidiaries as such business is currently conducted and, to the Actual Knowledge of the Company, as currently proposed to be conducted by the Company or any Company Subsidiary, including (i) the design, development, manufacturing, reproduction, marketing, licensing, sale, offer for sale, importation, distribution, provision or use of any Company Product, and (ii) the Company&#146;s or any Company Subsidiary&#146;s use of any product, device or process used in the business of the Company or the Company Subsidiaries as currently conducted and, to the Actual Knowledge of the Company, as currently proposed to be conducted by the Company or any Company Subsidiary, does not and will not infringe or misappropriate any Third Party Intellectual Property Rights and does not and, to the Actual Knowledge of the Company, will not constitute unfair competition or
unfair trade practices under the Laws of any jurisdiction in which the Company or any of the Company Subsidiaries conducts business.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) None of the Company-Owned IP, the Company Products, the Company and the Company Subsidiaries is subject to any judicial or governmental Action or outstanding Order (A) restricting in any manner the use, transfer, or licensing by the Company or any Company Subsidiary of any Company-Owned IP or any Company Product, or which may affect the validity, use or enforceability of any such Company-Owned IP or Company Product, or (B) restricting the conduct of the business of the Company or any Company Subsidiary in order to accommodate Third Party Intellectual Property Rights.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) Neither the Company nor any Company Subsidiary has received any written opinion of legal counsel that any Company Product or the operation of the business of the Company or any Company Subsidiary, as previously or currently conducted, infringes or misappropriates any Third Party Intellectual Property Rights.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(m) Except as set forth in Section 4.15(m) of the Company Disclosure Schedules, each of the Company and the Company Subsidiaries has secured from all of its consultants, employees and independent contractors who </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">independently or jointly contributed to the conception, reduction to practice, creation or development of any material Company-Owned IP, an assignment of inventions and ownership agreement, in the form Made Available to Parent, assigning all such third party&#146;s Intellectual Property in such contribution that the Company or any Company Subsidiary does not already own by operation of Law, and no such third party has retained any rights or licenses with respect thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(n) To the Company&#146;s Knowledge, no current or former employee, consultant or independent contractor of the Company or any Company Subsidiary (i) is in violation of any term or covenant of any Contract relating to employment, invention disclosure, invention assignment, non-disclosure or non-competition or any other Contract with any other party by virtue of such employee&#146;s, consultant&#146;s or independent contractor&#146;s being employed by, or performing services for, the Company or any Company Subsidiary or using trade secrets or proprietary information of others without permission, or (ii) has developed any technology, software or other copyrightable, patentable or otherwise proprietary work for the Company or any Company Subsidiary that is subject to any Contract under which such employee, consultant or independent contractor has assigned or otherwise granted to any third party any rights (including
Intellectual Property rights) in or to such technology, software or other copyrightable, patentable or otherwise proprietary work.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(o) To the Company&#146;s Knowledge, the employment of any employee of the Company or any Company Subsidiary or the use by the Company or any Company Subsidiary of the services of any consultant or independent contractor does not subject the Company or any Company Subsidiary to any liability to any third party for improperly soliciting such employee, consultant or independent contractor to work for the Company or any Company Subsidiary, whether such liability is based on contractual or other legal obligations to such third party.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(p) Except as set forth in Section 4.15(p) of the Company Disclosure Schedules, to the Company&#146;s Knowledge, no current or former employee, consultant or independent contractor of the Company or any Company Subsidiary has any right, license, claim or interest whatsoever in or with respect to any Company-Owned IP.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(q) The Company and the Company Subsidiaries have taken commercially reasonable steps to protect and preserve the confidentiality of all material confidential or non-public information included in the Company IP Rights. All use, disclosure or appropriation of such information owned by the Company or any Company Subsidiary by or to a third party has been pursuant to the terms of a written agreement or other legal binding arrangement between the Company or a Company Subsidiary and such third party. All use, disclosure or appropriation of such information by the Company and the Company Subsidiaries not owned by the Company or any Company Subsidiary has been pursuant to the terms of a written agreement between the Company or such Company Subsidiary and the owner of such information, or is otherwise lawful.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(r) Except as set forth in Section 4.15(r) of the Company Disclosure Schedules, to the Company&#146;s Knowledge, neither the Company nor any Company Subsidiary has (i) incorporated Open Source Materials into, or combined Open Source Materials with, Company IP, or (ii) distributed Open Source Materials in conjunction with any Company IP.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(s) To the Company&#146;s Knowledge, no (i) government funding, (ii) facilities of a university, college, other educational institution or research center, or (iii) funding from any Person (other than funds received in consideration for the Company Equity Interests or Indebtedness incurred on commercially reasonable terms) was used in the development of the Company-Owned IP.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.16 <I>Taxes</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Company and the Company Subsidiaries and each affiliated, combined, consolidated or unitary group of which the Company or any Company Subsidiary is or has been a member (each, a &#147;<B>Company Group</B>&#148;) have timely filed all material federal, state, local, and foreign Tax Returns required to be filed by it in the manner prescribed by applicable Laws and all such Tax Returns were true, complete and correct in all material respects. Except with respect to Taxes that are immaterial in amount, all Taxes of the Company and the Company Subsidiaries (whether or not shown or required to be shown on any Tax Return) that are due and payable have been timely paid in full and the accruals and reserves for Taxes (rather than any reserve for deferred Taxes established to reflect timing difference between book and Tax income) reflected in the Company Balance Sheet (rather than any notes thereto) are adequate in
accordance with GAAP to cover all unpaid Taxes </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">of the Company and the Company Subsidiaries. Except with respect to Taxes that are immaterial in amount, all reserves for Taxes as adjusted for operations and transactions and the passage of time through the Effective Time in accordance with past custom and practice of the Company and the Company Subsidiaries are adequate in accordance with GAAP to cover all unpaid Taxes of the Company and the Company Subsidiaries accruing through the Effective Time.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The Company and the Company Subsidiaries have withheld and paid over all material Taxes required to have been withheld and paid over, and to the Knowledge of the Company, the Company and the Company Subsidiaries have withheld and paid over all other Taxes required to have been withheld and paid over, and the Company and the Company Subsidiaries have complied with all material information reporting and backup withholding requirements, including the maintenance of required records with respect thereto, in each case in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party. There are no Encumbrances on any of the Properties of the Company or any Company Subsidiary with respect to Taxes.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Except as set forth in Section 4.16(c) of the Company Disclosure Schedules, no audit of material Tax Returns or other examination of the Company, any Company Subsidiary or any member of any Company Group is pending or threatened in writing. No deficiencies have been asserted against the Company or any Company Subsidiary as a result of examinations by any Tax Authority and no issue has been raised by any examination conducted by any Tax Authority that, by application of the same principles, might result in a proposed deficiency for any other period not so examined. Each deficiency resulting from any audit or examination relating to Taxes of the Company or any Company Subsidiary by any Tax Authority has been paid or is being contested in good faith and in accordance with the Law and is fully reserved for on the Company Balance Sheet in accordance with GAAP. No claim has ever been made by an authority in a
jurisdiction where the Company or any of the Company Subsidiaries does not file Tax Returns that the Company or any Company Subsidiary, as the case may be, is or may be subject to Tax in such jurisdiction. Neither the Company nor any Company Subsidiary is subject to any private letter ruling of the IRS or comparable rulings of other Tax Authorities that will be binding on the Company or any Company Subsidiary with respect to any period following the Effective Time. Neither the Company nor any of the Company Subsidiaries has granted any power of attorney that is currently in force with respect to any material Taxes or Tax Returns.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Neither the Company nor any Company Subsidiary has requested any extension of time within which to file any material Tax Return which Tax Return has not yet been filed. There are no agreements, waivers of statutes of limitations, or other arrangements providing for extensions of time in respect of the assessment or collection of any unpaid Taxes against the Company or any Company Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) The Company and each Company Subsidiary have disclosed on their federal income tax returns all material positions taken therein that could, if not so disclosed, give rise to a substantial understatement penalty within the meaning of Section 6662 of the Code. Neither the Company nor any Company Subsidiary has been a party to or participated in any way in a transaction that would be defined as a &#147;reportable transaction&#148; within the meaning of Treasury Regulation Section 1.6011-4(b) (including any &#147;listed transaction&#148;) or any confidential corporate tax shelter within the meaning of Treasury Regulation Section 1.6111-2.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Except as set forth in Section 4.16(f) of the Company Disclosure Schedules, neither the Company nor any Company Subsidiary has been a member of any Company Group other than the Company Group of which the Company is the parent. None of the Company or any Company Subsidiary has any liability for, or any indemnification or reimbursement obligation with respect to, (i) Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any similar provision under foreign, state or local Law), (ii) material Taxes of any Person as transferee or successor, or (iii) material Taxes of any Person by contract for Taxes. Neither the Company nor any Company Subsidiary is a party to any Tax sharing agreement, Tax indemnity obligation or similar Contract or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Tax Authority).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Except as set forth in Section 4.16(g) of the Company Disclosure Schedules, neither the Company nor any Company Subsidiary (nor any officer of the Company or any Company Subsidiary) is a party to any Contract (including this Agreement, the Related Agreement and the arrangements contemplated hereby and thereby) that, individually or collectively, could give rise to the payment of any amount (whether in cash or </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">property, including shares of capital stock) that would not be deductible pursuant to the terms of Sections 162(a)(1), 162(m) or 162(n) of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) Neither the Company nor any Company Subsidiary has agreed or is required to make any adjustment under Code Section 481(a) or Section 482 (or an analogous provision of state, local or foreign Law) by reason of a change in accounting method or otherwise. Neither the Company nor any Company Subsidiary will be required to include in income, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any &#147;closing agreement&#148; as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax Law).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) Neither the Company nor any Company Subsidiary is or has been a United States real property holding corporation (as defined in Section 897(c)(2) of the Code).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) Neither the Company nor any Company Subsidiary has had or maintained a permanent establishment other than in its country of organization.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) Section 4.16(k) of the Company Disclosure Schedule sets forth information with respect to each of the Company and the Company Subsidiaries as of the most recent practicable date regarding any material Tax holidays or foreign rulings to which the Company or any Company Subsidiary (as the case may be) is subject.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) Neither the Company nor any Company Subsidiary has incurred, and no state of affairs exist that could result in the Company or any Company Subsidiary incurring, any penalty under Section 6662(e) of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.17 <I>Insurance</I>. Section 4.17 of the Company Disclosure Schedules contains a true, correct and complete list of policies and bonds of insurance maintained by the Company and each Company Subsidiary, and the Company has Made Available to Parent true, correct and complete copies of such policies and bonds of insurance. There is no material claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid, and the Company and each Company Subsidiary is otherwise in compliance in all material respects with the terms of such policies and bonds. To the Knowledge of the Company, neither the Company nor any Company Subsidiary has received written notification of any threatened termination of, or material premium increase with respect to, any such policies or
bonds.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.18 <I>Opinion of Financial Advisor</I>. The Company Board has received the written opinion of Stenton Leigh Valuation Group, Inc. (the &#147;<B>Company Financial Advisor</B>&#148;) addressed to the Company Board, to the effect that the Merger Consideration is fair from a financial point of view to the holders of Company Common Shares (other than Affiliates of the Company), and the Company has delivered to Parent a true, correct and complete copy of such opinion solely for informational purposes.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.19 <I>Brokers</I>. Except for any fees set forth in Section 4.19 of the Company Disclosure Schedules, neither the Company nor any Affiliate of the Company is obligated for the payment of any fees or expenses of any investment banker, broker, advisor or similar party in connection with the origin, negotiation or execution of this Agreement or in connection with the Merger or any other Transaction. The Company is not obligated to continue to use the services of the Company Financial Advisor following the Merger or to pay the fees or expenses of the Company Financial Advisor in connection with any transaction other than the Merger following consummation of the Merger.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.20 <I>Properties</I>. Neither the Company nor Company Subsidiary owns any real property interests. Section 4.12 of the Company Disclosure Schedules lists all material real property Leases to which the Company or any Company Subsidiary is a party and each Amendment thereto that is now in effect. All such current Leases are in full force and effect, are valid and effective in accordance with their respective terms, and, except as set forth in Section 4.20 of the Company Disclosure Schedules, none of the Company and the Company Subsidiaries and, to the Actual Knowledge of the Company, no other party, is in Breach of any such Lease that would give rise to a material claim against the Company or any Company Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.21 <I>Interested Party Transactions</I>. Except as disclosed in the Company SEC Reports, since December&nbsp;31, 2005, no event has occurred and no relationship exists that would be required to be reported by the Company pursuant to Item 404 of Regulation S-K.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">Section 4.22 <I>Export and Import Laws</I>. The Company and each Company Subsidiary has conducted its export transactions in accordance in all material respects with applicable provisions of U.S. Export and Import Laws. Without limiting the generality of the foregoing, (i) the Company and each Company Subsidiary has obtained all export licenses and other approvals required for its exports of products, Intellectual Property, software and technologies from the United States, (ii) the Company and each Company Subsidiary is in material compliance with the terms of all applicable export licenses or other approvals, (iii) there are no pending or, to the Company&#146;s Actual Knowledge, threatened claims against the Company or any Company Subsidiary with respect to such export licenses or other approvals, (iv) to the Company&#146;s Knowledge, there are no conditions or circumstances pertaining to the Company&#146;s or
any Company Subsidiary&#146;s export transactions that may give rise to any future claims, and (v) no Consents in respect of any export licenses of the Company are required in connection with the Merger or the change in control of the Company, or such Consents can be obtained expeditiously without material cost.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.23 <I>Pseudo-Foreign Corporation</I>. The Company is not as of the date hereof, and will not be as of the date of the Company Stockholder Meeting, the Closing Date or the Effective Time, a &#147;foreign corporation&#148; subject to the requirements of Section 2115(b) of the California General Corporation Law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 4.24 <I>Representations Complete</I>. Except as set forth in Section 4.24 of the Company Disclosure Schedules, none of the representations or warranties made by the Company, and no financial statement, other written financial information or statements made in any exhibit, schedule or certificate Made Available or furnished by the Company to Parent pursuant to this Agreement or any Related Agreement, or furnished by the Company in or in connection with documents mailed or delivered to the stockholders of the Company or Parent for use in soliciting their approval of this Agreement and the Merger, contains or will contain at the Closing Date any untrue statement of a material fact or omits or will omit at the Closing Date to state any material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ARTICLE V.<BR>
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Parent and Merger Sub each jointly and severally represents and warrants to the Company that the statements contained in this Article V (or, with respect to Merger Sub, the statements contained in Section 5.1(a), Section 5.4, Section 5.5 and Section 5.23, to the extent applicable to it) are true, correct and complete as of the date of this Agreement, except as set forth, with respect to any specific Section or subsection in this Article V, in the corresponding section or subsection of the schedules Parent (on behalf of itself and Merger Sub) has delivered to the Company concurrently with the execution and delivery hereof (the &#147;<B>Parent Disclosure Schedules</B>&#148;) as follows (it being understood that the disclosure of any matter or item in the Parent Disclosure Schedules shall not be deemed to constitute an acknowledgement that such matter or item is required to be disclosed therein or is material to a representation or
warranty set forth in this Agreement and shall not be used as a basis for interpreting the terms &#147;material,&#148; &#147;materially,&#148; &#147;materiality&#148; or &#147;Material Adverse Effect&#148; or any word or phrase of similar import, and does not mean that such matter or item would, with any other matter or item, have or be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on Parent):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.1 <I>Organization and Qualification; Subsidiaries</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Subsidiary of Parent (each a &#147;<B>Parent Subsidiary</B>&#148; and, collectively, the &#147;<B>Parent Subsidiaries</B>&#148;) has been duly organized, and is validly existing and in good standing, under the laws of the jurisdiction of its incorporation or organization, as the case may be. Each of Parent and each Parent Subsidiary has the requisite power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as it is now being conducted and as currently proposed by it to be conducted. Each of Parent and each Parent Subsidiary is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary other than in such jurisdictions where the failure to be so qualified individually or in the aggregate would not have a Material Adverse Effect on Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Section 5.1(b) of the Parent Disclosure Schedules sets forth a true, correct and complete list of all of the Parent Subsidiaries and the jurisdictions of their organization. Except as set forth on Section 5.1(b) of the Parent </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">Disclosure Schedules, none of the Parent or any Parent Subsidiary holds an Equity Interest in any other Entity. Parent directly, or indirectly through the ownership of a Parent Subsidiary, is the owner of all of the issued and outstanding Equity Interests in each Parent Subsidiary, and all such Equity Interests are duly authorized, validly issued, fully paid and nonassessable. Except as set forth in Section 5.1(b) of the Parent Disclosure Schedules, all of the issued and outstanding Equity Interests of each Parent Subsidiary are owned directly by Parent, or indirectly through the ownership of a Parent Subsidiary, free and clear of all Encumbrances and are not subject to any preemptive right or right of first refusal created by Law or the Organizational Documents of such Parent Subsidiary or any Contract to which such Parent Subsidiary is a party or by which it is bound. There are no outstanding Commitments or
other Contracts of any character relating to the issued or unissued Equity Interests or other Securities of any Parent Subsidiary, or otherwise obligating Parent or any Parent Subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire or sell any such Equity Interests or Securities.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.2 <I>Certificate of Incorporation and Bylaws; Corporate Books and Records</I>. Parent has Made Available to the Company a true, correct and complete copy of Parent&#146;s Articles of Incorporation, as Amended (the &#147;<B>Parent Certificate of Incorporation</B>&#148;), and the Parent&#146;s Bylaws, as Amended (the &#147;<B>Parent Bylaws</B>&#148;), in each case as now in effect. Parent has Made Available to the Company a true, correct and complete copy of the Organizational Documents of each Parent Subsidiary, in each case as Amended and now in effect. Neither Parent nor any Parent Subsidiary is in material violation of any of the provisions of its Organizational Documents. Except as set forth in Section 5.2 of the Parent Disclosure Schedules, (i) true, correct and complete copies of all Minute Books of Parent and the Parent Subsidiaries have been Made Available to the Company, and (ii) the Minute Books of Parent and each
Parent Subsidiary Made Available to the Company contain accurate summaries of all meetings of directors and stockholders (or equivalent managers and owners) or actions by written consent of the directors and stockholders (or equivalent managers and owners) of Parent and the respective Parent Subsidiaries through the date of this Agreement or the Closing Date, as the case may be.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.3 <I>Capitalization</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The authorized capital shares of Parent consist of 10,000,000 Parent Common Shares. As of December 31, 2006, 4,913,290 Parent Common Shares (other than treasury shares) were issued and outstanding, all of which are validly issued and fully paid, nonassessable and free of preemptive rights (excluding shares held in the treasury of Parent).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Except for (i) Parent Common Shares reserved for issuance as set forth in this Section 5.3 or in Section 5.3 of the Parent Disclosure Schedules, and (ii) Commitments under the Transaction Documents; there are no Commitments or other rights or Contracts obligating Parent or any Parent Subsidiary to issue or sell any Equity Interests, or Securities convertible into or exchangeable for Equity Interests, in Parent or any Parent Subsidiary. Since the Parent Balance Sheet Date, Parent has not issued any Equity Interests, or Securities convertible into or exchangeable for such Equity Interests, other than those Parent Common Shares reserved for issuance as set forth in this Section 5.3 or in Section 5.3 of the Parent Disclosure Schedules. All issued and outstanding Parent Common Shares and all outstanding Parent Options were issued, and all repurchases of Parent Common Shares were made, in material compliance with all
applicable Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) As of December 31, 2006, Parent has reserved 2,450,000 Parent Common Shares for issuance to employees, non-employee directors and consultants pursuant to Parent Stock Option Plans, of which 1,403,134 shares are subject to outstanding and unexercised Parent Options and 1,046,866 shares remain available for issuance thereunder. As of December 31, 2006, no outstanding Parent Common Shares were subject to Repurchase Rights. Section 5.3(c)(1) of the Parent Disclosure Schedules identifies (i) the name and full address of each Person who held Parent Options or Parent Common Shares subject to a Repurchase Right as of December 31, 2006, (ii) the particular Parent Stock Option Plan pursuant to which such Parent Option was granted or such Parent Common Shares were issued, (iii) the date on which such Parent Option was granted or such Parent Common Shares were issued, (iv) the exercise or base price of such Parent Option or
the repurchase price of such Parent Common Shares, (v) the number of Parent Common Shares subject to such Parent Option or Repurchase Right or value covered thereby, (vi) the number of Parent Common Shares as to which such Parent Option had vested (or such Repurchase Right had lapsed) at such date, (vii) the applicable vesting schedule for such Parent Option or such Parent Common Shares and whether the exercisability or vesting of such Parent Option, or lapsing of the Repurchase Right, will be accelerated or affected in any way by the Merger or the transactions contemplated hereby (whether alone or in combination with any other event or condition, such as termination of employment), (viii) the date on which such Parent Option or Repurchase Right </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">expires, and (ix) in the case of shares subject to a Repurchase Right, the material terms of any promissory note delivered in payment of the purchase price for such Parent Common Shares (including limitations on recourse). Section 5.3(c)(2) of the Parent Disclosure Schedules sets forth a true, correct and complete list of all holders of outstanding Parent Options that are held by Persons that are not employees of Parent or any Parent Subsidiary (including non-employee directors, consultants, advisory board members, vendors, service providers or other similar Persons). All of the Parent Common Shares subject to issuance under Parent Stock Option Plans, upon issuance prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. True, correct and complete
copies of each of the Parent Stock Option Plans and the standard form of all agreements and instruments relating to or issued under each Parent Stock Option Plan and all agreements and instruments relating to or issued under Parent Stock Option Plans or Parent Options that differ in any material respect from such standard form agreements have been Made Available to the Company, and such agreements and instruments have not been Amended since being Made Available to the Company, and there are no agreements, understandings or commitments to Amend such agreements or instruments in any case from those Made Available to the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Section 5.3(d) of the Parent Disclosure Schedules sets forth all outstanding Parent Warrants and other Commitments (other than Parent Options disclosed in Section 5.3(c) of the Parent Disclosure Schedules). Parent has Made Available to the Company complete and correct copies of all Parent Warrants and Contracts governing such other Commitments, in each case as Amended to date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Section 5.3(e) of the Parent Disclosure Schedules sets forth all outstanding Contractual obligations of Parent or any Parent Subsidiary (i) restricting the transfer of, (ii) affecting the voting rights of, (iii) requiring the repurchase, redemption or disposition of, or (iv) granting any preemptive or anti-dilutive right with respect to; any Parent Common Shares or any other Equity Interests in Parent or any Parent Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.4 <I>Authority</I>. Each of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement and each Related Agreement to which it is a signatory, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby (other than, on the date hereof, the Parent Stockholder Approval), including, with respect to Merger Sub, the filing of the Certificate of Merger pursuant to the DGCL. The execution and delivery of this Agreement and each Related Agreement to which Parent or Merger Sub is a signatory by Parent or Merger Sub, as the case may be, and the consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby, including, in the case of Merger Sub, said filing of the Certificate of Merger, have been duly and validly authorized by all necessary corporate action (other than, on the date hereof, the Parent
Stockholder Approval). Assuming the due authorization, execution and delivery by the Company of this Agreement, this Agreement and each Related Agreement to which Parent or Merger Sub is a signatory has been duly authorized and validly executed and delivered by Parent or Merger Sub, as the case may be, and constitutes its legal, valid and binding obligation, enforceable against Parent or Merger Sub, as the case may be, in accordance with their respective terms, subject only to the effect, if any, of (i) applicable bankruptcy and other similar Laws affecting the rights of creditors generally, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. The Parent Board and the Board of Directors of Merger Sub each has unanimously (A) approved and declared advisable this Agreement, each Related Agreement to which Parent or Merger Sub, as the case may be, is a signatory, the Merger and the other Transactions applicable to it, (B) determined that this Agreement and
each Related Agreement to which Parent or Merger Sub, as the case may be, is a signatory and the terms and conditions of the Merger and other Transactions are fair to, advisable and in the best interests of Parent or Merger Sub, as the case may be, and its stockholders, and (C) directed that the adoption of this Agreement and the approval of this Agreement, the Merger and the Parent Authorized Stock Increase be submitted to Parent&#146;s or Merger Sub&#146;s, as the case may be and as applicable, stockholders for approval at a meeting of such stockholders and recommended that all of Parent&#146;s or Merger Sub&#146;s, as the case may be, stockholders adopt and approve this Agreement and approve the Merger and, in the case of Parent, the Parent Authorized Stock Increase; <I>provided, however</I>, that after the date hereof the Parent Board acting in good faith may withdraw its recommendation. The affirmative vote of the holders of a majority of all Parent Common Shares present in person or by proxy and
voting at the meeting of Parent&#146;s stockholders to adopt and approve this Agreement and approve the Merger (the &#147;<B>Parent Stockholders Meeting</B>&#148;) is the only vote of the holders of capital stock of Parent necessary to adopt this Agreement under applicable Law, including the NPCA, the Nasdaq Marketplace Rules and Parent&#146;s Organizational Documents (the &#147;<B>Parent Stockholder Approval</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.5 <I>No Conflict; Required Filings and Consents</I>.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(a) The execution and delivery of this Agreement and the Related Agreements to which Parent or Merger Sub is a signatory by Parent or Merger Sub, as the case may be, do not, and the performance of this Agreement and such Related Agreements by Parent or Merger Sub, as the case may be, will not, (i) subject to obtaining approval by Parent&#146;s stockholders for the Parent Authorized Stock Increase, conflict with or violate any provision of the Organizational Documents of Parent or any Parent Subsidiary, (ii) subject to obtaining the Parent Stockholder Approval and approval of the sole stockholder of Merger Sub and assuming that all Consents described in Section 5.5(b) have been obtained and all filings and notifications described in Section 5.5(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to Parent or any Parent
Subsidiary, or by which any Property of Parent or any Parent Subsidiary is bound or affected, (iii) result in the creation of any Encumbrance on any of the Properties of Parent or any Parent Subsidiary, or (iv) require any Consent under, or result in any Breach of, any Parent Material Contract or Parent Permit, in each case except as set forth in Section 5.5 of the Parent Disclosure Schedules.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The execution and delivery of this Agreement and the Related Agreements to which Parent or Merger Sub is a signatory by Parent or Merger Sub, as the case may be, do not, and the performance of this Agreement and such Related Agreements by Parent or Merger Sub, as the case may be, and then consummation of the Transactions will not, require any Consent of, or filing with or notification to, any Governmental Entity, except for the Specified Consents and such other Consents and filings with or notifications to Governmental Entities the failures of which to make or obtain, individually or in the aggregate, would not have a Material Adverse Effect on Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.6 <I>Permits; Compliance With Law</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Each of Parent and each Parent Subsidiary is in possession of all material Governmental Permits, and has made all material filings, applications and registrations with any Governmental Entity, in each case that are necessary for Parent and each Parent Subsidiary to own, lease or operate its Properties, or to carry on its respective businesses substantially in the manner described in Parent SEC Reports filed prior to the date hereof or the Closing Date, as the case may be, and substantially as it is being conducted as of the date hereof (the &#147;<B>Parent Permits</B>&#148;), and all such Parent Permits are valid and in full force and effect, except where the failure to have, or the suspension or cancellation of, or failure to be valid or in full force and effect of, any of Parent Permits would not, individually or in the aggregate, reasonably be expected to (i) prevent or materially delay consummation of the
Merger or any other transactions contemplated by this Agreement, (ii) otherwise prevent or materially delay performance by Parent of any of its material obligations under this Agreement or any Related Agreement to which it or Merger Sub is a signatory, or (iii) have a Material Adverse Effect on Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) None of Parent and the Parent Subsidiaries is in conflict with, or in default or violation of, (A) in any material respect, any Law applicable to Parent or any Parent Subsidiary or by which any Property of Parent or any Parent Subsidiary is bound or affected, or (B) any Parent Permit, except, with respect to clause (B) next preceding, for any such conflicts, defaults or violations that would not, individually or in the aggregate, reasonably be expected to (i) prevent or materially delay consummation of the Merger or any other transactions contemplated by this Agreement, (ii) otherwise prevent or materially delay performance by Parent of any of its material obligations under this Agreement or any Related Agreement to which it or Merger Sub is a signatory, or (iii) have a Material Adverse Effect on Parent. None of the Parent Permits will be terminated or impaired or will become terminable, in whole or in part, as a
result of the transactions contemplated by this Agreement or any Related Agreement to which it or Merger Sub is a signatory.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Neither Parent nor any Parent Subsidiary has, within the last three years, received any warning, notice, notice of violation or probable violation, notice of revocation or other communication from or on behalf of any Governmental Entity, alleging (x) any conflict with, or default or violation of, any Parent Permit, or (y) that Parent or any Parent Subsidiary requires any Parent Permit for its business as currently conducted that is not currently held by it. Except as set forth in Section 5.6 of Parent Disclosure Schedules, to Parent&#146;s Actual Knowledge, no investigation or inquiry by any Governmental Entity with respect to Parent or any Parent Subsidiary is pending or threatened, in each case with respect to any alleged or claimed violation of Law applicable to Parent or any Parent Subsidiary or by which any Property of Parent or any Parent Subsidiary is bound or affected.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(d) Neither Parent nor any of Parent Subsidiaries, nor to Parent&#146;s Actual Knowledge, any director, officer, Affiliate or employee thereof, has on behalf of or with respect to Parent engaged in any conduct constituting a violation of the Foreign Corrupt Practices Act of 1977, as amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.7 <I>SEC Filings; Financial Statements</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Parent has filed all SEC Reports required under applicable Law to be filed by it with the SEC in the last five years. All of the Parent SEC Reports have been Made Available to the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) As of their respective dates, each Parent SEC Report (i) complied as to form in all material respects with the requirements of the Securities Act, the Exchange Act and the SEC Rules applicable to such Parent SEC Report, and (ii) did not at the time it was filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected (A) in the case of a Parent SEC Report filed prior to the date of this Agreement that was amended or superseded prior to the date of this Agreement, by the filing of such amending or superseding Parent SEC Report, and (B) in the case of a Parent SEC Report filed after the date of this Agreement that is amended or superseded prior to the Effective Time, by the filing of such amending or
superseding Parent SEC Report. None of the Parent Subsidiaries is required to file any SEC Reports with the SEC.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) As of their respective dates, each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Parent SEC Reports (the &#147;<B>Parent Financial Statements</B>&#148;), (i) complied as to form in all material respects with the published SEC Rules applicable thereto, (ii) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q, Form 8-K or any successor form under the Exchange Act), and (iii) fairly presented in all material respects the consolidated financial position of Parent and the Parent Subsidiaries as at the respective dates thereof and the consolidated results of Parent&#146;s and the Parent Subsidiaries&#146; operations and cash flows for the periods indicated in
accordance with GAAP, except that the unaudited interim financial statements may not contain footnotes and were or are subject to normal and recurring year-end adjustments in accordance with GAAP. Neither Parent nor any Parent Subsidiary has any liabilities (absolute, accrued, contingent or otherwise) required under GAAP to be set forth on a balance sheet that are, individually or in the aggregate, material to the business, results of operations or financial condition of Parent and the Parent Subsidiaries taken as a whole, except for (A) liabilities incurred since the Parent Balance Sheet Date in the Ordinary Course of Business which are of the type that typically recur and which do not result from any Breach of Contract, tort or default or violation of any Law, (B) those specifically set forth or specifically and adequately reserved against in the Parent Balance Sheet, and (C) the fees and expenses of investment bankers, attorneys and accountants incurred in connection with this Agreement and the
Transactions. Except as reflected in the Parent Financial Statements, neither Parent nor any Parent Subsidiary is a party to any material off-balance sheet arrangements (as defined in Item 303 of Regulation S-K promulgated by the SEC). Except as set forth in the Parent SEC Reports, Parent has not had any disagreement with any of its auditors regarding accounting matters or policies during any of its past three full fiscal years or to date during the current fiscal year. The books and records of Parent and each Parent Subsidiary have been maintained, and are being maintained, in all material respects in accordance with applicable legal and accounting requirements, and the Parent Financial Statements are consistent in all material respects with such books and records.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) No investigation by the SEC with respect to Parent or any Parent Subsidiary is pending or, to the Knowledge of Parent, threatened.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Parent has established and maintains &#147;disclosure controls and procedures&#148; (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) that are reasonably designed to ensure that material information (both financial and non-financial) relating to Parent and the Parent Subsidiaries required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is communicated to the Parent&#146;s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and the principal financial officer of Parent required by Section 302 of SOX, with respect to such reports. For purposes of this Section 5.7(e), &#147;principal executive officer&#148; and &#147;principal financial officer&#148; shall have
the meanings ascribed to such terms in SOX. Each of the principal executive officer and the </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">principal financial officer of Parent (or each former principal executive officer and each former principal financial officer of Parent, as applicable) has made all certifications required by Sections 302 and 906 of SOX and the rules and regulations promulgated by the SEC thereunder with respect to the Parent SEC Reports.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Parent maintains a system of internal accounting controls designed to provide reasonable assurance that (i) transactions are executed in accordance with management&#146;s general or specific authorizations, (ii)&nbsp;transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management&#146;s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Parent has Made Available to the Company accurate and complete copies of all material policies, manuals and other documents promulgating such internal accounting controls. Except as set forth in Section 5.7(f) of the Parent Disclosure Schedules, to Parent&#146;s Knowledge,
there are no &#147;material weaknesses&#148; (as defined by the PCAOB) and there are no series of multiple &#147;significant deficiencies&#148; (as defined by the PCAOB) that are reasonably likely to collectively represent a &#147;material weakness&#148; in the design or operation of Parent&#146;s internal controls and procedures, and to Parent&#146;s Knowledge, there are no significant deficiencies in the design or operation of Parent&#146;s internal controls and procedures. To Parent&#146;s Knowledge, in the last five years, there has been no fraud that involves management or other employees who have a significant role in Parent&#146;s internal controls and procedures.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) To Parent&#146;s Knowledge, (A) BKR Cornwell Jackson, which has expressed its opinion with respect to the Parent Financial Statements as of December 31, 2004 and as of December 31, 2005, and for each of Parent&#146;s fiscal years in the two-year period ended December 31, 2005, and (B) CF &amp; Co., L.L.P., which has expressed its opinion with respect to the Parent Financial Statements as of December 31, 2003 and for Parent&#146;s fiscal year in the one-year period ended December 31, 2003; in each case included in the Parent SEC Reports (including the related notes), is &#147;independent&#148; with respect to Parent and the Parent Subsidiaries within the meaning of Regulation S-X and has been &#147;independent&#148; within such meaning at all times since January 1, 2002. Parent has made such disclosure of non-audit services performed by BKR Cornwell Jackson or CF &amp; Co., L.L.P. in its proxy statements with
respect to its annual meetings of its stockholders as is required under the Exchange Act, Securities Act and SEC Rules, and all such non-audit services have been approved in advance by the audit committee of the Parent Board. Parent is in compliance with the applicable criteria for continued listing of the Parent Common Shares on the Parent&#146;s Principal Market.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.8 <I>Disclosure Documents</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Parent Information included in, or incorporated by reference into, the Form S-4, Proxy Statement and any Other Filings, and any amendments or supplements thereto, will, at the Applicable Times, comply as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act, the SEC Rules and other applicable Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The information supplied or to be supplied by or on behalf of Parent or any of its officers, directors or stockholders for inclusion or use, or incorporation by reference, in (i) the Form S-4, (ii) the Proxy Statement, or (iii) any other document (including any report filed by the Company or Parent under the Exchange Act) filed with any Governmental Entity in connection with the Transactions, or in each case any amendment or supplement thereto; in each case do not and will not, at the Applicable Times, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein regarding the Parent Information, in light of the circumstances under which they are made, not misleading. The Parent Information provides all information relating to Parent or its operations, business, directors, officers, Subsidiaries and stockholders required
to be provided by the provisions of the Securities Act, the Exchange Act and the SEC Rules, including form S-4 and Regulation 14A.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Notwithstanding the foregoing provisions of this Section 5.8, Parent makes no representation or warranty, and assumes no responsibility, with respect to statements made or incorporated by reference in the Form S-4, the Proxy Statement or any Other Filings, or in each case any amendment or supplement thereto, supplied by the Company (other than Parent Information so supplied) for inclusion or incorporation by reference therein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.9 <I>Absence of Certain Changes or Events</I>. Since the Parent Balance Sheet Date, except as specifically disclosed in the Parent SEC Reports filed thereafter, as contemplated hereby or as set forth in Section 5.9 of the </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">Parent Disclosure Schedules, Parent and each Parent Subsidiary has conducted its business only in the Ordinary Course of Business and, since such date:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) no Events have caused a Material Adverse Effect on Parent;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) there has not been any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, Securities or Property) in respect of, any of Parent&#146;s Equity Interests, or any purchase, redemption or other acquisition by Parent of any of Parent&#146;s Equity Interests or any other Securities of Parent or any Commitments for any such Equity Interests of Securities, other than repurchases from employees or consultants following their termination pursuant to the terms of existing Repurchase Rights;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) there has not been any Capitalization Adjustment of any of Parent&#146;s Equity Interests;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) there has not been any increase in compensation or fringe benefits paid or payable to any of the officers, directors or managers or employees of Parent or any Parent Subsidiary at the vice president or director level or higher, or who earn base salary of more than $100,000 per year, or any payment by Parent or any of the Parent Subsidiaries of any bonus to any of their officers, directors or managers or employees at the vice president or director level or higher, or who earn base salary of more than $100,000 per year, or any granting by Parent or any of the Parent Subsidiaries of any increase in severance or termination pay, or any entry by Parent or any of the Parent Subsidiaries into, or material Amendment of, any currently effective employment, severance, termination or indemnification agreement or any agreement the benefits of which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Parent of the nature of any Transactions, or any subsequent event, other than increases in the Ordinary Course of Business in base salary and target bonuses for employees who are not officers of Parent, in an amount that does not exceed 50% of such base salary, in connection with periodic compensation or performance reviews or for ordinary course severance and release agreements as made in connection with the termination of employment that do not provide severance in excess of Parent&#146;s standard policies;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) there has not been any change by Parent or any of the Parent Subsidiaries in its accounting methods, principles or practices (including any material change in depreciation or amortization policies or rates or revenue recognition policies), except as required by concurrent changes in GAAP;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) there has not been any sale, transfer, or other disposition of any Parent IP Rights or any other Properties by Parent or any of the Parent Subsidiaries, except in the Ordinary Course of Business;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) neither Parent nor any Parent Subsidiary has made any loan, advance or capital contribution to, or investment in, any Person, including any director, officer or Affiliate of Parent, other than (i) loans, advances or capital contributions to or investments in wholly-owned Subsidiaries or Entities that became wholly-owned Subsidiaries made in the Ordinary Course of Business, (ii) investments made in accordance with Parent&#146;s investment guidelines, a copy of which has been Made Available to the Company, in the Ordinary Course of Business, (iii) routine travel and entertainment expense advances in the Ordinary Course of Business and in accordance with Parent&#146;s travel and expense policy, a copy of which has been Made Available to the Company, and (iv) loans and advances to third party customers in the Ordinary Course of Business;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) there has not been any material change with respect to the management or other key personnel of Parent, any termination of employment of any such employees or a material number of employees, or any material labor dispute or material claim of unfair labor practices involving Parent or any Parent Subsidiary; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) neither Parent nor any Parent Subsidiary has agreed, whether in writing or otherwise, to take any action described in this Section 5.9.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.10 <I>Employee Benefit Plans</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Section 5.10(a) of the Parent Disclosure Schedules lists as of the date of this Agreement, with respect to Parent and the Parent Subsidiaries and their respective ERISA Affiliates, (i) all employee benefit plans within the meaning of Section 3(3) of ERISA, (ii) each loan from Parent, any Parent Subsidiary or any such ERISA Affiliate to an employee in excess of $5,000, (iii) all stock option, stock purchase, phantom stock, stock appreciation right, supplemental retirement, severance, salary continuation, sabbatical, employee relocation, cafeteria benefit (Section 125 of the Code), dependent care (Section 129 of the Code), life insurance or accident insurance plans, programs or arrangements, (iv) all bonus, pension, profit sharing, savings, retirement, deferred </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">compensation or incentive plans, programs or arrangements, whether written or oral, qualified or nonqualified, funded or unfunded, currently effective or terminated, (v) other fringe or employee benefit plans, programs or arrangements that apply to senior management and that do not generally apply to all employees, and (vi) any employment or service agreements (except for offer letters providing for at-will employment that do not provide for severance, acceleration or post-termination benefits), compensation agreements or severance agreements, written or otherwise, for the benefit of, or relating to, any present or former director, officer, employee, or consultant (<I>provided</I> that, for (1) former and current consultants, and (2) former directors, officers and employees; such arrangements need only be listed if unsatisfied obligations of Parent or any Parent Subsidiary of greater than $5,000 remain
thereunder) of Parent or any Parent Subsidiary (all of the foregoing described in clauses (i) through (vi) next preceding, collectively, the &#147;<B>Parent Benefit Plans</B>&#148;). Parent has no liability with respect to any plan, arrangement or practice of the type described in the preceding sentence other than the Parent Benefit Plans. Parent has not, since July 30, 2002, extended credit, arranged for the extension of credit, or renewed, modified or forgiven an extension of credit made prior to such date, in the form of a personal loan to or for any person who was, at any time since such date, an officer or director of Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Prior to the date of this Agreement, Parent has Made Available to the Company a true, correct and complete copy of each Parent Benefit Plan and all current and prior related plan documents (including adoption agreements, vendor contracts and administrative services agreements, trust documents, insurance policies or contracts (including policies relating to fiduciary liability insurance covering the fiduciaries of such Parent Benefit Plans), bonds required by ERISA, employee booklets, summary plan descriptions and other authorizing documents, summaries of material modifications and any material written employee communications relating thereto) and has, with respect to each Parent Benefit Plan that is subject to ERISA reporting requirements, Made Available to the Company true, correct and complete copies of the Form 5500 reports filed for the last three plan years (including all audits, financial statements,
schedules and attachments thereto, where applicable). Any Parent Benefit Plan intended to be qualified under Section 401(a) of the Code has (i) obtained from the IRS a current favorable determination letter as to its qualified status under the Code and as to the exemption from tax under the provisions of Code Section 501(a) of each trust created thereunder, or (ii) has been established under a standardized master and prototype or volume submitter plan for which a favorable Internal Revenue Service advisory letter or opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer. Parent has also Made Available to the Company a true, correct and complete copy of the most recent such Internal Revenue Service determination letter, advisory letter or opinion letter issued with respect to each Parent Benefit Plan, and, to Parent&#146;s Knowledge, nothing has occurred since the issuance of each such letter that could reasonably be expected to cause the loss of the tax-qualified
status of any Parent Benefit Plan subject to Section 401(a) of the Code. Parent has also Made Available to the Company all registration statements and prospectuses and investment policy statements prepared in connection with each Parent Benefit Plan, where applicable. All individuals who, pursuant to the terms of any Parent Benefit Plan, are entitled to participate in such Parent Benefit Plan, are currently participating in such Parent Benefit Plan or have been offered an opportunity to do so. None of Parent and the Parent Subsidiaries and their respective ERISA Affiliates sponsors or maintains any self-funded employee benefit plan, including any plan to which a stop-loss policy applies.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Except as set forth in Section 5.10(c) of the Parent Disclosure Schedules, none of the Parent Benefit Plans promises or provides retiree medical or other retiree welfare benefits to any person other than as required under COBRA, or applicable state law. There has been no prohibited transaction (within the meaning of Section 406 of ERISA and Section 4975 of the Code) with respect to any Parent Benefit Plan that is not exempt under Section 408 of ERISA. To Parent&#146;s Actual Knowledge, each Parent Benefit Plan has been administered in accordance with its terms and in compliance with the requirements prescribed by applicable Law (including ERISA and the Code), and Parent and the Parent Subsidiaries, and their respective ERISA Affiliates, each has performed all obligations required to be performed by it under, is not in any material respect in default under or in violation of, and has no Actual Knowledge of any
material default or in violation by any other party to, any of the Parent Benefit Plans. None of Parent and the Parent Subsidiaries and their respective ERISA Affiliates is subject to any liability or penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any of the Parent Benefit Plans. All contributions required to be made by Parent or any Parent Subsidiary or any of their respective ERISA Affiliates to any Parent Benefit Plan have been made on or before their due dates and, to the extent required by GAAP, all amounts have been accrued for the current plan year (and no further contributions will be due or will have accrued thereunder as of the Closing Date, other than contributions accrued in the Ordinary Course of Business after the Parent Balance Sheet Date as a result of the operations of Parent and the Parent Subsidiaries after the Parent Balance Sheet Date). In addition, with respect </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">to each Parent Benefit Plan intended to include a Code Section 401(k) arrangement, the Parent and each Parent Subsidiary and their respective ERISA Affiliates have at all times made timely deposits of employee salary reduction contributions and participant loan repayments, as determined pursuant to regulations issued by the United States Department of Labor. No Parent Benefit Plan that is an employee welfare benefit plan as defined in Section 3(1) of ERISA is a self-insured plan. No Parent Benefit Plan is covered by, and none of Parent and the Parent Subsidiaries and their respective ERISA Affiliates has incurred or expects to incur any liability under Title IV of ERISA or Section 412 of the Code. With respect to each Parent Benefit Plan subject to ERISA as either an employee pension benefit plan within the meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the meaning of Section 3(1)
of ERISA, Parent has prepared in good faith and timely filed all requisite governmental reports (which were true, correct and complete as of the date filed), including any required audit reports, and has properly and timely filed and distributed or posted all notices and reports to employees required to be filed, distributed or posted with respect to each such Parent Benefit Plan. No Action has been brought, or to the Actual Knowledge of Parent or any Parent Subsidiary, is threatened, against Parent or any Parent Subsidiary or with respect to any such Parent Benefit Plan, including any audit or inquiry by the IRS or United States Department of Labor.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) None of Parent and the Parent Subsidiaries and their respective ERISA Affiliates is a party to, or has made any contribution to or otherwise incurred any obligation under, any &#147;multiemployer plan&#148; as such term is defined in Section 3(37) of ERISA or any &#147;multiple employer plan&#148; as such term is defined in Section 413(c) of the Code. There has been no termination or partial termination of any Parent Benefit Plan within the meaning of Section 411(d)(3) of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Each Foreign Plan of Parent or any Parent Subsidiary is listed in Section 5.10(e) of the Parent Disclosure Schedules, except for plans maintained by Governmental Entities. As regards each such Foreign Plan, (i) such Foreign Plan is in compliance with the provisions of the laws of each jurisdiction in which such Foreign Plan is maintained, to the extent those laws are applicable to such Foreign Plan, (ii) Parent and each Parent Subsidiary, and each of their respective ERISA Affiliates, has complied with all applicable reporting and notice requirements, and such Foreign Plan has obtained from the Governmental Entity having jurisdiction with respect to such Foreign Plan any required determinations, if any, that such Foreign Plan is in compliance with the laws of the relevant jurisdiction if such determinations are required in order to give effect to such Foreign Plan, and (iii) such Foreign Plan has been administered
in accordance with its terms and applicable Law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Section 5.10(f) of the Parent Disclosure Schedules lists each person who Parent reasonably believes is, with respect to Parent or any Parent Subsidiary or any of their respective ERISA Affiliates, a &#147;disqualified individual&#148; (within the meaning of Section 280G of the Code and the regulations promulgated thereunder) determined as of the date hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Section 5.10(g) of the Parent Disclosure Schedules lists as of the date of this Agreement each employee of Parent or any Parent Subsidiary who is not fully available to perform work because of disability or other leave and also lists, with respect to each such employee, the basis of such disability or leave and the anticipated date of return to full service.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) Except as set forth in Section 5.10(h) of the Parent Disclosure Schedules, none of the execution and delivery of this Agreement or the consummation of the Transactions (or the Transactions in combination with any subsequent transactions or events, other than transactions or events initiated solely by the Company) will (i)&nbsp;result in any employee, director or consultant of Parent or any Parent Subsidiary becoming entitled to any deferred compensation, bonus or severance pay or materially increase or otherwise enhance any benefits otherwise payable by Parent or any Parent Subsidiary, (ii) result in the acceleration of the time of payment or vesting, or an increase in the amount of any compensation due to any employee, director or consultant of Parent or any Parent Subsidiary, except as may be required under Section 411(d)(3) of the Code, (iii) result in forgiveness in whole or in part of any outstanding loans
made by Parent or any Parent Subsidiary to any of their employees, directors or consultants, or (iv) result in a payment that would be considered an &#147;excess parachute payment&#148; and treated as nondeductible under Section 280G of the Code or subject to the excise Tax under Section 4999 of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) To Parent&#146;s Knowledge, Parent has neither granted, nor is a party to, any Contract that grants any compensation, equity award, or bonus, that fails to comply in good faith with the provisions of Section 409A of the Code.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(j) Each of Parent and the Parent Subsidiaries is in compliance in all material respects with all currently applicable Laws respecting employment, discrimination in employment, terms and conditions of employment, worker classification (including the proper classification of workers as independent contractors and consultants), wages, hours and occupational safety and health and employment practices, including the Immigration Reform and Control Act. Parent and each Parent Subsidiary has paid in full to all employees, independent contractors and consultants all wages, salaries, commissions, bonuses, benefits, and other compensation due to or on behalf of such employees, independent contractors or consultants. Neither Parent nor any Parent Subsidiary is liable for any payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation benefits, social
security or other benefits or obligations for employees (other than routine payments to be made in the Ordinary Course of Business). There are no controversies pending or, to the Actual Knowledge of Parent, threatened, between Parent or any Parent Subsidiary and any of their respective employees, which controversies have or could reasonably be expected to result in an Action before any Governmental Entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) Neither Parent nor any of the Parent Subsidiaries has any obligation to pay any amount or provide any benefit to any former employee or officer, other than obligations (i) for which Parent has established a reserve for such amount on the Parent Balance Sheet in accordance with GAAP, and (ii) pursuant to Contracts entered into after the Parent Balance Sheet Date and disclosed on Section 5.10(k) of the Parent Disclosure Schedules. Neither Parent nor any Parent Subsidiary is a party to or bound by any collective bargaining agreement or other labor union contract, no collective bargaining agreement is being negotiated by Parent or any Parent Subsidiary and neither Parent nor any Parent Subsidiary has any duty to bargain with any labor organization. There is no pending demand for recognition or any other request or demand from a labor organization for representative status with respect to any person employed by Parent
or any Parent Subsidiary. Parent has no Actual Knowledge of any activities or proceedings of any labor union to organize the employees of Parent or any Parent Subsidiary. There is no labor dispute, strike or group work stoppage against Parent or any Parent Subsidiary pending or to the Actual Knowledge of Parent threatened that may interfere with the respective business activities of Parent or any Parent Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) To the Knowledge of Parent, no employee of Parent or any Parent Subsidiary is in violation of any term of any employment agreement, patent disclosure agreement, non-competition agreement, or any restrictive covenant to a former employer relating to the right of any such employee to be employed by Parent or any Parent Subsidiary because of the nature of the business conducted or presently proposed to be conducted by Parent or any Parent Subsidiary or to the use of trade secrets or proprietary information of others. No Key Employee of Parent or any Parent Subsidiary has given notice of termination or resignation to Parent or any Parent Subsidiary, nor does Parent otherwise have Actual Knowledge that any such Key Employee intends to terminate his or her employment with Parent or any Parent Subsidiary. The employment of each of the employees of Parent or any Parent Subsidiary is &#147;at will&#148; and Parent and each
Parent Subsidiary does not have any obligation to provide any particular form or period of notice prior to terminating the employment of any of their respective employees, and the employment of each employee of Parent and each Parent Subsidiary may be terminated without prior notice and without financial liability to the Parent or any Parent Subsidiary (other than as provided under applicable Law or as set forth in Section 5.10(a) of the Parent Disclosure Schedules).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(m) Parent has Made Available to the Company a true, correct and complete list of the names of all current officers, directors, consultants and employees of Parent and each Parent Subsidiary showing each such person&#146;s name, position, rate of annual remuneration, status as exempt/non-exempt and bonuses for the current fiscal year and the most recently completed fiscal year.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(n) Parent has Made Available to the Company, with respect to Parent and the Parent Subsidiaries, true, correct and complete copies of each of the following: (i) all forms of offer letters, (ii) all forms of employment agreements and severance agreements, (iii) all forms of services agreements and forms of agreements with current and former consultants or advisory board members, (iv) all forms of confidentiality, non-competition or invention agreements by and between current and former employees, consultants or others and Parent or any Parent Subsidiary (and a true, correct and complete list of employees, consultants or others not subject thereto), (v) all management organization charts, (vi) all agreements or insurance policies providing for the indemnification of any officers or directors of Parent or any Parent Subsidiary, (vii) a summary of Parent&#146;s standard severance policy, (viii) a summary of outstanding
liability for termination payments and benefits to current and former directors, officers, employees and consultants of Parent or any Parent Subsidiary, and (ix) a schedule of bonus commitments made to employees of Parent or any Parent Subsidiary.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(o) Parent and each Parent Subsidiary is in compliance in all material respects with the WARN Act or any similar Law. In the past two years (i) Parent has not effectuated a &#147;plant closing&#148; (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a &#147;mass layoff&#148; (as defined in the WARN Act) affecting any site of employment or facility of Parent of any Parent Subsidiary, and (iii) Parent has not been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation. Parent has not caused any of its employees to suffer an &#147;employment loss&#148; (as defined in the WARN Act) during the 90-day period prior to the date of this
Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.11 <I>Customers</I>. Neither Parent nor any of the Parent Subsidiaries has any outstanding material dispute concerning its goods or services with any jewelry dealer or other wholesale customer or distributor who, in the six months ending September 30, 2006, was one of the 20 largest sources of consolidated revenue for Parent and the Parent Subsidiaries, based on amounts paid or payable during such periods (each, a &#147;<B>Significant Parent Customer</B>&#148;). Each Significant Parent Customer is listed on Section 5.11 of the Parent Disclosure Schedules. Neither Parent nor any of the Parent Subsidiaries has received any written notice from any Significant Parent Customer that such Person (i) will not continue as a customer or distributor of Parent or any Parent Subsidiary after the Merger, (ii)&nbsp;intends to terminate or materially modify existing Contracts or relationships with Parent or any Parent Subsidiary, or (iii)
intends to materially reduce the amount of business conducted with Parent and the Parent Subsidiaries.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.12 <I>Contracts</I>. Section 5.12 of the Parent Disclosure Schedules specifically identifies (by the applicable subsection set forth below in this Section 5.12) each Parent Material Contract (other than this Agreement or any Related Agreement). The term &#147;<B>Parent Material Contract</B>&#148; shall include each of the following Contracts to which Parent or any Parent Subsidiary is a party to or by which Parent or any Parent Subsidiary is bound (in each case, other than this Agreement or any Related Agreement):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) any Contract with any Significant Parent Customer;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) any Contract generating, or that is reasonably likely to generate, more than $100,000 in revenues for Parent and the Parent Subsidiaries over the twelve month period from the date of this Agreement, other than those set forth on Section 5.12(i) of the Parent Disclosure Schedules;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) any Contract with any director, officer, employee or consultant that would require Parent or any Parent Subsidiary to make any payments in connection with the Merger, or upon termination of employment, but excluding any Contract (i) that is terminable at-will or, in the case of consultants, with 30 or fewer days of notice by Parent or any of the Parent Subsidiaries without cost, liability or financial obligations (other than accrued regular compensation and benefits through the date of termination, including any such notice period), or (ii) under which Parent and the Parent Subsidiaries collectively have paid or are obligated to pay less than $100,000;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) any Contract for indemnification (other than standard indemnification provisions in Contracts entered into by Parent or any Parent Subsidiary in the Ordinary Course of Business) or any guaranty;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) any Contract containing any covenant limiting in any respect the right of Parent or any of the Parent Subsidiaries to (i) engage, participate or compete in any line of business, market or geographic area, (ii) develop, market or distribute products or services, (iii) conduct business with any Person, (iv) solicit the employment of, or hire, any Person, or (v) compete with any Person; or granting any exclusive sales, distribution, marketing or other exclusive rights, rights of first refusal, &#147;most favored nation&#148; rights, rights of first negotiation or other exclusive rights or similar terms to any Person, but in each case excluding Contracts containing limitations that (A) are not material to Parent or any Parent Subsidiary, and (B) do not limit the ability of Parent or any Parent Subsidiary to develop or market additional products or services;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) any Lease for real or personal property in which the amount of payments that Parent or any of the Parent Subsidiaries is required to make on an annual basis exceeds $25,000;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) any Contract pursuant to the express terms of which Parent or any of the Parent Subsidiaries is currently obligated to pay in excess of $25,000 in any one year period that is not terminable by Parent or the Parent Subsidiaries without penalty upon notice of ninety (90) days or less;</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(h) any Contract currently in force relating to the disposition or acquisition by Parent or any of the Parent Subsidiaries after the date hereof of (i) assets with a book value exceeding $25,000; or (ii) Equity Interests in an Entity;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) any Contract pursuant to which Parent or any Parent Subsidiary is a licensor of Intellectual Property or agrees to Encumber, not assert, Transfer or sell rights in or with respect to any Intellectual Property, except for distribution contracts with retail outlets, independent sales agents, other distributors and end users entered into by Parent or any Parent Subsidiary in the Ordinary Course of Business;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) any joint venture Contract or any other Contract that involves a sharing of revenues in excess of $25,000, or involves a sharing of profits, cash flows, expenses or losses, with other Persons, or the payment of royalties to any other Person, other than Contracts identified in Section 5.12(a) of the applicable Parent Disclosure Schedule;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) any Contract currently required to be filed as an exhibit pursuant to Item 601(b)(10) of Regulation S-K promulgated under the Securities Act, other than those currently on file with the SEC (including any Amendments to Contracts filed as of the Parent Balance Sheet Date that are required to be filed);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) any Contract containing a &#147;standstill&#148; provision with respect to any Equity Interests of Parent;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(m) any Contract in effect on the date of this Agreement, including any Parent Stock Option Plan, relating to the sale, issuance, grant, exercise, award, purchase, repurchase or redemption of any Parent Common Shares or any other Equity Interests or Securities of Parent or any of the Parent Subsidiaries, or any Commitments to purchase or otherwise acquire any such Parent Common Shares, Equity Interests or Securities, except for the Parent Stock Option Plans, the Parent Options and Parent Warrants disclosed in Section 5.3 of the applicable Parent Disclosure Schedule;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(n) any Contract under which Parent or any Parent Subsidiary is obligated to provide consulting services, development services, professional services or support services (other than maintenance and support customer contracts on Parent&#146;s standard, unmodified forms), in each case excluding (i) Contracts that are terminable by Parent or the Parent Subsidiary on notice of thirty (30) days or less without penalty in excess of $25,000, individually or in the aggregate, and without any ongoing material obligations, and (ii) Contracts that generated less than $25,000 in revenue to Parent during the 12 months preceding the date of this Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(o) any Contract with any investment banker, broker, advisor or similar Person, or any accountant, legal counsel or other Person retained by Parent, in connection with this Agreement and the Transactions, other than Contracts with service providers entered into in Parent&#146;s Ordinary Course of Business with fees to be paid based on the provider&#146;s customary hourly rates;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(p) any Contract pursuant to which Parent or any of the Parent Subsidiaries has acquired a business or Entity, or assets of a business or Entity, whether by way of merger, consolidation, purchase of stock, purchase of assets, license or otherwise, or any Contract pursuant to which it has any material ownership interest in any other Entity (other than the Parent Subsidiaries), in either case which was entered into within the three years preceding the date hereof or under which any Liabilities exist;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(q) all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments pursuant to which any Indebtedness of Parent or any of the Parent Subsidiaries in an aggregate principal amount in excess of $100,000 is outstanding or may be incurred on the terms thereof, and the respective principal amounts currently outstanding thereunder as of the date hereof; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(r) any other Contract not listed in subsections (a)-(q) next preceding that individually provides for payments to or by Parent or any Parent Subsidiary in excess of $50,000, or pursuant to which Parent or any Parent Subsidiary have been paid, or expects to be paid, more than $50,000 in any consecutive 12-month period, or that individually provides for payments by Parent or any Parent Subsidiary in excess of $50,000 or is otherwise material to Parent or the Parent Subsidiaries or their respective businesses, operations, financial condition, properties or assets (other than employee offer letters in the Ordinary Course of Business).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Except as set forth on Section 5.12 of the Parent Disclosure Schedules, all Parent Material Contracts are in written form. Parent has Made Available to the Company true, correct and complete copies of each Parent Material Contract, as Amended to date. Each Parent Material Contract is (i) valid and binding on Parent and each Parent </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">Subsidiary party thereto and, to the Parent&#146;s Knowledge, each other party thereto, and (ii) in full force and effect. Parent and each Parent Subsidiary has in all material respects performed all material obligations required to be performed by it to the date hereof under each Parent Material Contract and, to Parent&#146;s Knowledge, each other party to each Parent Material Contract has in all material respects performed all obligations required to be performed by it under such Parent Material Contract. As of the date hereof, none of Parent and the Parent Subsidiaries has Knowledge of, or has received notice from the other contracting party of, any actual or alleged material Breach of any Parent Material Contract. There exists no Breach with respect to Parent or any Parent Subsidiary or, to the Knowledge of Parent, with respect to any other contracting party, which, with the giving of notice or the lapse of time or both,
would reasonably be expected to constitute a material Breach of such Parent Material Contract.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.13 <I>Litigation</I>. Except as set forth in Section 5.13 of the Parent Disclosure Schedules, (i) there is no Action pending or, to Parent&#146;s Actual Knowledge, threatened against Parent or any Parent Subsidiary or, to Parent&#146;s Actual Knowledge, for which Parent or any Parent Subsidiary is obligated to indemnify a third party, (ii) none of Parent and the Parent Subsidiaries is subject to any outstanding Order, and (iii) to Parent&#146;s Knowledge, there has been no refusal to indemnify or denial of indemnification and no intention to refuse indemnification, by any third party in connection with any past, pending or threatened Action with respect to which Parent or any Parent Subsidiary is or may be entitled to indemnification from any third party. Except as set forth in Section 5.13 of the Parent Disclosure Schedules, neither Parent nor any Parent Subsidiary has any Action pending against any other Person. There has
not been since December 31, 2005, nor are there currently, any internal investigations or inquiries being conducted by Parent, the Parent Board (or any committee thereof) or any third party at the request of any of the foregoing concerning any financial, accounting, tax, conflict of interest, illegal activity, fraudulent or deceptive conduct, violation of Parent policy or other misfeasance or malfeasance issues.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.14 <I>Environmental Matters</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Parent and each Parent Subsidiary is in material compliance with all Environmental Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Neither Parent nor any Parent Subsidiary has received notification regarding any existing or potential Environmental Claims against Parent or any Parent Subsidiary, nor have any of them received any written notification of any allegation of any actual or potential responsibility for, or any Action regarding, (i) any violation of Environmental Laws, or (ii) any Environmental Release or threatened Environmental Release at any Facilities of any Materials of Environmental Concern generated or transported by Parent or any Parent Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) There has been no Environmental Release at any Facilities of Parent or any Parent Subsidiary of any Materials of Environmental Concern in quantities that could trigger the need for investigation or remediation pursuant to any Environmental Laws.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.15 <I>Intellectual Property</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Unless otherwise expressly provided herein, the following terms, whenever used in this Agreement, shall have the meanings ascribed to them in this Section 5.15(a):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) &#147;<B>Parent IP</B>&#148; means (i) all Intellectual Property used in the conduct of the business of Parent or any Parent Subsidiary as currently conducted by Parent and the Parent Subsidiaries, and (ii) all other Parent-Owned IP.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) &#147;<B>Parent-Owned IP</B>&#148; means all Intellectual Property owned by Parent or any Parent Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) &#147;<B>Parent Products</B>&#148; means, collectively, (i) all products and services that are currently being published, marketed, licensed, sold, leased, auctioned, distributed or performed, or offered for publication, licensing, sale, lease, distribution or performance or at auction, by or on behalf of Parent or any Parent Subsidiary, and (ii) all products or services currently under development by Parent or any Parent Subsidiary or that Parent or any of the Parent Subsidiaries are Contractually obligated to develop.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Parent and the Parent Subsidiaries (i) own and have independently developed or acquired, or (ii) have the valid right or license (exclusive or non-exclusive, as applicable) to, all Parent IP. The Parent IP is sufficient for the conduct of the business of Parent and the Parent Subsidiaries as currently conducted and to Parent&#146;s Knowledge as currently proposed to be conducted by Parent or any Parent Subsidiary.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(c) Neither Parent nor any of the Parent Subsidiaries has (i) transferred ownership of any material Parent-Owned IP to any third party, (ii) knowingly permitted any material Parent-Owned IP to enter the public domain, or (iii) permitted any material Parent Registered Intellectual Property or application therefor to lapse (other than through the expiration of Registered Intellectual Property at the end of its maximum statutory term or the abandonment of trademarks or service marks in the Ordinary Course of Business using reasonable business judgment).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Except as set forth in Section 5.15(d) of the Parent Disclosure Schedules, Parent and the Parent Subsidiaries own and have good and exclusive title to all Parent-Owned IP and all Parent Registered Intellectual Property, free and clear of any Encumbrances. Except as set forth in Section 5.15(d) of the Parent Disclosure Schedules, the right, license and interest of Parent and the Parent Subsidiaries in and to all Third Party Intellectual Property Rights licensed by Parent or a Parent Subsidiary are free and clear of all Encumbrances (excluding restrictions contained in the applicable license agreements with such third parties).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Except as set forth in Section 5.15(e) of the Parent Disclosure Schedules, none of the execution and delivery or effectiveness of this Agreement, the consummation of the Transactions and the performance by Parent of its obligations under this Agreement or the Related Agreements to which it is a signatory, will cause the forfeiture or termination of, or give rise to a right of forfeiture or termination of, any Parent-Owned IP, or impair the right of Parent or any Parent Subsidiary to use, possess, sell or license any Parent-Owned IP or any portion thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Section 5.15(f) of the Parent Disclosure Schedule lists all Parent Registered Intellectual Property, and for each item of such Registered Intellectual Property, (i) the jurisdictions in which such Registered Intellectual Property has been issued or registered or in which any application for such issuance and registration has been filed, and (ii) the legal counsel (if any) assisting in the initial registration or the maintenance of such Registered Intellectual Property.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Each item of Parent Registered Intellectual Property is subsisting (or, in the case of applications, applied for), all registration, maintenance and renewal fees currently due in connection with such Registered Intellectual Property have been or will be timely paid, and all documents, recordations and certificates in connection with such Registered Intellectual Property currently required to be filed have been or will be timely submitted to the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of prosecuting, maintaining and perfecting such Registered Intellectual Property and recording Parent&#146;s and the Parent Subsidiaries&#146; ownership interests therein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) Except as set forth in Section 5.15(h) of the Parent Disclosure Schedules, to Parent&#146;s Actual Knowledge, there is no unauthorized use, unauthorized disclosure, infringement or misappropriation of any Parent-Owned IP by any third party, including any employee or former employee of Parent or any Parent Subsidiary. Except as set forth in Section 5.15(h) of the Parent Disclosure Schedules, neither Parent nor any Parent Subsidiary has initiated any lawsuit, mediation or arbitration for infringement or misappropriation of any Intellectual Property.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) Except as set forth in Section 5.15(i) of the Parent Disclosure Schedules, neither Parent nor any Parent Subsidiary has (i) been sued in any Action (or received any written notice or, to the Actual Knowledge of Parent, threat) that involves a claim of infringement or misappropriation of any Third Party Intellectual Property Right or which contests the validity, ownership or right of Parent or any Parent Subsidiary to exercise any Intellectual Property right, or (ii) received any written communication that puts Parent or any Parent Subsidiary on notice of or involves an offer to license or grant any Third Party Intellectual Property Right or immunities in respect thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) The operation of the business of Parent and the Parent Subsidiaries as such business is currently conducted and, to the Actual Knowledge of Parent, as currently proposed to be conducted by Parent or any Parent Subsidiary, including (i) the design, development, manufacturing, reproduction, marketing, licensing, sale, offer for sale, importation, distribution, provision or use of any Parent Product, and (ii) Parent&#146;s or any Parent Subsidiary&#146;s use of any product, device or process used in the business of Parent or the Parent Subsidiaries as currently conducted and, to the Actual Knowledge of Parent, as currently proposed to be conducted by Parent or any Parent Subsidiary, does not and will not infringe or misappropriate any Third Party Intellectual Property Rights and does not and, to the Actual Knowledge of Parent, will not constitute unfair </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">competition or unfair trade practices under the Laws of any jurisdiction in which Parent or any of the Parent Subsidiaries conducts business.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) None of the Parent-Owned IP, the Parent Products, Parent and the Parent Subsidiaries is subject to any judicial or governmental Action or outstanding Order (A) restricting in any manner the use, transfer, or licensing by Parent or any Parent Subsidiary of any Parent-Owned IP or any Parent Product, or which may affect the validity, use or enforceability of any such Parent-Owned IP or Parent Product, or (B) restricting the conduct of the business of Parent or any Parent Subsidiary in order to accommodate Third Party Intellectual Property Rights.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) Neither Parent nor any Parent Subsidiary has received any written opinion of legal counsel that any Parent Product or the operation of the business of Parent or any Parent Subsidiary, as previously or currently conducted, infringes or misappropriates any Third Party Intellectual Property Rights.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(m) Except as set forth in Section 5.15(m) of the Parent Disclosure Schedules, each of Parent and the Parent Subsidiaries has secured from all of its consultants, employees and independent contractors who independently or jointly contributed to the conception, reduction to practice, creation or development of any material Parent-Owned IP, an assignment of inventions and ownership agreement, in the form Made Available to the Company, assigning all such third party&#146;s Intellectual Property in such contribution that Parent or any Parent Subsidiary does not already own by operation of Law, and no such third party has retained any rights or licenses with respect thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(n) To Parent&#146;s Knowledge, no current or former employee, consultant or independent contractor of Parent or any Parent Subsidiary (i) is in violation of any term or covenant of any Contract relating to employment, invention disclosure, invention assignment, non-disclosure or non-competition or any other Contract with any other party by virtue of such employee&#146;s, consultant&#146;s or independent contractor&#146;s being employed by, or performing services for, Parent or any Parent Subsidiary or using trade secrets or proprietary information of others without permission, or (ii) has developed any technology, software or other copyrightable, patentable or otherwise proprietary work for Parent or any Parent Subsidiary that is subject to any Contract under which such employee, consultant or independent contractor has assigned or otherwise granted to any third party any rights (including Intellectual Property
rights) in or to such technology, software or other copyrightable, patentable or otherwise proprietary work.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(o) To Parent&#146;s Knowledge, the employment of any employee of Parent or any Parent Subsidiary or the use by Parent or any Parent Subsidiary of the services of any consultant or independent contractor does not subject Parent or any Parent Subsidiary to any liability to any third party for improperly soliciting such employee, consultant or independent contractor to work for Parent or any Parent Subsidiary, whether such liability is based on contractual or other legal obligations to such third party.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(p) Except as set forth in Section 5.15(p) of the Parent Disclosure Schedules, to Parent&#146;s Knowledge, no current or former employee, consultant or independent contractor of Parent or any Parent Subsidiary has any right, license, claim or interest whatsoever in or with respect to any Parent-Owned IP.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(q) Parent and the Parent Subsidiaries have taken commercially reasonable steps to protect and preserve the confidentiality of all material confidential or non-public information included in the Parent IP Rights. All use, disclosure or appropriation of such information owned by Parent or any Parent Subsidiary by or to a third party has been pursuant to the terms of a written agreement or other legal binding arrangement between Parent or a Parent Subsidiary and such third party. All use, disclosure or appropriation of such information by Parent and the Parent Subsidiaries not owned by Parent or any Parent Subsidiary has been pursuant to the terms of a written agreement between Parent or such Parent Subsidiary and the owner of such information, or is otherwise lawful.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(r) Except as set forth in Section 5.15(r) of the Parent Disclosure Schedules, to Parent&#146;s Knowledge, neither Parent nor any Parent Subsidiary has (i) incorporated Open Source Materials into, or combined Open Source Materials with, Parent IP, or (ii) distributed Open Source Materials in conjunction with any Parent IP.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(s) To Parent&#146;s Knowledge, no (i) government funding, (ii) facilities of a university, college, other educational institution or research center, or (iii) funding from any Person (other than funds received in </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">consideration for the Parent Equity Interests or Indebtedness incurred on commercially reasonable terms) was used in the development of the Parent-Owned IP.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.16 <I>Taxes</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Parent and the Parent Subsidiaries and each affiliated, combined, consolidated or unitary group of which Parent or any Parent Subsidiary is or has been a member (each, a &#147;<B>Parent Group</B>&#148;) have timely filed all material federal, state, local, and foreign Tax Returns required to be filed by it in the manner prescribed by applicable Laws and all such Tax Returns were true, complete and correct in all material respects. Except with respect to Taxes that are immaterial in amount, all Taxes of Parent and the Parent Subsidiaries (whether or not shown or required to be shown on any Tax Return) that are due and payable have been timely paid in full and the accruals and reserves for Taxes (rather than any reserve for deferred Taxes established to reflect timing difference between book and Tax income) reflected in the Parent Balance Sheet (rather than any notes thereto) are adequate in accordance with GAAP to
cover all unpaid Taxes of Parent and the Parent Subsidiaries. Except with respect to Taxes that are immaterial in amount, all reserves for Taxes as adjusted for operations and transactions and the passage of time through the Effective Time in accordance with past custom and practice of Parent and the Parent Subsidiaries are adequate in accordance with GAAP to cover all unpaid Taxes of Parent and the Parent Subsidiaries accruing through the Effective Time.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Parent and the Parent Subsidiaries have withheld and paid over all material Taxes required to have been withheld and paid over, and to the Knowledge of Parent, Parent and the Parent Subsidiaries have withheld and paid over all other Taxes required to have been withheld and paid over, and Parent and the Parent Subsidiaries have complied with all material information reporting and backup withholding requirements, including the maintenance of required records with respect thereto, in each case in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party. There are no Encumbrances on any of the Properties of Parent or any Parent Subsidiary with respect to Taxes.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Except as set forth in Section 5.16(c) of the Parent Disclosure Schedules, no audit of material Tax Returns or other examination of Parent, any Parent Subsidiary or any member of any Parent Group is pending or threatened in writing. No deficiencies have been asserted against Parent or any Parent Subsidiary as a result of examinations by any Tax Authority and no issue has been raised by any examination conducted by any Tax Authority that, by application of the same principles, might result in a proposed deficiency for any other period not so examined. Each deficiency resulting from any audit or examination relating to Taxes of Parent or any Parent Subsidiary by any Tax Authority has been paid or is being contested in good faith and in accordance with the Law and is fully reserved for on the Parent Balance Sheet in accordance with GAAP. No claim has ever been made by an authority in a jurisdiction where Parent or
any of the Parent Subsidiaries does not file Tax Returns that Parent or any Parent Subsidiary, as the case may be, is or may be subject to Tax in such jurisdiction. Neither Parent nor any Parent Subsidiary is subject to any private letter ruling of the IRS or comparable rulings of other Tax Authorities that will be binding on Parent or any Parent Subsidiary with respect to any period following the Effective Time.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Neither Parent nor any Parent Subsidiary has requested any extension of time within which to file any material Tax Return which Tax Return has not yet been filed. There are no agreements, waivers of statutes of limitations, or other arrangements providing for extensions of time in respect of the assessment or collection of any unpaid Taxes against Parent or any Parent Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Parent and each Parent Subsidiary have disclosed on their federal income tax returns all material positions taken therein that could, if not so disclosed, give rise to a substantial understatement penalty within the meaning of Section 6662 of the Code. Neither Parent nor any Parent Subsidiary has been a party to or participated in any way in a transaction that would be defined as a &#147;reportable transaction&#148; within the meaning of Treasury Regulation Section 1.6011-4(b) (including any &#147;listed transaction&#148;) or any confidential corporate tax shelter within the meaning of Treasury Regulation Section 1.6111-2.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Except as set forth in Section 5.16(f) of the Parent Disclosure Schedules, neither Parent nor any Parent Subsidiary has been a member of any Parent Group other than the Parent Group of which Parent is the parent. None of Parent or any Parent Subsidiary has any liability for, or any indemnification or reimbursement obligation with respect to, (i) Taxes of any Person under Treasury Regulation Section 1.1502-6 (or any similar provision under foreign, state or local Law), (ii) material Taxes of any Person as transferee or successor, or (iii)&nbsp;material Taxes of any Person by contract for Taxes. Neither Parent nor any Parent Subsidiary is a party to </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">any Tax sharing agreement, Tax indemnity obligation or similar Contract or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Tax Authority).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Except as set forth in Section 5.16(g) of the Parent Disclosure Schedules, neither Parent nor any Parent Subsidiary (nor any officer of Parent or any Parent Subsidiary) is a party to any Contract (including this Agreement, the Related Agreement and the arrangements contemplated hereby and thereby) that, individually or collectively, could give rise to the payment of any amount (whether in cash or property, including shares of capital stock) that would not be deductible pursuant to the terms of Sections 162(a)(1), 162(m) or 162(n) of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) Neither Parent nor any Parent Subsidiary has agreed or is required to make any adjustment under Code Section 481(a) or Section 482 (or an analogous provision of state, local or foreign Law) by reason of a change in accounting method or otherwise. Neither Parent nor any Parent Subsidiary will be required to include in income, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any &#147;closing agreement&#148; as described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax Law).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) Neither Parent nor any Parent Subsidiary is or has been a United States real property holding corporation (as defined in Section 897(c)(2) of the Code).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) Neither Parent nor any Parent Subsidiary has had or maintained a permanent establishment other than in its country of organization.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) Section 5.16(k) of Parent Disclosure Schedule sets forth information with respect to each of Parent and the Parent Subsidiaries as of the most recent practicable date regarding any material Tax holidays or foreign rulings to which Parent or any Parent Subsidiary (as the case may be) is subject.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) Neither Parent nor any Parent Subsidiary has incurred, and no state of affairs exist that could result in Parent or any Parent Subsidiary incurring, any penalty under Section 6662(e) of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.17 <I>Insurance</I>. Section 5.17 of the Parent Disclosure Schedule contains a true, correct and complete list of policies and bonds of insurance maintained by Parent and each Parent Subsidiary, and the Parent has Made Available to the Company true, correct and complete copies of such policies and bonds of insurance. There is no material claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid, and Parent and each Parent Subsidiary is otherwise in compliance in all material respects with the terms of such policies and bonds. To the Knowledge of Parent, neither Parent nor any Parent Subsidiary has received written notification of any threatened termination of, or material premium increase with respect to, any such policies or bonds.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.18 <I>Opinion of Financial Advisor</I>. In the event that the Parent Board has resolved to retain a financial advisor and a fairness opinion in connection with the Merger, the Parent Board has received the written opinion of such financial advisor (the &#147;<B>Parent Financial Advisor</B>&#148;) addressed to the Parent Board, to the effect that the Merger Consideration is fair from a financial point of view to the holders of Parent Common Shares, and Parent has delivered to the Company a true, correct and complete copy of such opinion solely for informational purposes.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.19 <I>Brokers</I>. Neither Parent nor any Affiliate of Parent is obligated for the payment of any fees or expenses of any investment banker, broker, advisor or similar party in connection with the origin, negotiation or execution of this Agreement or in connection with the Merger or any other Transaction.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.20 <I>Properties</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Section 5.20(a) of the Parent Disclosure Schedules lists all real property owned by Parent or any Parent Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Section 5.20(b) of the Parent Disclosure Schedules lists all material real property Leases to which Parent or any Parent Subsidiary is a party and each Amendment thereto that is now in effect. All such current Leases are in full force and effect, are valid and effective in accordance with their respective terms, and, except as set forth in Section 5.20(b) of the Parent Disclosure Schedules, none of Parent and the Parent Subsidiaries </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">and, to the Actual Knowledge of Parent, no other party, is in Breach of any such Lease that would give rise to a material claim against Parent or any Parent Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.21 <I>Interested Party Transactions</I>. Except as disclosed in the Parent SEC Reports, since December 31, 2005, no event has occurred and no relationship exists that would be required to be reported by Parent pursuant to Item 404 of Regulation S-K.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.22 <I>Export and Import Laws</I>. Parent and each Parent Subsidiary has conducted its export transactions in accordance in all material respects with applicable provisions of U.S. Export and Import Laws. Without limiting the generality of the foregoing, (i) Parent and each Parent Subsidiary has obtained all export licenses and other approvals required for its exports of products, Intellectual Property, software and technologies from the United States, (ii) Parent and each Parent Subsidiary is in material compliance with the terms of all applicable export licenses or other approvals, (iii) there are no pending or, to Parent&#146;s Actual Knowledge, threatened claims against Parent or any Parent Subsidiary with respect to such export licenses or other approvals, and (iv) to Parent&#146;s Knowledge, there are no conditions or circumstances pertaining to Parent&#146;s or any Parent Subsidiary&#146;s export transactions that may
give rise to any future claims.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.23 <I>Capitalization, Ownership and Prior Activities of Merger Sub</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The authorized capital shares of Merger Sub consist of 1,000 shares of common stock, par value $0.0001 per share. As of the date hereof, all of such shares were issued and outstanding, all of which are held and owned directly by Parent and are validly issued and fully paid, nonassessable and free of preemptive rights. There are no Commitments or other rights or Contracts obligating Parent or Merger Sub to issue or sell any Equity Interests, or Securities convertible into or exchangeable for Equity Interests, in Merger Sub.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Except for obligations or liabilities incurred in connection with its incorporation or organization, the execution and deliver of this Agreement and the Related Agreement to which it is a signatory and the Transactions, Merger Sub has not and, prior to the Effective Time, will not have (i) incurred, directly or indirectly through any Subsidiary or Affiliate, any Liabilities, (ii) engaged in any business activities, or (iii)&nbsp;entered into any Contracts with any Person.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.24 <I>Interested Stockholders</I>. None of Parent or any of its Affiliates is an &#147;interested stockholder&#148; (as defined in Section 203 of the DGCL) of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 5.25 <I>Representations Complete</I>. Except as set forth in Section 5.25 of the Parent Disclosure Schedules, none of the representations or warranties made by Parent, and no financial statement, other written financial information or statements made in any exhibit, schedule or certificate Made Available or furnished by Parent to the Company pursuant to this Agreement or any Related Agreement, or furnished by Parent in or in connection with documents mailed or delivered to the stockholders of Parent or the Company for use in soliciting their approval of this Agreement and the Merger, contains or will contain at the Closing Date any untrue statement of a material fact or omits or will omit at the Closing Date to state any material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ARTICLE VI.<BR>
COVENANTS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.1 <I>SEC Reports; Preparation of Form S-4 and Proxy Statement</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) As promptly as practicable after the execution of this Agreement, Parent shall, subject to the full and prompt assistance of the Company and Stanford, prepare and file with the SEC the Proxy Statement, and Parent shall prepare and file with the SEC the Form S-4, in which the Proxy Statement shall be included as a prospectus (it being understood by the parties that Parent intends to file a post-effective amendment to the Form S-4 to include the Company FY 2006 Financial Statements and updated Parent and <I>pro forma</I> financial statements therein prior to requesting the effectiveness of the Form S-4). The Company shall promptly provide, and shall use its Best Efforts to cause the other stockholders of the Company promptly to supply, to Parent and its Representatives any and all information in writing concerning the Company, its business, operations, directors, officers, Subsidiaries, stockholders or any other
matters which may in Parent&#146;s reasonable discretion be required for inclusion in the Form S-4 or Proxy Statement, or to respond to any comments from the SEC thereon, or reasonably requested by Parent in connection therewith. The Company and Stanford shall promptly </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">provide to Parent and its Representatives any and all information in writing concerning Stanford&#146;s business, controlling persons or any other matters which may in Parent&#146;s reasonable discretion be required for inclusion in the Form S-4 or Proxy Statement, or to respond to any comments from the SEC thereon, or reasonably requested by Parent in connection therewith. Parent and the Company shall additionally prepare and file with the SEC any Other Filings as and when required or requested by the SEC in connection with this Agreement, the Related Agreements or the Transactions (the &#147;<B>Other Merger Filings</B>&#148;). Prior to filing the Proxy Statement or any Other Merger Filing with the SEC or any other Governmental Entity, Parent and the Company shall provide the other of them with reasonable opportunity to review and comment on each such filing in advance. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Each of Parent and the Company shall use its reasonable Best Efforts to have the Form S-4 declared effective under the Securities Act by the SEC as promptly as practicable after the filing thereof with the SEC. Each of Parent and the Company shall advise the other of them promptly after it receives notice of any SEC request for an amendment or supplement to the Form S-4, the Proxy Statement or any Other Merger Filing or comments thereon and responses thereto or requests by the SEC for additional information. Parent and the Company shall use their respective Best Efforts to promptly respond to any comments from the SEC on the Form S-4, Proxy Statement or any Other Merger Filing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) The Proxy Statement shall solicit proxies for the approval by the stockholders of Parent of (i) this Agreement and the Merger, (ii) an increase in the number of Parent Common Shares authorized in the Parent Certificate of Incorporation to 30,000,000 Parent Common Shares (or such other number as Parent in its discretion deems will provide sufficient reserve authorized shares for the issuance of the Merger Consideration, the issuance of Parent Common Shares upon the exercise of Company Warrants assumed pursuant to Section 3.9, and such additional shares as the Parent Board in its sole discretion deems prudent to have authorized) (the &#147;<B>Parent Authorized Stock Increase</B>&#148;), and (iii) subject to the consent of the Company (which consent shall not be unreasonably withheld, conditioned or delayed), such other matters as Parent deems appropriate for approval of its stockholders in furtherance of the
Transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) The Proxy Statement shall solicit proxies for the approval by the stockholders of the Company of (i)&nbsp;this Agreement and the Merger, (ii) the irrevocable appointment and constitution of the Stockholder Agent (for avoidance of doubt, including its successors hereunder) as the exclusive agent, attorney-in-fact and representative of the Stockholders in relation to or in connection with this Agreement, the Escrow Agreement and the Transactions contemplated hereby and thereby, and (iii) subject to the consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed), such other matters as the Company deems appropriate for approval of its stockholders in furtherance of the Transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Parent and the Company shall each use its reasonable Best Efforts to cause the Proxy Statement to be mailed to its stockholders as promptly as practicable after the Form S-4 is declared effective under the Securities Act. Parent shall promptly provide the Proxy Statement, as amended or supplemented from time to time, to the Company for use in connection with the meeting of the stockholders of the Company to approve, among other matters, this Agreement and the Merger.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Parent shall use its Best Efforts to take any action (other than qualifying to do business or registering as a broker-dealer in any jurisdiction in which it is not now so qualified or registered) required to be taken under any applicable Blue Sky Laws in connection with the issuance of Parent Common Shares in the Merger, and the Company shall furnish all information concerning the Company and its stockholders as may be reasonably requested in connection with any such action.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Parent agrees that the Form S-4 and the Proxy Statement (other than with respect to Company Information) shall not, at any Applicable Time, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company agrees that the Form S-4 and the Proxy Statement (other than with respect to Parent Information) shall not, at any Applicable Time, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If at any time prior to the final conclusion of the Parent Stockholders Meeting or Company Stockholders Meeting any Events occur relating to Parent or the Company, or any of their
respective officers, directors, stockholders or Subsidiaries, is discovered or learned by Parent, the Company or Stanford which, individually or together, (i)&nbsp;should be set forth in an amendment or supplement to the Form S-4, the Proxy Statement or any Other </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">Merger Filing, so that the Form S-4, Proxy Statement or Other Merger Filing would not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (ii) cause the Form S-4, Proxy Statement or Other Merger Filing to become incorrect, incomplete or misleading in any material respect, or (iii) under the Securities Act, the Exchange Act or the SEC Rules, are otherwise required to be set forth in an amendment or supplement to the Form S-4, Proxy Statement or Other Merger Filing; then in each such case, the Person which discovers or learns of such Events shall promptly inform the other of them of such Events in writing, and Parent and the Company shall cooperate with each other, including by providing each other with any necessary or desirable
corrected, updated or supplemental information, in promptly filing with the SEC or its staff or any other Governmental Entities or officials thereof, and, to the extent required by the Securities Act, the Exchange Act, the SEC Rules or other applicable Law, Parent and the Company shall cooperate with each other in mailing to the their respective stockholders, any appropriate amendment or supplement to the Form S-4, the Proxy Statement or Other Merger Filing in order to cause the Form S-4, the Proxy Statement and Other Merger Filing to comply with the Securities Act, the Exchange Act, the SEC Rules and other applicable Law, and not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) The parties shall notify each other promptly of the time when the Form S-4 has become effective, of the issuance of any stop order or suspension of the qualification or registration of the Parent Common Shares issuable in connection with the Merger for offering or sale in any jurisdiction, or of the receipt of any comments from the SEC or the staff of the SEC for amendments or supplements to the Proxy Statement or the Form S-4 or for additional information and shall supply each other with copies of (i) all correspondence between it or any of its Representatives, on the one hand, and the SEC or staff of the SEC, on the other hand, with respect to the Proxy Statement, the Form S-4 or any Other Merger Filing, and (ii) all orders of the SEC relating to the Form&nbsp;S-4.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) The Parties hereto acknowledge and agree that Parent shall be responsible for directing and controlling the gathering of information for and the preparation of all disclosures (including information relating to the Company) to be included in the Form S-4, the Proxy Statement and the Other Merger Filings and the filing thereof with the SEC. Parent hereby covenants to use its Best Efforts to do so on its own behalf and on behalf of the Company at the earliest practicable date and to proceed with due diligence to respond to any comments from the SEC or the staff of the SEC as promptly as practicable with a view to having the Form S-4 declared effective at the earliest practicable date. Without limiting the generality of the foregoing, Parent shall use its Best Efforts (and, with respect to the Company, shall cause Merger Sub to use its Best Efforts under the Management Agreement) (i) to promptly complete and file, or
cause to be filed, the Form S-4, the Proxy Statement and the Other Merger Filings along with any amendments or supplements thereto required or requested by the SEC, (ii) to have the Form S-4 be declared effective, (iii) to call, arrange and hold the respective special stockholders&#146; meetings of Parent and the Company to seek the stockholder approvals described herein, and (iv) to take such other actions as may be reasonable or necessary to effectuate the foregoing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.2 <I>Parent Stockholders Meeting</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Promptly after the date on which the Form S-4 is declared effective by the SEC and mailed to Parent&#146;s stockholders, Parent shall take all lawful and commercially reasonable action necessary in accordance with the NPCA, the rules and regulations of its Principal Market and its Organizational Documents to call, notice, convene and hold the Parent Stockholders Meeting. Parent shall use its Best Efforts to hold the Parent Stockholders Meeting within forty-five days of the date the SEC declares the Form S-4 effective. In connection with the Parent Stockholders Meeting, Parent shall (i) subject to applicable Laws, use its Best Efforts (including postponing or adjourning the Parent Stockholders Meeting to obtain a quorum or to solicit additional proxies) to obtain the Parent Stockholder Approval, and (ii) otherwise comply with all applicable Law pertaining to the Parent Stockholders Meeting. Notwithstanding anything
to the contrary contained in this Agreement, Parent may adjourn, delay or postpone the Parent Stockholders Meeting (i) to the extent necessary to ensure that any required supplement or amendment to the Form S-4 or Proxy Statement is provided to its stockholders, or (ii) if as of the time for which the Parent Stockholders Meeting is originally scheduled (as set forth in the Proxy Statement) there are insufficient Parent Common Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Parent Stockholders Meeting.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(b) Until the termination of this Agreement in accordance with its terms, Parent&#146;s obligation to call, give notice or convene and hold the Parent Stockholders Meeting in accordance with this Section 6.2 shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission to the Company of any Acquisition Proposal or Superior Offer, or by any withholding, withdrawal or modification of the recommendation of the Company Board in favor of the Company Stockholder Approval.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Prior to the Closing Date, Parent shall take all necessary action as the sole stockholder of Merger Sub to effect the due authorization and approval of this Agreement and the approval of the Merger by the Board of Directors and the stockholders of Merger Sub.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.3 <I>Company Stockholders Meeting</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Promptly after the date on which the Form S-4 is declared effective by the SEC and mailed to the Company&#146;s stockholders, the Company shall take all lawful and commercially reasonable action necessary in accordance with the DGCL, the rules and regulations of its Principal Market and its Organizational Documents to call, notice, convene and hold the Company Stockholders Meeting. The Company shall use its Best Efforts to hold the Company Stockholders Meeting within forty-five days of the date the SEC declares the Form S-4 effective. In connection with the Company Stockholders Meeting, the Company shall (i) subject to applicable Laws, use its Best Efforts (including postponing or adjourning the Company Stockholders Meeting to obtain a quorum or to solicit additional proxies) to obtain the Company Stockholder Approval and Stockholder Agent Appointment, and (ii) otherwise comply with all applicable Law pertaining
to the Company Stockholders Meeting. Notwithstanding anything to the contrary contained in this Agreement, the Company may adjourn, delay or postpone the Company Stockholders Meeting (i) to the extent necessary to ensure that any required supplement or amendment to the Form S-4 or Proxy Statement is provided to its stockholders, (ii) at Parent&#146;s request to permit Parent to register or qualify the Parent Common Shares to be issued as Merger Consideration under applicable Blue Sky Laws, or (iii) if as of the time for which the Company Stockholders Meeting is originally scheduled (as set forth in the Proxy Statement) there are insufficient the Company Common Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Company Stockholders Meeting.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Until the termination of this Agreement in accordance with its terms, the Company&#146;s obligation to call, give notice or convene and hold the Company Stockholders Meeting in accordance with this Section 6.3 shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission to the Company of any Acquisition Proposal or Superior Offer, or by any withholding, withdrawal or modification of the recommendation of the Company Board in favor of the Company Stockholder Approval.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.4 <I>Access to Information; Confidentiality</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) From the date of this Agreement to the Effective Time, the Company shall, and shall cause each Company Subsidiary and each of its and each Company Subsidiary&#146;s Representatives to, (i) provide to Parent and Parent&#146;s Representatives access, at reasonable times upon prior notice, to the officers, employees, agents, properties, offices and other facilities and books and records of the Company and the Company Subsidiaries, and (ii) furnish promptly such information concerning the business, properties, insurance, Contracts, prospects, Property, Liabilities, Tax Returns, Tax elections and all other workpapers and studies relating to Taxes, personnel, internal financial statements and other aspects of the Company and the Company Subsidiaries as Parent or Parent&#146;s Representatives may reasonably request. Notwithstanding the foregoing, the Company may restrict the foregoing access to the extent that (A) any
Law of any Governmental Entity applicable to the Company requires the Company or any Company Subsidiary to restrict or prohibit such access to any such Properties or information, (B) Parent&#146;s access to the information would breach the Company&#146;s confidentiality obligations to a third party (provided that upon Parent&#146;s reasonable request the Company shall use its reasonable efforts to obtain such third party&#146;s consent to permit Parent access to such information, subject to appropriate confidentiality protections), or (C) disclosure of any such information or document would result in the loss of the Company&#146;s or any Company Subsidiary&#146;s attorney-client privilege. Subject to compliance with applicable Laws, from the date of this Agreement until the earlier of the termination of this Agreement and the Effective Time, the Company shall confer from time to time as reasonably requested by Parent to meet with one or more Representatives of Parent to discuss any material changes or
developments in the operational matters of the Company and each Company Subsidiary and the general status of the ongoing operations of the Company and the Company Subsidiaries.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(b) From the date of this Agreement to the Effective Time, Parent shall, and shall cause each Parent Subsidiary and each of its and each Parent Subsidiary&#146;s Representatives to, (i) provide to the Company and the Company&#146;s Representatives access, at reasonable times upon prior notice, to the officers, employees, agents, properties, offices and other facilities and books and records of Parent and Parent Subsidiaries, and (ii) furnish promptly such information concerning the business, properties, insurance, Contracts, prospects, Property, Liabilities, Tax Returns, Tax elections and all other workpapers and studies relating to Taxes, personnel, internal financial statements and other aspects of Parent and the Parent Subsidiaries as the Company or the Company&#146;s Representatives may reasonably request. Notwithstanding the foregoing, Parent may restrict the foregoing access to the
extent that (A) any Law of any Governmental Entity applicable to Parent requires Parent or any Parent Subsidiary to restrict or prohibit such access to any such Properties or information, (B) the Company&#146;s access to the information would breach Parent&#146;s confidentiality obligations to a third party (provided that upon the Company&#146;s reasonable request Parent shall use its reasonable efforts to obtain such third party&#146;s consent to permit the Company access to such information, subject to appropriate confidentiality protections), or (C) disclosure of any such information or document would result in the loss of Parent&#146;s or any Parent Subsidiary&#146;s attorney-client privilege. Subject to compliance with applicable Laws, from the date of this Agreement until the earlier of the termination of this Agreement and the Effective Time, Parent shall confer from time to time as reasonably requested by the Company to meet with one or more Representatives of the Company to discuss any
material changes or developments in the operational matters of Parent and each Parent Subsidiary and the general status of the ongoing operations of Parent and the Parent Subsidiaries.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) The parties hereto acknowledge that Parent, the Company and Stanford have previously executed that certain Mutual Confidentiality Agreement, effective April 1, 2006 (as Amended from time to time, the &#147;<B>Confidentiality Agreement</B>&#148;), which shall continue in full force and effect in accordance with its terms.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.5 <I>Notice of Acquisition Proposals</I>. Each of Parent and the Company agrees that, as promptly as practicable (but in no event more than twenty-four hours after receipt), it shall advise the other of them orally and in writing of (i) an Acquisition Proposal, (ii) any inquiry, expression of interest, proposal or offer that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (iii) any request for non-public information that could reasonably be expected to lead to an Acquisition Proposal, including, in each such case, (1) the material terms and conditions of such Acquisition Proposal, inquiry, expression of interest, proposal, offer, notice or request, and (2) the identity of the Person making any such Acquisition Proposal, inquiry, expression of interest, proposal, offer, notice or request. Each of Parent and the Company shall (x) keep the other of them informed, as promptly as practicable, of
the status and details (including any Amendments or proposed Amendments) of any such Acquisition Proposal, inquiry, expression of interest, proposal, offer, notice or request, and (y) provide to the other of them, as promptly as practicable, a copy of all written materials and other information provided to it in connection with any such Acquisition Proposal, inquiry, expression of interest, proposal, offer, notice or request. Parent and the Company each shall provide the other of them with at least three (3) Business Days prior written notice (or such lesser prior notice as provided to the members of its Board of Directors but in no event less than twenty-four (24) hours) of any meeting of its Board of Directors at which the its Board of Directors is reasonably expected to discuss any Acquisition Proposal, including to determine whether such Acquisition Proposal is a Superior Offer.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.6 <I>Affiliate Letters</I>. At least 30 days prior to the Closing Date, the Company shall deliver to Parent a list of names and addresses of those Persons who were, in the Company&#146;s reasonable judgment at the record date for the Company Stockholders Meeting, &#147;affiliates&#148; (each such Person, a &#147;<B>Company Affiliate</B>&#148;) of the Company within the meaning of Rule 145 of the rules and regulations promulgated under the Securities Act. The Company shall use its Best Efforts to deliver or cause to be delivered to Parent, prior to the Closing Date, from each Company Affiliate, and Stanford agrees to deliver, an affiliate letter (an &#147;<B>Affiliate Letter</B>&#148;) in a customary form reasonably satisfactory to Parent. Parent shall be entitled to place legends as specified in such Affiliates Letters on the certificates representing any Parent Common Shares to be received by such Company Affiliates pursuant
to the Merger, and to issue appropriate stop transfer instructions to the transfer agent for the Parent Common Shares, consistent with the terms of such Affiliate Letters.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.7 <I>Certain Notices</I>. Parent and the Company shall notify the other of them in writing promptly after learning of (i) any notice or other communication from any Person alleging that the Consent of such Person is or may be required in connection with the Merger or any other Transaction, (ii) any notice or other communication from any Governmental Entity in connection with the Merger or any other Transaction, (iii) any Action by or before any Governmental Entity initiated by or against it or any of its Subsidiaries, or known by it or any of its Subsidiaries to be threatened against it or any such Subsidiary or any of their respective directors, officers, employees or </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">stockholders in their capacity as such, or of any verbal or written correspondence from any Person asserting or implying a claim against it or any of its Subsidiaries or with respect to any of its Properties (including Intellectual Property), (iv) any Event not in the Ordinary Course of Business of it or any of its Subsidiaries that, individually or in the aggregate with any other such Events, (A) have a Material Adverse Effect on it, or (B) is reasonably likely to cause any of the conditions to closing set forth in Article VII not to be satisfied, or (v) any claim, or any verbal or written inquiry by any Tax Authority regarding Taxes payable by it or any of its Subsidiaries. Parent and the Company shall give prompt notice to the other of them of any representation or warranty made by it contained in this Agreement or any Related Agreement to which it is a signatory becoming untrue or inaccurate, or its failure to comply with or
satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or any Related Agreement to which it is a signatory, <I>provided, however</I>, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.8 <I>Public Announcements</I>. Parent and the Company shall use their respective Best Efforts to agree to the text of the press release announcing the execution and delivery of this Agreement. Parent and the Company shall provide to each other any subsequent press releases and public written statements or filings related to this Agreement, the Related Agreements, the Merger or the other Transactions and shall consult with each other before issuing or making any such release or written public statement or filing. Neither the Company nor the Parent shall issue any such press release or make any such public written statement or filing without the prior written consent of the other of them (such consent not to be unreasonably withheld, delayed or conditioned); <I>provided</I> that either Parent of the Company may, without obtaining the prior consent of the other of them, issue such press release or make such public statements or
filings, including the filing of SEC Reports, as such party determines in good faith, following consultation with legal counsel, are required by applicable Law or the rules and regulations of its Principal Market, if it has used reasonable efforts under the circumstances to first consult and reach agreement with the other of them. The Company and Parent shall cause their respective employees, officers and directors to comply with this Section 6.8.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.9 <I>Certain Litigation</I>. Parent and the Company shall promptly advise the other of them orally and in writing of any Action commenced after the date hereof against it or any of its directors by any of its stockholders relating to this Agreement, any Related Agreement, the Merger or the other Transactions, and shall keep the other of them reasonably informed regarding any such Action. Parent and the Company shall give the other of them the opportunity to consult with it regarding the defense or settlement of any such Action and shall consider the views of the other of them with respect to such Action and shall not settle any such Action without the prior written consent of the other of them (which consent shall not be unreasonably withheld).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.10 <I>Employees</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) From and after the Effective Time, Parent and the Merger Sub shall have the rights and obligations described in this Section 6.10 regarding the individuals who were employees of the Company immediately prior to the Effective Time and who continue employment with the Company, a Parent Subsidiary or Parent following the Effective Time (&#147;<B>Continuing Employees</B>&#148;). With respect to any potential Continuing Employee (i) Parent and the Company shall confer and work together in good faith to determine appropriate employment terms, and (ii) the Company shall, in good faith, cooperate with Parent and assist Parent with its efforts to enter into offer letters, assignment of invention agreements and related documents after the date of this Agreement and in any event prior to the Closing Date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Within a reasonable period of time after the last Business Day of each calendar month after the date of this Agreement and on or about the date that is five Business Days prior to the expected Closing Date, if there shall have been any change in the information required to be set forth in Section 4.10(f) of the Company Disclosure Schedules, the Company shall, deliver to Parent a revised Section 4.10(f) of the Company Disclosure Schedules, which sets forth each person who the Company reasonably believes is, with respect to the Company or any of its ERISA Affiliates, a &#147;disqualified individual&#148; (within the meaning of Section 280G of the Code and the regulations promulgated thereunder), as of the date such revised Section 4.10(f) is delivered to Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Parent, in the event it does not continue the employee welfare benefit plans sponsored and maintained by the Company, will take commercially reasonable efforts after the Effective Time to cause Continuing Employees to be eligible for employee welfare benefits that are substantially similar in the aggregate to the benefits provided to similarly situated employees of Parent or its Subsidiaries. To the extent Parent elects to </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">have Continuing Employees, and their eligible dependents where applicable, participate in Parent&#146;s employee benefit plans, programs or policies following the Effective Time, (i) Parent shall allow such Continuing Employees, and their eligible dependents where applicable, to participate in such plans, programs and policies on terms substantially similar to those provided to similarly situated employees of Parent or its Subsidiaries, (ii)&nbsp;each Continuing Employee will, to the extent reasonably practicable, receive credit for purposes of eligibility to participate and vesting under such plans, programs and policies for years of service with the Company or any Company Subsidiary prior to the Effective Time, <I>provided</I> such credit does not result in duplication of benefits, and (iii) Parent, to the extent required by applicable Law and as permitted by the terms of the applicable group health plans,
shall give credit for any co-payments or deductibles paid during the year in which the Closing Date occurs and shall use is commercially reasonable efforts to cause any pre-existing condition limitations, eligibility waiting periods and evidence of insurability requirements under any group health plans of Parent in which Continuing Employees and their eligible dependents will participate to be waived.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.11 <I>Termination of Benefit Plans</I>. Unless Parent provides contrary written notice to the Company, effective as of the day immediately preceding the Closing Date, the Company shall terminate any and all Company Benefit Plans intended to include a Code Section 401(k) arrangement (each, a &#147;<B>401(k) Plan</B>&#148;). The Company shall provide Parent with a reasonable opportunity to review and comment on the resolutions to be adopted by the Company&#146;s Board of Directors and other action to be taken to effect the termination of the 401(k) Plans.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.12 <I>Parent Board</I>. Subject to the applicable fiduciary duties of the Parent Board, or any applicable committee thereof, and compliance by Parent and the Parent Board, or such committee, in good faith with applicable Law, including the SEC Rules and the listing rules of Parent&#146;s Principal Market, Parent shall recommend the following directors to constitute the Parent Board upon the consummation of the Merger (the &#147;<B>Post-Merger Parent Board</B>&#148;): Dr. L.S. Smith; William H. Oyster; two current Independent directors of the Parent Board; two Independent nominees to be designated by Stanford prior to the filing of the Form S-4; and David Rector. Effective as of the Effective Time, (i) the Parent Board, if necessary, shall resolve to change the number of directors to serve on the Parent Board, within the range permitted by Parent&#146;s Organizational Documents, to effectuate the Post-Merger Parent Board, (ii)
each director of the Parent Board not included in the Post-Merger Parent Board shall resign, and (iii) the remaining directors of the Parent Board shall fill any vacancies on the Parent Board as necessary to effectuate the Post-Merger Parent Board.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.13 <I>Company Board</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Subject to the applicable fiduciary duties of the Company Board, or any applicable committee thereof, and compliance by the Company and the Company Board, or such committee, in good faith with applicable Law, including the SEC Rules and the listing rules of the Company&#146;s Principal Market, the Company shall recommend the following directors to constitute the Company Board promptly after the effectiveness of this Agreement: Scott Williamson, John Benson, William H. Oyster, Mitchell Stolz and David Rector (the &#147;<B>Interim Company Board</B>&#148;). Effective as of the date hereof, (i) each director of the Company Board not included in the Interim Company Board shall resign, and (ii) the remaining directors of the Company Board shall fill any vacancies on the Company Board as necessary to effectuate the Interim Company Board.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Parent shall have the right to appoint a designee as an observer to the Company Board and any committee thereof. Such designee shall be given notice of all regular and special meetings at the same time and in the same manner as the directors of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.14 <I>Tax Matters</I>. None of Parent, Merger Sub and the Company shall, and none of them shall permit any of their respective Subsidiaries to, take any action prior to or following the Closing that would reasonably be expected to cause the Merger to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Section 6.15 <I>Third Party Consent</I>s.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Company shall use its reasonable Best Efforts to obtain and deliver to Parent at or prior to the Closing all Consents and waivers under each Contract listed or described (or required to be listed or described) in Section 4.5 of the Company Disclosure Schedule.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(b) Parent shall use its reasonable Best Efforts to obtain and deliver to the Company at or prior to the Closing all Consents and waivers under each Contract listed or described (or required to be listed or described) in Section 5.5 of the Parent Disclosure Schedule.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.16 <I>Best Efforts</I>. Subject to Article IX, each Party agrees to use its Best Efforts, and to cooperate with the other Parties, to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, appropriate or desirable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other Transactions, including (i) taking all reasonable actions to satisfy the respective conditions set forth in Article VII, including (A) promptly completing and filing, or causing to be filed, the Form S-4, the Proxy Statement and the Other Merger Filings, and any necessary amendments or supplements thereto, (B) using its commercially reasonable efforts to have the Form S-4 declared effective, and (C) arranging, convening and holding the Parent Stockholders Meeting or Company Stockholders Meeting to seek the approvals described herein, and (ii)&nbsp;executing and
delivering such other instruments and doing and performing such other acts and things as may be necessary or reasonably desirable to effect completely the consummation of the Merger and the other Transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.17 <I>Refinancings</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The Company shall use its Best Efforts to amend and restate that certain Commercial Loan and Security Agreement, dated October 1, 2003 (as Amended from time to time, including on the date hereof, the &#147;<B>Stanford LOC</B>&#148;), with Stanford, as lender, subject to and effective immediately prior to the consummation of the Merger, in the form attached hereto as Exhibit D (the &#147;<B>Amended and Restated Stanford LOC</B>&#148;). The Company shall not Amend the terms and provisions of the Amended and Restated Stanford LOC without the written consent of Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Parent shall use its Best Efforts to amend and restate that certain Loan Agreement, dated as of December 22, 2005, by and between Parent and Texas Capital Bank, National Association, and any applicable Loan Documents (as such term is defined in such Loan Agreement), to permit (i) the Merger, and (ii) the Surviving Corporation to grant to Stanford under the Amended and Restated Stanford LOC a security interest in and other Liens on all of the Properties of the Surviving Corporation and its Subsidiaries, including all Equity Interests of the Subsidiaries of the Surviving Corporation, and to take all reasonable further action as required by Stanford to perfect such security interest and Liens (including the delivery of any stock certificates to Stanford and the amendment of UCC-1 financing statements).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) In consideration of the amendments and restatements specified in Section 6.17(a) and for the exchange of outstanding Company Indebtedness pursuant to the Note Exchange Agreement, at the Closing or as soon thereafter as reasonably practicable, Parent shall issue to (i) Stanford and its assignees specified in <I>Schedule 1</I>, warrants substantially in the form of <I>Exhibit E</I>, exercisable for a period of seven years from the date hereof for an aggregate of 845,634 Parent Common Shares at an exercise price of $1.89 per share (the &#147;<B>A Warrants</B>&#148;); and (ii) Stanford and its assignees specified in <I>Schedule 2</I>, warrants substantially in the form of <I>Exhibit E</I>, exercisable for a period of seven years from the date hereof for an aggregate of 863,000 Parent Common Shares at an exercise price of $0.001 per share (the &#147;<B>B Warrants</B>&#148;). As promptly as practicable after the
execution of this Agreement, Parent shall prepare and file with the SEC a registration statement registering the issuance of the A Warrants and B Warrants, and Parent shall use its reasonable Best Efforts to have such registration statement declared effective under the Securities Act by the SEC as promptly as practicable after the filing thereof with the SEC (it being agreed that Parent shall be deemed to have prepared and filed such registration statement as promptly as practicable if Parent includes the A Warrants and the B Warrants on the Form S-4 as initially filed with the SEC).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 6.18 <I>Indemnification</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) For four years after the Effective Time, Parent shall cause to be maintained directors&#146; and officers&#146; liability insurance policies (&#147;<B>D&amp;O Insurance</B>&#148;) in respect of acts or omissions occurring prior to the Effective Time covering each individual who is an officer or director of the Company and is listed on Section 6.18 of the Company Disclosure Schedules (the &#147;<B>Insured Parties</B>&#148;) and is covered as of the date hereof or hereafter by the Company&#146;s D&amp;O Insurance on terms with respect to coverage and amounts, to the extent reasonably available to Parent, no less favorable than those of such policy in effect on the date hereof; <I>provided, however</I>, that in no event shall Parent or the Surviving Corporation be required to expend more than an amount per annum equal to 150% of the current annual premiums paid by the Company for such insurance (the &#147;<B>Maximum
Amount</B>&#148;) to maintain or procure insurance coverage pursuant hereto; <I>provided, further</I>, that if the amount of the annual </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">premiums necessary to maintain or procure such insurance coverage exceeds the Maximum Amount, Parent and the Surviving Corporation shall procure and maintain for such four-year period as much coverage as is reasonably practicable for the Maximum Amount; and, <I>provided, further</I>, that Parent and the Surviving Corporation shall have the right (and prior to the Effective Time the Company shall take any action reasonably requested by Parent to perfect such right) to cause coverage to be extended under the Company&#146;s D&amp;O Insurance by obtaining a four-year &#147;tail&#148; policy on terms and conditions no less advantageous, to the extent reasonably available to Parent, than the Company&#146;s existing D&amp;O Insurance provided by one or more commercial insurance providers, and such &#147;tail&#148; policy shall satisfy in full the obligations of Parent and the Surviving Corporation under this Section
6.18.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) In the event the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Entity and shall not be the continuing or surviving Entity of such consolidation or merger, or (ii) transfers all or substantially all of its Properties to any Person; then in each such case, proper provisions shall be made so that the successors and assigns of the Surviving Corporation, or at Parent&#146;s option, Parent, shall assume, fulfill and honor in all respects the obligations set forth in this Section 6.18.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) This Section 6.18 shall survive the consummation of the Merger, is intended to benefit each of the Insured Parties, shall be binding on all successors and assigns of the Surviving Corporation and Parent, shall be enforceable by each Insured Party and his or her heirs and representatives, and may not be amended, altered or repealed with respect to any Insured Party after the Effective Time without the prior written consent of such Insured Party; <I>provided</I> that until the Effective Time, any Amendment of this Agreement shall be exclusively governed by Section 9.3.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ARTICLE VII.<BR>
CLOSING CONDITIONS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 7.1 <I>Conditions to Obligations of Each Party Under This Agreement</I>. The respective obligations of Parent, Merger Sub and the Company to consummate the Merger and the other Transactions shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, any or all of which may be waived in writing by Parent (on behalf of itself and Merger Sub) or the Company, in whole or in part, to the extent permitted by applicable Law:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Company Stockholder Approval</I>. (i) The Company Stockholder Approval shall have been obtained, and (ii) the Stockholders shall have approved the Stockholder Agent Appointment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Parent Stockholder Approval</I>. (i) Either the Parent Stockholder Approval shall have been obtained, or such approval shall not be required either under the NPCA or for continued listing by the rules and regulations of Parent&#146;s Principal Market, and (ii) the stockholders of Parent shall have approved the Parent Authorized Stock Increase.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>No Adverse Law or Order</I>. No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) which is in effect and prevents or prohibits consummation of any Transaction.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Registration and Qualification of Parent Common Shares</I>. The SEC shall (i) have declared the Form S-4 effective under the Securities Act, (ii) not have issued a stop order suspending the effectiveness of the Form S-4, and not have initiated or threatened to initiate any proceedings for that purpose. Any material Blue Sky Laws applicable to the issuance of the Parent Common Shares constituting Merger Consideration shall have been complied with and no stop order or similar Order shall have been issued or threatened in respect of any Parent Common Shares constituting Merger Consideration by any applicable state securities commissioner or court of competent jurisdiction.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <I>No Adverse Order</I>. No Order shall be in effect which (i) prohibits, restrains or substantially interferes with the consummation of the Merger or any other Transaction; (ii) relates to any Transaction and imposes upon Parent, Merger Sub or the Company damages that are material to Parent, Merger Sub or the Company; (iii)&nbsp;prohibits or limits in any respect Parent&#146;s right, power or ability to vote, receive dividends with respect to or otherwise exercise ownership rights with respect to any Equity Interests in the Surviving Corporation or to own, operate or control the Surviving Corporation or any material portion of the business or Property of Parent or the Surviving Corporation; or (iv) has or would have a material adverse effect on the Company or on Parent&#146;s </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">ability to operate the Surviving Corporation&#146;s business, or to own, use and enjoy the Property of the Surviving Corporation, after consummation of the Transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 7.2 <I>Additional Conditions to Obligations of Parent and Merger Sub</I>. The obligations of Parent and Merger Sub to effect the Merger and the other transactions contemplated herein are also subject to the satisfaction, at or prior to the Effective Time, of the following conditions, any or all of which may be waived, in whole or in part:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Preferred Stock Conversions</I>. All issued and outstanding Company Preferred Shares shall have been tendered for conversion into Company Common Shares immediately prior to the Effective Time, such that, at the Effective Time, no Company Preferred Shares shall be issued and outstanding.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Conversion Agreements</I>. Stanford and DiGenova shall each be in compliance with their respective Conversion Agreements, which shall each be in full force and effect.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Note Exchange Agreement</I>. (i) Stanford and the Company shall have executed and delivered to Parent the Note Exchange Agreement, substantially in the form of Exhibit F (the &#147;<B>Note Exchange Agreement</B>&#148;), to be entered into by and between Parent, the Company and Stanford, and (ii) Stanford shall have tendered to the Company an amount of outstanding Company debt, and the notes evidencing such debt, for exchange for Company Common Shares, all as provided in the Note Exchange Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Stanford LOC Refinancing</I>s. The Company and Stanford shall have executed and delivered the Amended and Restated Stanford LOC, as contemplated by Section 6.17(a).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <I>Termination and Release</I>. (i) Stanford, Stanford Financial Group Company (&#147;<B>SFG</B>&#148;), Stanford Venture Capital Holdings, Inc. (&#147;<B>SVCH</B>&#148;), and the Company shall have executed and delivered the Termination and Release Agreement, substantially in the form of <I>Exhibit G</I> (the &#147;<B>Termination and Release Agreement</B>&#148;), and (ii) DiGenova shall have executed and delivered the supplement attached as Exhibit A to that certain Termination and Release Agreement, made and entered into as of the date hereof, by and between Parent, Merger Sub, the Company, DiGenova, Stanford, SFG and Stanford Venture Capital Holdings, Inc.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) <I>Escrow Agreement</I>. The Stockholder Agent shall have entered into the Escrow Agreement, which shall be in full force and effect as of the Closing Date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) <I>Corporate Governance Agreement</I>. Stanford shall have executed and delivered the Corporate Governance Agreement, substantially in the form of <I>Exhibit I</I>, which shall be in full force and effect as of the Closing Date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) <I>Other Related Agreements</I>. Stanford, SFG and SVCH shall have executed and delivered to Parent and the Company each other Related Agreement to which such Person is to be a party or signatory.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) <I>Legal Opinion</I>. The Company shall have delivered a legal opinion of Rutan &amp; Tucker LLP, counsel to the Company, in substantially the form of <I>Exhibit K</I>, with such standard and customary procedures, qualifications and limitations as are in form and substance reasonably satisfactory to Parent and its counsel.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) <I>Stanford Deliverables</I>. Stanford shall have delivered or caused to be delivered to Parent all of the following agreements, instruments and documents:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) an executed officers&#146; certificate, substantially in the form of <I>Exhibit J</I>, dated the Closing Date, signed by the Chief Executive Officer or the Chief Financial Officer of Stanford, certifying the fulfillment of certain conditions specified therein;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) a legal opinion of Adorno &amp; Yoss LLP, counsel to Stanford, in substantially the form of <I>Exhibit L</I>, with such standard and customary procedures, qualifications and limitations as are in form and substance reasonably satisfactory to DGSE and its counsel; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) an Affiliate Letter from Stanford.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 7.3 <I>Additional Conditions to Obligations of the Company</I>. The obligation of the Company to effect the Merger and the other transactions contemplated herein are also subject to the satisfaction, at or prior to the Effective Time, of the following conditions, any or all of which may be waived, in whole or in part:</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(a) <I>Parent Line of Credit Modifications</I>. Parent shall have executed and delivered an amendment to its loan agreement and related documents, as contemplated by Section 6.17(b).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Registration Rights Agreement</I>. Parent shall have duly executed and delivered a registration rights agreement, substantially in the form of <I>Exhibit H</I> (the &#147;<B>Registration Rights Agreement</B>&#148;), in respect of the Parent Common Shares issuable upon the exercise of the A Warrants and the B Warrants and certain other Parent Common Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Parent Officers&#146; Certificate</I>. Parent shall have delivered to the Company an executed officers&#146; certificate, substantially in the form of <I>Exhibit M</I>, dated the Closing Date, signed by the Chief Executive Officer, the Chief Financial Officer and the Chief Operations Officer of Parent, certifying the fulfillment of the conditions specified in Section 7.3(a) and Section 7.3(b).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Warrants</I>. Parent shall have duly executed and tendered (subject only to the exchange of the debt contemplated by the Note Exchange Agreement) to Stanford and its assignees the A Warrants and the B Warrants pursuant to Section 6.17(c), and the SEC shall have declared a registration statement covering the issuance by Parent of the A Warrants and the B Warrants to Stanford and its assignees effective under the Securities Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <I>Other Deliverables</I>. Parent shall have delivered or caused to be delivered to the Company all of the agreements, instruments and documents required to be delivered to the Company pursuant to the foregoing provisions of this Section 7.3, together with:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) a legal opinion of Sheppard, Mullin, Richter &amp; Hampton, LLP, special counsel to the Company, in substantially the form attached hereto as <I>Exhibit N</I>, with such standard and customary procedures, qualifications and limitations as are in form and substance reasonably satisfactory to Superior and its counsel;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) certificates dated as of a date within a reasonable period of time prior to the Closing Date as to the good standing of Parent, Merger Sub and each material Parent Subsidiary, executed by the appropriate officials of the applicable state of incorporation, organization or formation, and each other jurisdiction in which Parent or each material Parent Subsidiary is licensed or qualified to do business as a foreign corporation;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) a certificate executed by the secretary of Parent certifying, as complete and accurate as of the Closing Date, (i) the complete Organizational Documents of Parent and each material Parent Subsidiary, and (ii) the resolutions or actions of each of the stockholders of Parent and the Board of Directors of Parent approving this Agreement or the Merger; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(4) the written resignations of directors of the Parent Board, if any, as required by Section 6.12.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ARTICLE VIII.<BR>
SURVIVAL OF REPRESENTATIONS, WARRANTIES <BR>
AND COVENANTS; INDEMNIFICATION</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.1 <I>Survival of Representations, Warranties and Covenants</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The representations, warranties and certifications of Parent, Merger Sub and the Company contained in this Agreement, or in any certificate or other instrument delivered pursuant to this Agreement by such Person or on its behalf, shall remain in effect until, and shall expire on, the Closing Date, except that:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) the representations and warranties contained in Section 4.3 (Capitalization) shall survive until the date one calendar year after the Closing Date;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) neither the Escrow Termination Date nor any of the other foregoing time limits shall apply to claims based upon fraud or willful misrepresentation; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) the representation, warranty, covenant or obligation that is the subject matter of a Claim Notice made in accordance with Section 8.1(c) on or before the Escrow Termination Date, or such later date as applies to the survival of such representation, warranty, covenant or obligation pursuant to this Section </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; page-break-before:always">8.1(a), shall not so expire with respect to such Claim Notice or any subsequent Claim Notice that is reasonably related to the subject matter of such initial Claim Notice, but rather shall remain in full force and effect until such time as each and every claim that is based upon the claims or alleged facts or circumstances of such initial Claim Notice has been fully and finally resolved, either by means of a written settlement agreement or by the dispute resolution procedure set forth in Section 8.6.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The representations, warranties, certifications, covenants and obligations of Parent, Merger Sub and the Company, and the rights and remedies that may be exercised by any Person having a right to indemnification pursuant to this Article VIII, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or any Knowledge of, any of the Indemnified Parties or any of their Representatives.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) For purposes of this Agreement, a &#147;<B>Claim Notice</B>&#148; relating to a particular representation, warranty, covenant or obligation shall be deemed to have been delivered if any Indemnified Party, acting in good faith, delivers to the Stockholder Agent (with a copy to the Escrow Agent) a written notice stating that such Indemnified Party believes that there is or has been a possible breach of such representation, warranty, covenant or obligation and containing (i) a brief description of the circumstances supporting such Indemnified Party&#146;s belief that there is or has been such a possible breach; and (ii) a non-binding, preliminary estimate of the aggregate dollar amount of the actual and potential Losses that have arisen and may arise as a direct or indirect result of such possible breach.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) It is the intent of the parties hereto that all indemnification obligations under this Article VIII shall apply without regard to whether or not (x) any Indemnifying Party was negligent or otherwise at fault in any respect with regard to the existence or occurrence of any of the matters covered by any such indemnification obligation, or (y) any Indemnifying Party otherwise caused or created, or is claimed to have caused or created, the existence or occurrence of any of the matters covered by any such indemnification obligation, whether through its own acts or omissions or otherwise. Notwithstanding the foregoing, the indemnification obligation of the Indemnifying Parties shall be reduced to the extent that an Indemnified Party receives insurance proceeds or other payment from a third party that specifically covers the Losses for which the Indemnifying Parties otherwise would be required to indemnify such
Indemnified Party pursuant to this Article VIII. If an Indemnified Party receives insurance proceeds or other payment from a third party that specifically covers Losses for which one or more of the Indemnifying Parties previously paid such Indemnified Party pursuant to this Article VIII, then such Indemnified Party shall refund to the Indemnifying Parties an amount equal to the lesser of (i) the amount that the Indemnifying Parties previously paid to such Indemnified Party relating to such Losses, and (ii) the amount of such insurance proceeds or other payment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.2 <I>Indemnification; Closing Balance Sheet; Escrow Account</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) From and after the Closing Date, the Stockholders entitled to Merger Consideration and DiGenova (collectively, the &#147;<B>Indemnifying Parties</B>&#148;) shall, subject to Section 8.3 (including the limitations on recourse), defend, indemnify and hold Parent and its Representatives and Affiliates (including the Surviving Corporation) (collectively, the &#147;<B>Indemnified Partie</B>s&#148;) harmless against all Losses incurred by the Indemnified Parties directly or indirectly as a result of any inaccuracy or Breach of any representation, warranty or certification of the Company specified in Section 8.1(a)(1) (without giving effect to (i) any Updated Disclosure Schedules, or (ii) to any sections of the Disclosure Schedules, or portions thereof, identified in Section 8.2 of the Parent Disclosure Schedules delivered on or prior to the date hereof); <I>provided</I> that the Indemnifying Parties shall have no
obligation to defend, indemnify or hold the Indemnified Parties harmless against Losses (A) to the extent accrued for in the Closing Balance Sheet, or (B) for avoidance of doubt, for any inaccuracy or Breach of any representation, warranty or certification of the Company not specified in Section 8.1(a)(1).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The Company shall use its Best Efforts to prepare and file with the SEC a quarterly report on Form 10-Q for the Company&#146;s fiscal quarter ended December 31, 2006 prior to February 15, 2007 (or, if not then filed, as promptly thereafter as practicable). On or prior to such filing date, Parent shall prepare and deliver to the Stockholder Agent a certificate calculating the difference of (x) the Minimum Company Stockholders Equity, <I>minus</I> (y) the stockholders&#146; equity reflected in the consolidated financial statements contained in such Form 10-Q (such difference, the &#147;<B>Balance Sheet Correction</B>&#148;). For example, if such stockholders&#146; equity were -$4,000,000, then the Balance Sheet Correction would be $876,572, but if such stockholders&#146; equity were -$3,000,000, the Balance Sheet Correction would be $0 and no payment would be made under this Section </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">8.2(b). Notwithstanding clause (A) to the proviso in Section 8.2(a), if the Balance Sheet Correction is a positive number, then the Indemnifying Parties shall, subject to Section 8.3 (including the limitations on recourse), pay to Parent as an indemnity hereunder the full amount of the Balance Sheet Correction. If the Balance Sheet Correction is a negative number, no adjustment will be made and no payments will be due to any Party. The Parties, and, by approval of this Agreement or the Merger, the Stockholders entitled to Merger Consideration, (i) acknowledge that the Minimum Company Stockholders Equity, which is based on financial information represented by the Company to be true and correct, constitutes the basis for calculating the amount of the Exchanged Debt (as such term is defined in the Note Exchange Agreement), and (ii) agree that the amount of the Balance Sheet Correction, if positive, constitutes a
Loss to Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) The Indemnifying Parties shall, subject to Section 8.3 (including the limitations on recourse), pay to the Company as an indemnity hereunder any amounts paid by the Company to or at the request of the Stockholder Agent pursuant to Section 8.5(i). The Parties, and, by approval of this Agreement or the Merger, the Stockholders entitled to Merger Consideration, agree that any payments to or at the request of the Stockholder Agent under Section 8.5(i) constitutes a Loss to the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) As security for the indemnity provided to the Indemnified Parties in this Article VIII and by virtue of this Agreement and the Certificate of Merger, Parent shall deposit the Escrow Stock into the Escrow Account pursuant to the terms set forth in Section 3.14 and the Escrow Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.3 <I>Limitation on Indemnification</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Notwithstanding any provision of this Agreement to the contrary, after the Closing Date, the Indemnifying Parties shall have no obligation to indemnify any Indemnified Parties until the aggregate of all Losses suffered by the Indemnified Parties exceeds $100,000 (the &#147;<B>Basket Amount</B>&#148;), in which case the Indemnified Parties shall be entitled to recover all Losses including the Basket Amount; <I>provided, however</I>, that any Losses resulting from a willful or intentional Breach of this Agreement or any Transaction Document or fraud by any party hereto shall not be subject to such Basket Amount.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Notwithstanding any provision of this Agreement to the contrary, in the event any Indemnified Party shall suffer any Losses for which such Indemnified Party is entitled to indemnification under this Article VIII, such Indemnified Party shall be entitled to recover such Losses solely from the Escrow Account pursuant to the terms and conditions set forth in the Escrow Agreement, at the rate per share of Escrow Stock specified in Section 3.14(a), until no additional amounts remain in the Escrow Account. Subject to Section 8.8, the Indemnifying Parties shall have no liability for Losses in excess of the Escrow Stock deposited in the Escrow Account under Section 3.14(a), the DiGenova Warrant, and the Escrow Agreement (including the proceeds thereof and distributions thereon), and the Indemnified Parties shall have recourse solely against the Escrow Stock and the other Escrow Assets.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Subject to Section 8.8 and any claim based on the enumerated representations set forth in Section 8.1(a), no claim for indemnification hereunder or otherwise with respect to a breach of this Agreement may be made by any Indemnified Party after the Escrow Termination Date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.4 <I>Indemnification Procedures</I>. All claims for indemnification under this Article VIII shall be asserted and resolved as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Third Party Claims.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) <I>Notice</I>. In the event an Indemnified Party becomes aware of a third-party claim that such Indemnified Party believes may result in a demand against the Escrow Account, such Indemnified Party (or Parent on its behalf) shall promptly notify the Stockholder Agent of such claim; <I>provided</I> that the failure to so notify the Stockholder Agent shall not relieve any Indemnifying Party of any liability that it may have to any Indemnified Party, except to the extent that the Indemnifying Party demonstrates that the defense of such third-party claim is prejudiced by the failure to give such notice.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) <I>Defense</I>. If an Indemnified Party (or Parent on its behalf) provides notice to the Stockholder Agent pursuant to Section 8.4(a)(1) of the assertion of a third-party claim, the Stockholder Agent shall be entitled to participate in the defense of such third-party claim and, to the extent that it wishes (unless (i) the Stockholder Agent is also a Person against whom the third-party claim is made and the Indemnified Party determines in good faith that joint representation would be inappropriate, or (ii) the Stockholder Agent fails </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; page-break-before:always">to provide reasonable assurance to the Indemnified Party of both (x) its financial capacity to defend such third-party claim, and (y) its ability to provide indemnification, including against the Escrow Account, with respect to such third-party claim), to assume the defense of such third-party claim with counsel satisfactory to the Indemnified Party. After notice from the Stockholder Agent to the Indemnified Party of its election to assume the defense of such third-party claim, the Stockholder Agent shall not, so long as it diligently conducts such defense, be liable to the Indemnified Party under Article VIII for any fees of other counsel or any other expenses with respect to the defense of such third-party claim, in each case subsequently incurred by the Indemnified Party in connection with the defense of such third-party claim, other than reasonable costs of investigation. If the Stockholder Agent assumes
the defense of a third-party claim, (A) such assumption shall establish conclusively for purposes of this Agreement that the claims made in that third-party claim are within the scope of and subject to indemnification, and (B) no compromise or settlement of such third-party claims may be effected by the Stockholder Agent without the Indemnified Party&#146;s written consent unless (1) there is no finding or admission of any violation of Law or any violation of the rights of any Person, (2) the sole relief provided is monetary damages that are paid in full by the Stockholder Agent (including with Escrow Stock from the Escrow Account), and (3) the Indemnified Party shall have no liability with respect to any compromise or settlement of such third-party claims effected without its written consent. If notice is given to a Stockholder Agent of the assertion of any third-party claim and the Stockholder Agent does not, within ten days after the Indemnified Party&#146;s notice is provided, provide notice to
the Indemnified Party of its election to assume the defense of such third-party claim, the Stockholder Agent and Indemnifying Parties shall be bound by any determination made in such third-party claim or any compromise or settlement effected by the Indemnified Party.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) <I>Exception</I>. Notwithstanding the foregoing, if an Indemnified Party determines in good faith that there is a reasonable probability that a third-party claim may adversely affect it or its Related Persons other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Party may, by notice to the Stockholder Agent, assume the exclusive right to defend, compromise or settle such third-party claim, but the Stockholder Agent shall not be bound by any determination of any third-party claim (including the Losses incurred in connection therewith) so defended for the purposes of this Agreement or any compromise or settlement effected without its written consent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(4) <I>Disputes</I>. Any dispute between any Indemnified Party and the Stockholder Agent under this Section 8.4(a) shall be resolved pursuant to the dispute resolution procedures described in Section 8.4(b) and Section 8.6.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(5) <I>Finality</I>. In the event that the Stockholder Agent has conducted any defense or consented to any settlement under this Section 8.4(a), neither the Stockholder Agent nor any of the Indemnifying Parties shall have the right, power or authority to object to the amount of any claim by any Indemnified Party against the Escrow Account or otherwise with respect to and in accordance with such settlement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Non-Third Party Claims</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) In the event an Indemnified Party has a claim hereunder that does not involve a claim being asserted against or sought to be collected by a third party, such Indemnified Party shall with reasonable promptness deliver a Claim Notice with respect to such claim to the Stockholder Agent (with a copy to the Escrow Agent). If the Stockholder Agent does not notify such Indemnified Party within thirty (30) calendar days from the date of receipt of such Claim Notice that the Stockholder Agent disputes such claim, the amount of such claim shall be conclusively deemed a liability of the Indemnifying Parties hereunder. In case the Stockholder Agent shall object in writing to any claim made in accordance with this Section 8.4(b)(1), the Indemnified Party shall have fifteen (15) calendar days to respond in a written statement to the objection of the Stockholder Agent. If after such fifteen (15) calendar day period there remains
a dispute as to any claim, the Indemnified Party and Stockholder Agent shall attempt in good faith for sixty (60) calendar days to agree upon the rights of the respective parties with respect to each of such claims. If the Indemnified Party and Stockholder Agent should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties. If such parties do not so agree, the Indemnified Party and Stockholder Agent shall resolve such dispute pursuant to Section 8.6.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt; page-break-before:always">(2) If Parent or any Indemnified Party is making a claim against the Escrow Account, the Escrow Agent shall refrain from disbursing any portion of the Escrow Account until resolution of such dispute pursuant to this Section 8.4 (including, if applicable, Section 8.6).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Failure to Provide Notice</I>. An Indemnified Party&#146;s failure to give reasonably prompt notice to the Stockholder Agent of any actual, threatened or possible claim or demand which may give rise to a right of indemnification hereunder shall not relieve the Indemnifying Parties of any liability which the Indemnifying Parties may have to such Indemnified Party, unless the failure to give such notice materially and adversely prejudiced the Indemnifying Parties.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.5 <I>Stockholder Agent</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Appointment</I>. By adopting and approving this Agreement, approving the Merger, and appointing and constituting the Stockholder Agent as their exclusive agent, attorney-in-fact and representative for purposes of this Agreement, the Escrow Agreement and the Transactions contemplated hereby and thereby at the Company Stockholder Meeting, the stockholders of the Company shall have (i) appointed and constituted the Stockholder Agent their exclusive agent, attorney-in-fact and representative in relation to or in connection with this Agreement, the Escrow Agreement and the Transactions contemplated hereby and thereby, (ii) consented to and authorized the Stockholder Agent to take or omit to take any and all actions and to make or omit to make any and all decisions required or permitted to be taken by it under this Agreement or the Escrow Agreement, and (iii) consented to and approved the terms and provisions of the
Escrow Agreement; in each case without any further action on the part of any such stockholder. As evidenced by the execution of the Limited Joinder Agreement or by countersigning the Escrow Agreement, as applicable, the Stockholder Agent accepts such appointment as stockholder agent to act on behalf of the Stockholders with respect to the matters contemplated by this Agreement and the Escrow Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Rights and Duties</I>. The Stockholder Agent shall serve as the exclusive agent, attorney-in-fact and representative for the Stockholders in relation to or in connection with this Agreement, the Merger Agreement and the Transactions, including the following rights, authorities, powers, duties and obligations:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) to provide and receive notices and other communications;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) to agree to, negotiate, enter into settlements and compromises of, make claims and demand arbitration and comply with orders of courts and awards of arbitrators with respect to claims made or any other action to be taken by or on behalf of any Indemnifying Parties, or on its own behalf in its capacity as Stockholder Agent, under this Article VIII or under the Escrow Agreement, and to take all actions necessary or appropriate in the judgment of the Stockholder Agent for the accomplishment of the foregoing;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) to use the Escrow Stock, cash, investments and other assets held from time to time in the Escrow Account (the &#147;<B>Escrow Assets</B>&#148;) as collateral to secure the rights, and to demand and withdraw Escrow Assets to satisfy the claims, of the Indemnified Parties under this Article VIII and the Escrow Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(4) to demand, withdraw and use the Escrow Assets to reimburse certain reasonable out-of-pocket fees and expenses of the Stockholder Agent as provided in Section 3.14(b) and in the Escrow Agreement; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(5) to take all actions necessary or appropriate in the judgment of the Stockholder Agent for the accomplishment of any of the foregoing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Actions of the Stockholder Agent</I>. A decision, act, omission, agreement, settlement, claim, consent or instruction of the Stockholder Agent in relation to any matter referred to in Section 3.14(b) or this Article VIII or in the Escrow Agreement shall constitute a decision, act, omission, agreement, settlement, claim, consent or instruction, as the case may be, for all of the Stockholders, and shall be final, binding and conclusive upon each and every Stockholder, and Parent and the Escrow Agent may, without further inquiry, conclusively rely upon any such decision, act, omission, agreement, settlement, claim, consent or instruction of the Stockholder Agent as being the decision, act, omission, agreement, settlement, claim, consent or instruction, as the case may be, of each and every Stockholder. Parent and the Escrow Agent each is hereby relieved from any liability to any Person for any acts done by them in
accordance with or in reliance upon any decision, act, omission, agreement, settlement, claim, consent or instruction of the Stockholder Agent; <I>provided, however</I>, that if Parent has in fact received a valid written notice of the appointment of a successor Stockholder Agent, upon the effectiveness of </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; page-break-before:always">such appointment, Parent, and upon notification of such successor Stockholder Agent from Parent, the Escrow Agent, and the Stockholders shall be obligated to recognize, and shall be able to so rely only upon the decisions, acts, omissions, agreements, settlements, claims, consents and instructions of, such successor Stockholder Agent as the Stockholder Agent for all purposes under this Agreement and the Escrow Agreement. Neither Parent nor the Escrow Agent shall incur any liability to any Person with respect to any action taken or suffered by it in good faith in reliance on the Stockholder Agent as aforesaid.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Resignation and Removal</I>. The Stockholder Agent may resign at any time by written notice to Parent and the Escrow Agent effective not earlier than twenty days after receipt thereof by DGSE and the Escrow Agent, and the Stockholder Agent may be removed at any time by written notice signed by Stockholders holding not less than a majority of the Closing Company Common Shares (exclusive of Dissenting Shares), as conclusively evidenced by <I>Exhibit A</I> to the Escrow Agreement, effective not earlier than ten days after receipt thereof by Parent and the Escrow Agent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <I>Successors</I>. The Stockholders shall have the sole right, power and authority to appoint a successor Stockholder Agent. The Stockholders may appoint a new or substitute Stockholder Agent in a written instrument delivered to Parent and the Escrow Agent; <I>provided </I>that such successor Stockholder Agent (A) was an Affiliate of the Company immediately preceding the Merger, (B) was or is a director or officer of the Company or the Surviving Corporation, or (C) is reasonably acceptable to Parent. Such instrument shall (1) represent and warrant that (i) it is signed by Stockholders holding not less than a majority of the Closing Company Common Shares, exclusive of Dissenting Shares, and (B) the successor Stockholder Agent is qualified to act as such pursuant to the proviso next preceding, (2) irrevocably appoint and constitute the successor Stockholder Agent (for avoidance of doubt, including its successors
hereunder) as the exclusive agent, attorney-in-fact and representative of the Stockholders in relation to or in connection with this Agreement, the Escrow Agreement and the Transactions contemplated hereby and thereby, (3) be countersigned by such successor Stockholder Agent, accepting such appointments and agreeing to be fully bound by the duties and obligations, and to exercise the rights, powers and authorities, of the Stockholder Agent under this Agreement and the Escrow Agreement, and (4) otherwise be in form and substance reasonably satisfactory to Parent. Parent shall be under no obligation whatsoever to investigate the accuracy of any representation made in such written instrument and shall be fully protected in relying on the accuracy thereof in good faith, irrespective of any notice by any Person other than the Stockholder Agent to the contrary. If the Stockholders shall have failed to appoint a successor Stockholder Agent within ten days of the resignation or removal of the Stockholder
Agent as provided in this Section 8.5(e), Parent may petition any court of competent jurisdiction for the appointment of a successor Stockholder Agent or for other appropriate relief, with due regard to the qualifications for a successor Stockholder Agent specified in the proviso to the first sentence of this Section 8.5(e), and any such resulting appointment shall be binding upon all Stockholders, all parties hereto and all beneficiaries hereof. Upon such an appointment of a successor Stockholder Agent, the Stockholder Agent shall accept such appointment, and thereby be effectively constituted the Stockholder Agent for all purposes of this Agreement and the Escrow Agreement, by (i) countersigning this Agreement and the Escrow Agreement, agreeing to be bound by and subject hereto and thereto, or (ii) executing a joinder agreement in form and substance satisfactory to Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) <I>Vacancy</I>. If at any time there is no Stockholder Agent, Parent or the Escrow Agent may in its sole discretion, but shall not be obligated to, serve notices on all Stockholders at the address of such Stockholders appearing on <I>Exhibit A</I> to the Escrow Agreement, and such service shall be deemed notice for all purposes hereof, but shall under no circumstances be obligated to accept any notices from, or to negotiate with, any Stockholder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) <I>Exculpation</I>. The Stockholder Agent shall not be liable for any act done or omitted under this Agreement or the Escrow Agreement as Stockholder Agent while acting in good faith, and any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith. In performing any duties hereunder or under the Escrow Agreement, to the maximum extent permitted by applicable law, the Stockholder Agent shall not be directly or indirectly liable to any party, or any Affiliates of any party, for damages, losses, expenses or other Liabilities, whether sounding in tort, contract or otherwise, arising from its acts or omissions, including for their active negligence or other wrongful act of the Stockholder Agent, <I>except</I> for the acts of gross negligence or willful misconduct of the Stockholder Agent.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(h) <I>No Bond or Compensation</I>. No bond shall be required of the Stockholder Agent, and the Stockholder Agent shall receive no compensation for its services.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) <I>Reimbursement of Fees and Expenses</I>. Subject to the terms, limitations and conditions of this Section 8.5(i), the Stockholder Agent shall be entitled to reimbursement from the Company for the out-of-pocket fees, costs and expenses reasonably incurred by the Stockholder Agent on behalf of the Stockholders in connection with the exercise and performance of its powers, rights, authorities, duties and obligations under the agency granted and appointments made, or deemed granted or made, in this Section 8.5.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) The Company shall reimburse the Stockholder Agent in cash for the out-of-pocket fees, costs and expenses, including reasonable attorneys&#146; fees, reasonably incurred by the Stockholder Agent in connection with performing and exercising its rights, authorities, powers, duties and obligations on behalf of the Stockholders under this Agreement and the Escrow Agreement up to (but not exceeding) an aggregate amount of $100,000, or such greater amount as Parent may in its sole and absolute discretion agree at the request of the Stockholder Agent (such amount, the &#147;<B>Stockholder Agent Expense Cap</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) The Stockholder Agent may request reimbursement from Parent only upon the presentation of invoices and receipts for the amount requested and upon written certification that (i) such invoices and receipts are true and correct, (ii) such amount has been and shall be used strictly in accordance with the terms and provisions of this Article VIII and the Escrow Agreement, and (iii) such amount, together with (x) all amounts theretofore paid to the Stockholder Agent (for avoidance of doubt, including any predecessors in such capacity) pursuant to this Agreement, and (y) all amounts theretofore requested by the Stockholder Agent from Parent pursuant to this Section 8.5(i) and not paid or finally denied; do not exceed the Stockholder Agent Expense Cap.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(3) Any dispute between Parent and the Stockholder Agent regarding a claim by the Stockholder Agent for reimbursement of its fees, costs and expenses, whether arising under this Agreement, the Escrow Agreement or otherwise, shall be resolved pursuant to the dispute resolution procedures described in Section 8.6.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(4) The Stockholder Agent shall not have recourse against the Escrow Account, Parent, any Stockholder or, except for an aggregate amount not to exceed the Stockholder Agent Expense Cap, the Company, for any of its fees, costs or expenses hereunder or otherwise.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.6 <I>Resolution of Conflicts</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Arbitration</I>. If no agreement can be reached after good faith negotiation between the Indemnified Parties and the Stockholder Agent pursuant to Section 8.4(b)(1), or if a dispute arises concerning the reimbursement of Stockholder Agent fees and expenses, the Person defending the claim (the &#147;<B>Defending Party</B>&#148;), may, by written notice to the Person asserting the claim (the &#147;<B>Prosecuting Party</B>&#148;), demand arbitration of the matter, which arbitration shall be conducted by a single arbitrator. The Prosecuting Party and the Defending Party shall use their respective Best Efforts to agree on the arbitrator, provided that if they cannot so agree within ten (10) Business Days (or such longer period as they may agree), either the Prosecuting Party or the Defending Party can request that Judicial Arbitration and Mediation Services (&#147;<B>JAMS</B>&#148;) select the arbitrator. The
arbitrator shall set a limited time period and establish procedures designed to reduce the cost and time for discovery while allowing the Defending Party and Prosecuting Party an opportunity, adequate in the sole judgment of the arbitrator, to discover relevant information from the other of them about the subject matter of the dispute. The arbitrator shall rule upon motions to compel or limit discovery and shall have the authority to impose sanctions, including attorneys&#146; fees and costs, to the same extent as a court of competent law or equity, should the arbitrator determine that discovery was sought without substantial justification or that discovery was refused or objected to without substantial justification. The decision of the arbitrator shall be written, shall be in accordance with applicable Law and with this Agreement, and shall be supported by written findings of fact and conclusions of law, which shall set forth the basis for the decision of the arbitrator. The decision of the
arbitrator as to the validity and amount of any claim in a Claim Notice shall be binding and conclusive upon the Prosecuting Party, the Defending Party, the parties hereto, the Stockholders, the Indemnified Parties, the Indemnifying Parties, and, notwithstanding any other provision of this Article VIII, the Escrow Agent, if applicable, and each of such Persons shall be entitled to act in accordance with such decision and the Escrow Agent, if applicable, shall be entitled to make or withhold payments out of the Escrow Account in accordance therewith.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(b) <I>Judgment; Venue; Arbitration Expenses</I>. Judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction. Any such arbitration shall be held in Dallas, Texas under the commercial rules then in effect for JAMS. The non-prevailing party to an arbitration shall pay its own expenses, the fees of the arbitrator, any administrative fee of JAMS, and the expenses, including attorneys&#146; fees and costs, reasonably incurred by the other party to the arbitration.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.7 <I>No Contribution</I>. The Stockholder Agent herby irrevocably waives, and acknowledges and agrees that it shall not, on behalf of the Indemnifying Parties, or otherwise, have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other right or remedy against the Surviving Corporation in connection with any indemnification or other rights any Indemnified Party may have under or in connection with this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.8 <I>Fraud; Willful Misrepresentation</I>. Notwithstanding any provision in this Agreement to the contrary, the liability of any Person for fraud or willful misrepresentation on the part of such Person shall not be subject to any limitations set forth in this Article VIII. Without limiting the generality of the foregoing, any claim with respect to such liability need not be presented within the time limits set forth in Section 8.1(a)(1) and shall be subject only to the applicable statutes of limitation, and notwithstanding Section 8.9, any such claim shall be cumulative to any remedies provided in this Article VIII.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.9 <I>Exclusive Remedies</I>. Except as set forth in Section 8.8, the remedies set forth in this Article VIII and elsewhere in this Agreement shall be the sole and exclusive remedies of the parties hereto and the Indemnified Parties against any Indemnifying Party, Stockholder or any party hereto with respect to any claim relating to this Agreement or the Merger and the facts and circumstances relating and pertaining thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 8.10 <I>Purchase Price Adjustment</I>. Any payments made pursuant to this Article VIII shall be treated for tax purposes as an adjustment to the Merger Consideration.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ARTICLE IX.<BR>
TERMINATION, AMENDMENT AND WAIVER</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 9.1 <I>Termination</I>. This Agreement may be terminated, and the Merger and the other transactions contemplated by this Agreement may be abandoned, at any time prior to the Effective Time, by written notice explaining the reason for such termination (without prejudice to other remedies which may be available to the Parties under this Agreement, at law or in equity):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) by the mutual written consent of Parent and the Company, pursuant to resolutions adopted by their respective Boards of Directors;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) by either Parent or by resolution of the Independent Committee:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(1) if (i) the Merger shall not have been consummated prior to (A) March 31, 2007, or (B) if Parent has received notice from the SEC that the SEC will review the Form S-4 or any other Parent SEC Report or Company SEC Report, which review is responsible for a delay in the SEC declaring the Form S-4 effective, the date six months after the date Parent first filed the Form S-4 with the SEC (such date, the &#147;<B>Outside Date</B>&#148;), (ii) the terminating party is not, on the date of termination, in Material Breach of this Agreement, and (iii) the terminating party has not Breached this Agreement in a manner which is responsible for delaying the effectiveness of the Form S-4;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(2) if (i) Stanford or its assigns declares or notifies the Company of an &#147;Event of Default&#148; under the Stanford LOC or an &#147;Additional Default&#148; under that certain Forbearance Agreement, made as of the date hereof (the &#147;<B>Forbearance Agreement</B>&#148;), by and between the Company and Stanford, (ii) Stanford or its assigns demands payment of any principal due under the Amended and Restated Commercial Note issued by the Company to Stanford in connection with the amendment of the Stanford LOC on the date hereof, (iii) Stanford or its assigns exercises any rights or remedies against the Company, or seizes any collateral of the Company, under the Stanford LOC (other than for collection of accrued and unpaid interest), or (iv) the Forbearance Period (as defined in the Forbearance Agreement) expires or terminates and is not extended upon the request of Parent or the Company within five days of such
request;</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt; page-break-before:always">(3) if (i) any Governmental Entity of competent jurisdiction shall have issued an Order or taken any other action (including the failure to take action) permanently restraining, enjoining or otherwise prohibiting any Transaction, and such Order or other action shall have become final and nonappealable, (ii)&nbsp;the terminating party is not, on the date of termination, in Material Breach of this Agreement; and (iii)&nbsp;the terminating party has not Breached this Agreement in a manner which is responsible for such Order having been issued or such action having been taken;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(4) if (i) the Company Stockholder Approval or Stockholder Agent Appointment shall not have been obtained at the Company Stockholders Meeting or at any adjournment or postponement thereof, (ii) the terminating party is not, on the date of termination, in Material Breach of this Agreement, and (iii) the terminating party has not Breached this Agreement in a manner which is responsible for the failure to obtain the Company Stockholder Approval or Stockholder Agent Appointment, as the case may be; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(5) if (i) the satisfaction of a closing condition of the terminating party in Article VII is impossible; (ii)&nbsp;the terminating party is not, on the date of termination, in Material Breach of this Agreement; and (iii)&nbsp;the terminating party has not Breached this Agreement in a manner causing the impossibility of satisfying such closing condition; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) by Stanford if the Merger shall not have been consummated prior to the Outside Date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 9.2 <I>Effect of Termination</I>. In the event of termination of this Agreement by either the Company, Parent or Stanford as provided in Section 9.1, all obligations and Liabilities of the parties hereto under this Agreement shall forthwith terminate and become void and there shall be no Liability or obligation on the part of any party hereto or their respective Subsidiaries, officers, directors or stockholders, except (i) with respect to any breaches of Section 6.4 or Section 6.8, (ii) for the terms and provisions of the Confidentiality Agreement or Section 9.5, (iii) with respect to any Liabilities or damages incurred or suffered by a party as a result of the willful breach by any other party of any of its representations, warranties, covenants or other agreements set forth in this Agreement, (iv) for avoidance of doubt, amounts owed under the Shared Expenses Agreement, and (v) the provisions of Article I and Article X, to the
extent applicable to clauses (i)-(iv) next preceding.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 9.3 <I>Amendment</I>. This Agreement may be amended, supplemented or otherwise modified at any time prior to the Effective Time upon the execution and delivery of a written instrument executed by each of the parties hereto; <I>provided, however</I>, that, after the Company Stockholder Approval or the Parent Stockholder Approval has been obtained, if required by applicable Law or the rules and regulations of the applicable party&#146;s Principal Market, such amendment shall require an additional Company Stockholder Approval or Parent Stockholder Approval, as the case may be.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 9.4 <I>Waiver</I>. At any time prior to the Effective Time, any party hereto may (i) extend the time for the performance of any of the obligations or other acts of any other party hereto, (ii) waive any inaccuracies in the representations and warranties of any other party contained herein or in any document delivered pursuant hereto, (iii) waive compliance by any other party with any of its agreements and covenants set forth herein, or (iv) waive the satisfaction of any conditions to its obligations contained herein; <I>provided, however</I>, that, after the Company Stockholder Approval or the Parent Stockholder Approval has been obtained, if required by applicable Law or the rules and regulations of the applicable party&#146;s Principal Market, such extension or waiver shall require an additional Company Stockholder Approval or Parent Stockholder Approval, as the case may be. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party or parties to be bound thereby, but neither such a written extension or waiver, nor the failure to insist on strict compliance with an obligation, covenant, agreement or condition, shall operate as a waiver of, or estoppel with respect to, any subsequent or other failure.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 9.5 <I>Fees and Expenses</I>. Subject to the terms and provisions of that certain letter agreement, dated April&nbsp;3, 2006 (the &#147;<B>Shared Expenses Agreement</B>&#148;), by and among Parent, the Company and Stanford, regarding the sharing of certain expenses related to the exploration of a possible business combination between Parent and the Company, which agreement shall remain and continue in full force and effect in accordance with its terms, all Expenses incurred by the parties hereto shall be borne solely and entirely by the party that has incurred the same.</P>
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<P style="margin-top:13.35pt; margin-bottom:0pt; page-break-before:always" align=center><B>ARTICLE X.<BR>
GENERAL PROVISIONS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.1 <I>Notices</I>. All notices, requests, instructions or other documents to be given or delivered under this Agreement shall be in writing and shall be deemed given: (i) five Business Days following the deposit of registered or certified mail in the United States mails, postage prepaid, (ii) when confirmed by telephone confirmation, if sent by facsimile or email (but only if followed by transmittal by reputable national courier service or hand delivery on the next Business Day), (iii) when delivered, if delivered personally to the intended recipient, and (iv) one Business Day following delivery to a reputable national courier service for overnight delivery, postage prepaid; and in each case, addressed to a party at the following address for such party:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If to Parent, Merger Sub or the Surviving Corporation, addressed to it at:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:144pt">DGSE Companies, Inc.<BR>
2817 Forest Lane<BR>
Dallas, Texas 75234<BR>
Attn: Dr. L.S. Smith<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">with a copy (which shall not constitute notice and which shall not be required for delivery to be effective) to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:144pt">Sheppard, Mullin, Richter &amp; Hampton LLP<BR>
12275 El Camino Real, Suite 200<BR>
San Diego, California 92130-2006<BR>
Attn: John J. Hentrich, Esq.<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If to the Company, addressed to it at:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:144pt">Superior Galleries, Inc.<BR>
9478 W. Olympic Boulevard<BR>
Beverly Hills, California 90212<BR>
Attn: Chair, Special Independent Committee<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">with copies (which shall not constitute notice and which shall not be required for delivery to be effective) to Stanford and to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:144pt">Rutan &amp; Tucker LLP<BR>
611 Anton Boulevard Suite 1400<BR>
Costa Mesa, California 92626-1931<BR>
Attn: Thomas Brockington, Esq.<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If to Stanford, addressed to it at:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:144pt">Stanford International Bank Ltd.<BR>
c/o Stanford Financial Group<BR>
6075 Poplar Avenue<BR>
Memphis, Tennessee 38119<BR>
Attn: James M. Davis, Chief Financial Officer<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">with a copy (which shall not constitute notice and which shall not be required for delivery to be effective) to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:144pt">Adorno &amp; Yoss LLP<BR>
2525 Ponce de Leon Blvd., Suite 400<BR>
Miami, Florida 33134-6012<BR>
Attn: Seth P. Joseph, Esq.<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Any party hereto may change its address, email address or fax number for purposes hereof to such other address, email address or fax number as such party may have previously furnished to the other parties hereto in writing in accordance with this Section 10.1.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.2 <I>Headings</I>. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.3 <I>Severability</I>. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.4 <I>Entire Agreement</I>. This Agreement (together with the Exhibits, Schedules, Company Disclosure Schedules, Parent Disclosure Schedule and the other documents delivered pursuant hereto) and the Related Agreements, and any certificates, schedules and proxies delivered pursuant hereto or thereto, constitute the entire agreement and understanding of the parties hereto in respect of its and their subject matter and supersede all prior agreements and undertakings by or among the parties, both written and oral, among the parties, or any of them, with respect to the subject matter hereof or thereof (including the Original Agreement and that certain Limited Joinder Agreement, made and entered into as of July 12, 2006, by and among the Parties hereto, which agreements are superseded in their entirety by this Agreement and the Limited Joinder Agreement, respectively).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.5 <I>Assignment</I>. Neither this Agreement nor any of the rights, interests, Liabilities or obligations hereunder or under the Escrow Agreement shall be assigned by any of the parties hereto, in whole or in part, by operation of Law or otherwise, without the prior written consent of the other parties hereto, and any attempt to make any such assignment without such consent shall be null and void and of no force or effect. Notwithstanding the foregoing, Merger Sub may, in its sole discretion, assign any and all rights, interests and obligations under this Agreement or under the Escrow Agreement to any wholly-owned Subsidiary of Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.6 <I>Parties in Interest</I>. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, except as provided in (i) Section 6.18 with respect to Insured Parties, (ii) Article VIII with respect to Indemnified Parties, and (iii) Section 8.5 with respect to the Escrow Agent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.7 <I>Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) This Agreement and the performance of the obligations of the parties hereunder shall be governed by, and construed in accordance with, the laws of the State of Texas applicable to contracts negotiated, executed and to be performed entirely within such State, except that the Merger shall be governed by, and construed in accordance with, the laws of the State of Delaware.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction and venue of any Texas district court and any state appellate court therefrom within the County of Dallas in the State of Texas (or, if the Texas district court declines to accept jurisdiction over a particular matter, any state or federal court within said County) in any action or proceeding arising out of or relating to this Agreement or the Transactions or for recognition or enforcement of any judgment relating hereto, and each of the parties hereto hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Texas state court or, to the extent permitted by law, in such federal court, (iii) waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any such action or proceeding in any such Texas state or federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Texas state or federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.1. Nothing in this Agreement shall affect the right of any party to this Agreement to serve process in any other manner permitted by law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (2) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (3) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (4) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 10.7(d).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.8 <I>Disclosure</I>. Any matter set forth in any section of a party&#146;s disclosure schedule shall be considered disclosed for other sections of such disclosure schedule, but only to the extent that it would be readily apparent that such matter on its face would apply to a particular other section of such disclosure schedule. The provision of monetary or other quantitative thresholds for disclosure does not and shall not be deemed to create or imply a standard of materiality hereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.9 <I>Counterparts</I>. This Agreement may be executed in two or more original or facsimile counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute but one and the same agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.10 <I>Facsimile Execution</I>. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more Parties, and an executed copy of this Agreement may be delivered by one or more Parties by facsimile, email or similar electronic or digital transmission pursuant to which the signature of or on behalf of such Party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any Party, all Parties agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.11 <I>Remedies Cumulative</I>. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party hereto shall be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party hereto of any one remedy shall not preclude the exercise of any other remedy and nothing in this Agreement shall be deemed a waiver by any party of any right to specific performance or injunctive relief.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.12 <I>Specific Performance</I>. Each of the parties hereto acknowledges and agrees that any breach or non-performance of, or default under, any of the terms and provisions hereof would cause substantial and irreparable damage to the other parties hereto, and that money damages would be an inadequate remedy therefor. Accordingly, each of the parties hereto agrees that each of them shall be entitled to seek equitable relief, including specific performance and injunctive relief, in the event of any such breach, non-performance or default in any action, suit or proceeding instituted in any court of the United States or any State having competent jurisdiction, or before any arbitrator or referee, in addition to any other remedy to which such party may be entitled, at law or in equity. Each party hereto agrees to waive any requirement for the posting of, or securing of, a bond in connection with any such remedy.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.13 <I>Time</I>. Time is of the essence in the performance of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 10.14 <I>Certain Taxes</I>. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with the Merger, if any, shall be paid by the stockholders of the Company.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]</B></P>
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<P style="margin-top:0pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=218.5></TD><TD width=16.95></TD><TD width=232.55></TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=332.667 colspan=2><P style="margin:0pt"><B>DGSE COMPANIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6><P style="margin:0pt">By:&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=310.067><P style="margin:0pt">/s/ Dr. L.S. Smith</P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067><P style="margin:0pt">Dr. L.S. Smith <BR>
Chairman and Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=332.667 colspan=2><P style="margin:0pt"><B>DGSE MERGER CORP.</B></P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=310.067><P style="margin:0pt">/s/ William H. Oyster</P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067><P style="margin:0pt">William H. Oyster<BR>
Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=332.667 colspan=2><P style="margin:0pt"><B>SUPERIOR GALLERIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=310.067><P style="margin:0pt">/s/ Silvano DiGenova</P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067><P style="margin:0pt">Silvano DiGenova<BR>
Chief Executive Officer</P>
</TD></TR>
</TABLE>
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<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT A.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF CERTIFICATE OF MERGER</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(Attached)</B></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. A</P>
<P style="margin:0pt"><BR></P>
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<P style="margin:0pt; page-break-before:always" align=center><B>STATE OF DELAWARE<BR>
CERTIFICATE OF MERGER OF<BR>
DOMESTIC CORPORATIONS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Pursuant to Title 8, Section 251(c) of the Delaware General Corporation Law, the undersigned corporation executed the following Certificate of Merger:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>FIRST</B>: The name of the surviving corporation is <U>&nbsp;&nbsp;&nbsp;Superior Galleries, Inc.&nbsp;&nbsp;&nbsp;</U>, a Delaware corporation, and the name of the corporation being merged into this surviving corporation is <U>&nbsp;&nbsp;&nbsp;DGSE Merger Corp.&nbsp;&nbsp;&nbsp;</U>, a Delaware corporation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>SECOND</B>: The Agreement of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>THIRD</B>: The name of the surviving corporation is <U>&nbsp;&nbsp;&nbsp;Superior Galleries, Inc.&nbsp;&nbsp;&nbsp;</U>, a Delaware corporation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>FOURTH</B>: The Certificate of Incorporation of the surviving corporation shall be the Certificate of Incorporation of <U>&nbsp;&nbsp;&nbsp;DGSE Merger Corp.&nbsp;&nbsp;&nbsp;</U>, a Delaware corporation, except that Article I [ and Article IV ] of such Certificate of Incorporation shall be amended to read in [ its | their respective ] entirety as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:18pt; text-indent:18pt">[I.]<SUP>(1)</SUP> </P>
<P style="margin:0pt; padding-left:18pt; text-indent:54pt">The name of this corporation is: &nbsp;Superior Galleries, Inc.</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:18pt; text-indent:18pt">[IV. </P>
<P style="margin:0pt; padding-left:18pt; text-indent:54pt">The total number of shares of capital stock which the corporation shall have authority to issue is 6,000,000 shares of common stock, $0.0001 par value per share. ]<SUP>(1)</SUP></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>FIFTH</B>: The merger is to become effective on <U>&nbsp;&nbsp;&nbsp;the filing of this Certificate of Merger&nbsp;&nbsp;&nbsp;</U>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>SIXTH</B>: The Agreement of Merger is on file at <U>&nbsp;&nbsp;&nbsp;9478 W. Olympic Boulevard, Beverly Hills, California 90212&nbsp;&nbsp;&nbsp;</U>, the place of business of the surviving corporation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>SEVENTH</B>: A copy of the Agreement of Merger will be furnished by the surviving corporation on request, without cost, to any stockholder of the constituent corporations.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">IN WITNESS WHEREOF, said surviving corporation has caused this certificate to be signed by an authorized officer, the <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;day of <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, A.D., 2007.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=219.75></TD><TD width=14.45></TD><TD width=233.8></TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt" align=center>Authorized Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">William H. Oyster<BR>
Chief Executive Officer</P>
</TD></TR>
</TABLE>
<P style="line-height:13pt; margin-top:55pt; margin-bottom:0pt; font-size:11pt">&#151;&#151;&#151;&#151;&#151;&#151;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:18pt; text-indent:-18pt">(1)</P>
<P style="margin-top:0pt; margin-bottom:2.5pt; padding-left:18pt">Included bracketed language if DGSE Companies, Inc. elects to increase the authorized capital stock pursuant to Section 2.5 of the Amended and Restated Agreement and Plan of Merger and Reorganization.</P>
<P style="margin:0pt" align=center><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. A</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT B.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF LETTER OF TRANSMITTAL</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(Attached)</B></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. B</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC.</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>LETTER OF TRANSMITTAL<BR>
To Accompany Certificates Formerly Representing Shares of Common Stock<BR>
of<BR>
SUPERIOR GALLERIES, INC.</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>Mail or deliver this Letter of Transmittal, or a facsimile, <BR>
together with the certificate(s) representing your Shares, to:</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>Registrar &amp; Transfer Company (the &#147;Exchange Agent&#148;)<BR>
10 Commerce Drive<BR>
Cranford, NJ 07016</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>Attn: ___________________</B></P>
<P style="margin-top:10pt; margin-bottom:0pt" align=center><B>Telephone Assistance:<BR>
___-___-_____</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">To the Stockholders of Superior Galleries, Inc.:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">This Letter of Transmittal is being delivered in connection with the merger (the &#147;Merger&#148;) of Superior Galleries, Inc., a Delaware corporation (&#147;Superior&#148;), with DGSE Merger Corp., a Delaware corporation and a wholly-owned subsidiary of DGSE Companies, Inc., a Nevada corporation (&#147;DGSE&#148;), pursuant to that certain Amended and Restated Agreement and Plan of Merger, made and entered into as of January 6, 2007. The Merger became effective on ________ ___, 2007. &nbsp;Pursuant to the Merger, Superior common stockholders will receive, in exchange for each of their shares of Superior common stock, 0.2731 of a share of DGSE common stock (collectively the &#147;DGSE Shares&#148;), rounded up (in the case of fractional shares) to the nearest whole number of DGSE Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>No dividends or other distributions declared or made after the Merger with respect to DGSE Shares with a record date thirty or more days after the Merger but prior to the surrender of a certificate formerly representing any shares of Superior common stock (&#147;Superior Shares&#148;) will be paid or due to the holder of such certificate exchangeable therefor.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Letters of Transmittal, properly completed, must accompany the surrendered certificates formerly representing Superior Shares. All surrendered certificates must be accompanied by an appropriate Letter of Transmittal.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>The undersigned, subject to the terms and conditions set forth In this Letter of Transmittal, hereby surrenders the following certificates (the &#147;Certificates&#148;) formerly representing Superior Shares listed in the following box to DGSE. &nbsp;Please issue the new DGSE Companies, Inc. certificate in the name shown above to the above address unless instructions are given in the boxes below.</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Method of delivery of the certificate(s) is at the option and risk of the owner thereof. See Instruction 1.</P>
<TABLE style="font-size:10pt" cellspacing=0><TR><TD width=292.6></TD><TD width=89.75></TD><TD width=88.65></TD></TR>
<TR><TD style="border:0.75pt solid #000000" valign=top width=628 colspan=3><P style="line-height:11pt; margin:0pt; font-size:9pt">If your Certificate(s) have been lost, stolen, misplaced or mutilated contact the Exchange Agent at ___-___-_____, <I>See Instruction 5</I>.</P>
</TD></TR>
<TR><TD style="border-left:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=628 colspan=3>&nbsp;</TD></TR>
<TR><TD style="border-left:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=628 colspan=3><P style="line-height:13pt; margin:0pt; font-size:11pt">DESCRIPTION OF SHARES SURRENDERED &nbsp;<I>(Please fill in. Attach separate schedule if needed)</I></P>
</TD></TR>
<TR><TD style="border-left:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=390.133><P style="line-height:normal; margin:0pt" align=center>Name(s) and Address of Registered Holder(s)<BR>
If there is any error in the name or address shown below,<BR>
please make<B> </B>the necessary corrections</P>
</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=bottom width=119.667><P style="margin:0pt" align=center>Certificate No(s)</P>
</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=bottom width=118.2><P style="margin:0pt" align=center>Number of Shares</P>
</TD></TR>
<TR><TD style="border-left:0.75pt solid #000000; border-right:0.75pt solid #000000" valign=top width=390.133>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=119.667>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=118.2>&nbsp;</TD></TR>
<TR><TD style="border-left:0.75pt solid #000000; border-right:0.75pt solid #000000" valign=top width=390.133>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=119.667>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=118.2>&nbsp;</TD></TR>
<TR><TD style="border-left:0.75pt solid #000000; border-right:0.75pt solid #000000" valign=top width=390.133>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=119.667>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=118.2>&nbsp;</TD></TR>
<TR><TD style="border-left:0.75pt solid #000000; border-right:0.75pt solid #000000" valign=top width=390.133>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=119.667>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=118.2>&nbsp;</TD></TR>
<TR><TD style="background-color:#000000; border-left:0.75pt solid #000000; border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=390.133>&nbsp;</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=bottom width=119.667><P style="line-height:13pt; margin:0pt; font-size:11pt" align=right><B>Total Shares&nbsp;</B></P>
</TD><TD style="border-right:0.75pt solid #000000; border-bottom:0.75pt solid #000000" valign=top width=118.2>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The undersigned understands and agree that I (we) will not be able to change my (our) mind after delivering this Letter of Transmittal and my (our) Certificate(s) to the Exchange Agent. &nbsp;The undersigned acknowledges and accepts the indemnification provisions set forth in Article VIII of the Merger Agreement. &nbsp;The undersigned approves the selection and authorization of Stanford International Bank, Ltd., a company organized under the laws of Antigua and Barbuda, as the exclusive agent and representative of the stockholders (the &#147;<B>Stockholder Agent</B>&#148;). &nbsp;The undersigned understands and agrees that my (our) receipt of the merger consideration will subject me (us) to all of the terms and conditions in the Merger Agreement, including without limitation those terms and conditions with respect to the Stockholder Agent, as well as to all of the terms and conditions set forth in the Merger Agreement with respect to
the escrow and the Escrow Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Please carefully read the enclosed instructions for surrendering your Certificate(s).</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. B</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>CERTIFICATE HOLDER(S) SIGN HERE</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The undersigned hereby represents and warrants that the undersigned has full power and authority to complete and deliver this Letter of Transmittal and to deliver for surrender and cancellation the above described Certificate(s) delivered herewith and that the rights represented by the Certificate(s) are free and clear of all liens, restrictions, charges and encumbrances and are not subject to any adverse claim. &nbsp;The undersigned will, upon request, execute any additional documents necessary or desirable to complete the surrender of the Certificate(s) surrendered herewith. &nbsp;All authority conferred shall survive the death or incapacity of the undersigned and all obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=229.6></TD><TD width=9.35></TD><TD width=229.55></TD></TR>
<TR><TD style="border:0.5pt solid #000000" valign=top width=306.133><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:5.75pt"><B>SPECIAL ISSUANCE INSTRUCTIONS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:4.75pt">Complete ONLY if the new certificate is to be issued in a name which differs from the name on the surrendered Certificate(s). &nbsp;Issue to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:4.75pt">Name(s): <I>(Print Name)</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:4.75pt">Address: <I>(Print Address, including Zip Code)</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="line-height:10pt; margin-top:5.35pt; margin-bottom:5.35pt; padding-left:5.05pt; font-size:8pt">(Please also complete the enclosed Substitute Form&nbsp;W-9 AND see instructions regarding signature guarantee. &nbsp;See Instructions 3, 4 &amp;&nbsp;6.)</P>
</TD><TD style="border-right:0.5pt solid #000000" valign=top width=12.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=306.067><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:5.75pt"><B>SPECIAL DELIVERY INSTRUCTIONS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:5.75pt">Complete ONLY if the new certificate is to be mailed to some address other than the address reflected above. &nbsp;Mail to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:5.75pt">Name(s): (Print Name)</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:5.75pt">Address: (Print Address, including Zip Code)</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=306.133><P style="margin-top:1.65pt; margin-bottom:1.65pt; padding-left:4.75pt"><B>YOU MUST SIGN IN THE BOX BELOW</B></P>
</TD><TD valign=bottom width=12.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=306.067><P style="margin-top:1.65pt; margin-bottom:1.65pt; padding-left:4.3pt"><B>Also: &nbsp;Sign and provide your tax ID number on the enclosed Substitute Form W-9</B></P>
</TD></TR>
<TR><TD style="border-left:0.5pt solid #000000; border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=306.133><P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:4.75pt"><B>SIGNATURE(S) REQUIRED<BR>
</B>Signature(s) of Registered Holder(s) or Agent</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:4.75pt">Must be signed by the registered holder(s) EXACTLY as name(s) appear on stock certificate(s). &nbsp;If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title. &nbsp;<I>See Instructions 2, 3 or 4.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:4.75pt">Registered Holder</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:4.75pt">Registered Holder</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:4.75pt">Title, if any</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:4.75pt">Date</P>
<P style="margin:0pt; padding-left:4.75pt; text-indent:76pt">&nbsp;Phone</P>
</TD><TD style="border-right:0.5pt solid #000000" valign=top width=12.467>&nbsp;</TD><TD style="border-right:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=top width=306.067><P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:5.75pt"><B>SIGNATURE(S) GUARANTEED (IF REQUIRED)<BR>
</B><I>See Instruction 3.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:5.75pt">Unless the Certificate(s) is surrendered by the registered holder(s) thereof or for the account of a member of the Securities Transfer Agents&#146; Medallion Program (STAMP), Stock Exchange Medallion Program (SEMP) or New York Stock Exchange Medallion Signature Guarantee Program (MSP), the signature(s) to the left must be guaranteed by such a member. See Instruction 3.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:5.75pt">Authorized Signature</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:5.75pt">Name of Firm</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:5.75pt">Address of Firm <I>(Print Address, including Zip Code)</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="margin:6.65pt"><BR></P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. B</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>INSTRUCTIONS FOR SURRENDERING CERTIFICATES<BR>
(Please read these instructions carefully)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1. <I>Method of Delivery</I>: Your old Certificate(s) and the Letter of Transmittal must be sent or delivered to the Exchange Agent. <I>Do not send them to Superior or DGSE</I>. The method of delivery of Certificate(s) to be surrendered to the Exchange Agent at the address set forth on the front of the Letter of Transmittal is at the option and risk of the surrendering stockholder. Delivery will be deemed effective and the risk of loss will pass, only when received by the Exchange Agent. <B>If the Certificate(s) is sent by mail, registered mail with return receipt requested and properly insured, is suggested.</B> &nbsp;A return envelope is enclosed.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2. <I>New Certificate issued in the Same Name</I>: If the new certificate is to be issued in the same name as the surrendered Certificate(s) is registered, the Letter of Transmittal should be completed and signed exactly as the surrendered Certificate(s) is registered. &nbsp;<I>Do not sign the Certificate(s). &nbsp;Signature guarantees are not required if the Certificate(s) surrendered herewith is submitted by the registered owner</I> of the Superior Shares formerly represented by such Certificate(s) and the section entitled &#147;Special Issuance Instructions&#148; has been left blank, or is for the account of an Eligible Institution.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If any of the Superior Shares surrendered herewith are owned by two or more joint owners, all such owners must sign this Letter of Transmittal exactly as written on the face of the Certificate(s). If any Superior Shares are registered in different names on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations. Letters of Transmittal executed by trustees, executors, administrators, guardians attorneys-in fact, officers of corporations or others acting in a fiduciary or representative capacity, who are not identified as such in the registration, must be accompanied by proper evidence of the signer&#146;s authority to act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3. <I>New Certificate issued in Different Name</I>: If the section entitled &#147;Special Issuance Instructions&#148; is completed then signatures on this Letter of Transmittal must be guaranteed by a firm that is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agent Medallion Program (STAMP), a member of the Stock Exchanges Medallion Program (SEMP) or a member of the New York Stock Exchange Inc. Medallion Signature Program (MSP) (each such member is an &#147;<B>Eligible Institution</B>&#148;). Members of these programs are usually members of a recognized stock exchange in the United States, members of the National Association of Securities Dealers or banks and trust companies in the United States.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If the surrendered Certificate(s) is registered in the name of a person other than the signer of this Letter of Transmittal, or if issuance is to be made to a person other than the signer of this Letter of Transmittal, or if issuance is to be made to a person other than the registered owner(s), then the surrendered Certificate(s) must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name(s) of the registered owner(s) appears on such Certificate(s) or stock power(s), with the signature(s) on the Certificate(s) or stock power(s), guaranteed by an Eligible Institution as provided herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4. <I>Special Issuance and Delivery Instructions</I>. &nbsp;Indicate the name and address in which the new certificate is to be sent if different from the name and/or address of the person(s) signing this Letter of Transmittal. The stockholder is required to give the social security number or employer identification number of the record owner of the Superior Shares. If Special Issuance Instructions have been completed, the stockholder named therein will be considered the record owner for this purpose.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">5. <I>Letter of Transmittal Required: Surrender of Certificate(s) Lost Certificate(s)</I>: You will not receive your new certificate unless and until you deliver this Letter of Transmittal, properly completed and duly executed, to the Exchange Agent, together with the Certificate(s) formerly representing your Superior Shares and any required accompanying evidences of authority. <B>If your Certificate(s) has been lost, stolen, misplaced or destroyed, contact the Exchange Agent for Instructions at __-___-____ prior to submitting your Certificate(s) for exchange.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">6. <I>Substitute Form W 9</I>: Under Federal income tax law, a non exempt stockholder is required to provide the Exchange Agent with such stockholder&#146;s correct Taxpayer Identification Number (&#147;<B>TIN</B>&#148;) on the enclosed Substitute Form W 9. &nbsp;If the Certificate(s) is in more than one name or is not in the name of the actual owner, consult the enclosed Substitute Form W 9 Guidelines for additional guidance on which number to report.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">7. <I>Resolution of Disputes</I>. Any and all disputes with respect to Letters of Transmittal will be resolved by DGSE and its decision will be conclusive and binding on all concerned. DGSE may delegate this function to the Exchange Agent in whole or in part. DGSE or the Exchange Agent shall have the absolute right in its sole discretion to reject any and all Letters of Transmittal and surrenders of Certificates that are deemed by either of them to be not in proper form or to waive any immaterial irregularities or defects in any Letter of Transmittal or in the surrender of any Certificate. Surrenders of Certificates will not be deemed to have been made until all defects or irregularities that have not been waived have been cured.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">8. <I>Backup Withholding</I>. The surrendering stockholder must check the box in Part III of the enclosed Substitute Form W 9 if a TIN has not been issued and the stockholder has applied for a TIN or intends to apply for a TIN in the near future. If a TIN has been applied for and the Exchange Agent is not provided with a TIN before payment is made, the Exchange Agent will withhold 28% on all cash payments to such surrendering stockholder of any cash consideration due for their former Superior Shares. Please review the enclosed Guidelines for Certification of Taxpayers Identification Number on Substitute Form W 9 for additional details on what TIN to give the Exchange Agent.</P>
<P style="margin:0pt" align=center><BR></P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. B</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT C.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF ESCROW AGREEMENT</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(See Annex B)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. C</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT D.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(See Annex C)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. D</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT E.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF WARRANT</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(See Annex H)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. E</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT F.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF NOTE EXCHANGE AGREEMENT</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(See Annex D)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. F</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT G.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF STANFORD TERMINATION AND RELEASE AGREEMENT</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(See Annex E)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. G</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT H.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF REGISTRATION RIGHTS AGREEMENT</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(See Annex F)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh.&nbsp;H</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT I.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF CORPORATE GOVERNANCE AGREEMENT</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(See Annex G)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. I</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT J.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF STANFORD OFFICER&#146;S CERTIFICATE</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(Omitted)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. J</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT K.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF COMPANY LEGAL OPINION</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(Omitted)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. K</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT L.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF STANFORD LEGAL OPINION</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(Omitted)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. L</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT M.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF PARENT OFFICERS&#146; CERTIFICATE</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(Omitted)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. M</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT N.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>FORM OF PARENT LEGAL OPINION</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>(Omitted)</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. N</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>SCHEDULE 1</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>A WARRANT DISTRIBUTION AND ALLOCATION</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=190.3></TD><TD width=14.3></TD><TD width=145.85></TD><TD width=14.3></TD><TD width=91.25></TD><TD width=12></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=253.733><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Name</B></P>
</TD><TD valign=top width=19.067><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=194.467><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Address</B></P>
</TD><TD valign=top width=19.067><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=121.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>% of <BR>
Underlying Shares</B></P>
</TD><TD valign=top width=16>&nbsp;</TD></TR>
<TR><TD valign=top width=253.733>&nbsp;</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=194.467>&nbsp;</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.667>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD></TR>
<TR><TD valign=top width=253.733><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Stanford International Bank, Ltd.</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=194.467><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
St. John&#146;s, Antigua<BR>
West Indies</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.667><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>50.00</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=253.733><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Daniel T. Bogar</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=194.467><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Hollywood, Fl. 33019</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.667><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>11.56</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=253.733><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">William R. Fusselmann</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=194.467><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Key Biscayne, FL 33149</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.667><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>11.56</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=253.733><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Osvaldo Pi</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=194.467><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Pinecrest, FL 33156</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.667><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>11.56</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=253.733><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Ronald M. Stein</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=194.467><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Miami Beach, Fl. 33141</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.667><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>11.56</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=253.733><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Charles M. Weiser</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=194.467><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Hollywood, FL 33021</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.667><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>1.87</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=253.733><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Tal Kimmel</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=194.467><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Miami, FL 33131</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.667><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>1.87</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=right><BR>
<BR></P>
<P style="margin:0pt" align=center>Sch. 1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>SCHEDULE 2</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>B WARRANT DISTRIBUTION AND ALLOCATION</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=190.7></TD><TD width=14.3></TD><TD width=145.25></TD><TD width=14.3></TD><TD width=91.45></TD><TD width=12></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=254.267><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Name</B></P>
</TD><TD valign=top width=19.067><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=193.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Address</B></P>
</TD><TD valign=top width=19.067><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=121.933><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>% of <BR>
Underlying Shares</B></P>
</TD><TD valign=top width=16>&nbsp;</TD></TR>
<TR><TD valign=bottom width=254.267>&nbsp;</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=bottom width=193.667>&nbsp;</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=bottom width=121.933>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD></TR>
<TR><TD valign=top width=254.267><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Stanford International Bank, Ltd.</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><A NAME="OLE_LINK3"></A><A NAME="OLE_LINK4"></A><TD valign=top width=193.667><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
St. John&#146;s, Antigua<BR>
West Indies</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.933><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>50.0</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=254.267><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Daniel T. Bogar</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=193.667><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Hollywood, Fl. 33019</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.933><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>12.5</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=254.267><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">William R. Fusselmann</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=193.667><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Key Biscayne, FL 33149</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.933><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>12.5</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=254.267><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Osvaldo Pi</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=193.667><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Pinecrest, FL 33156</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.933><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>12.5</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
<TR><TD valign=top width=254.267><P style="margin-top:0pt; margin-bottom:1.65pt; padding-left:6pt; text-indent:-6pt">Ronald M. Stein</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=193.667><P style="margin-top:0pt; margin-bottom:1.65pt">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]<BR>
Miami Beach, Fl. 33141</P>
</TD><TD valign=top width=19.067>&nbsp;</TD><TD valign=top width=121.933><P style="margin-top:0pt; margin-bottom:1.65pt" align=right>12.5</P>
</TD><TD valign=top width=16><P style="margin-top:0pt; margin-bottom:1.65pt">%</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>Sch. 2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX B</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ESCROW AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS ESCROW AGREEMENT is made and entered into as of ____________ __, 2007 (this &#147;<B>Agreement</B>&#148;), by and among (i) DGSE Companies, Inc., a Nevada corporation (together with its successors and permitted assigns, &#147;<B>DGSE</B>&#148;), (ii) Stanford International Bank Ltd., a company organized under the laws of Antigua and Barbuda, as agent and representative for the Stockholders (as defined below) of Superior (as defined below) (in such capacity, together with any successors in such capacity, the &#147;<B>Stockholder Agent</B>&#148;), and (iii) American Stock Transfer &amp; Trust Company, a New York corporation, as securities intermediary and escrow agent (in such capacity, the &#147;<B>Escrow Agent</B>&#148;). Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in that certain Amended and Restated Agreement and Plan of Merger and Reorganization, made and entered into as of
January 6, 2007 (the &#147;<B>Merger Agreement</B>&#148;), by and among DGSE, DGSE Merger Corp., a Delaware corporation (&#147;<B>Merger Sub</B>&#148;), Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (&#147;<B>Superior</B>&#148;), and the Stockholder Agent.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>RECITALS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Merger Agreement provides for the merger of Superior with and into Merger Sub, with Superior as the surviving company and a wholly-owned subsidiary of DGSE (the &#147;<B>Merger</B>&#148;);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, pursuant to the Merger, all outstanding capital stock of Superior may be exchanged for shares of common stock, par value $0.01 per share, of DGSE (the &#147;<B>DGSE Common Stock</B>&#148;), subject to the terms and conditions set forth in the Merger Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, Section 3.14 and ARTICLE VIII of the Merger Agreement provide that a separate escrow account (the &#147;<B>Escrow Account</B>&#148;) shall be established for the purpose of securing the indemnification obligations of the stockholders of Superior listed from time to time on <I>Exhibit A</I> (collectively, the &#147;<B>Stockholders</B>&#148;) set forth in Article VIII of the Merger Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Stockholders have adopted and approved the Merger Agreement and irrevocably appointed and constituted the Stockholder Agent as their exclusive agent and representative for purposes of the Merger Agreement and this Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, simultaneously with the effectiveness of this Agreement, DGSE shall deliver to the Escrow Agent, on behalf of the Stockholders, shares of DGSE Common Stock as provided in Section 1, which shares shall be deposited in the Escrow Account;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, pursuant to the DiGenova Warrant, (i) DiGenova has agreed that a portion of the shares to be issued upon the exercise of such warrant shall be subject to the escrow provisions of the Merger Agreement and this Agreement, (ii) upon exercise of the DiGenova Warrant, DGSE is obligated to deposit a portion of the shares for which such warrant is exercised into the Escrow Account for the purpose of securing the indemnification obligations of the Stockholders and DiGenova set forth in Article VIII of the Merger Agreement (the &#147;<B>Warrant Shares</B>&#148;), and (iii) the holder of such warrant has irrevocably appointed and constituted the Stockholder Agent as its exclusive agent and representative for purposes of the applicable provisions of the Merger Agreement and this Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Escrow Agent desires to act as the escrow agent as provided in this Agreement; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Parties desire to establish the terms and conditions pursuant to which the Escrow Account shall be established and maintained.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>B-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto (collectively, the &#147;<B>Parties</B>&#148;), intending to be legally bound, hereby agree as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1. <I>Commencement of Duties; Escrow Account</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1.1 <I>Commencement of Duties</I>. Upon receipt by the Escrow Agent of the shares of DGSE Common Stock provided in Section 1.2, (i) the Escrow Agent shall deliver a notice to DGSE and to the Stockholder Agent acknowledging such receipt, and (ii) the Escrow Agent shall hold any Escrow Cash (defined below), the Escrow Shares (defined below) and any proceeds of the foregoing (other than Escrow Share Dividends (defined below)) in escrow pursuant to the terms of this Agreement. The Escrow Agent shall hold and safeguard the Escrow Account during the Escrow Period (defined below), shall treat such accounts as trust funds in accordance with the terms of this Agreement and not as the property of the Escrow Agent, DGSE, the Stockholders or the Stockholder Agent and shall hold and dispose of the cash and shares in the Escrow Account only in accordance with the terms set forth in this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1.2 <I>Initial Share Deposits</I>. Simultaneously with the effectiveness of this Agreement, DGSE shall deliver to the Escrow Agent, on behalf of the Stockholders and for the benefit of the Indemnified Parties, including as beneficiaries and secured parties, stock certificates evidencing the number of shares of DGSE Common Stock as determined in accordance with Section 3.14(a) of the Merger Agreement, issued in the name of the Escrow Agent, in its capacity as escrow agent hereunder, or its nominee, and containing the restrictive legend set forth on <I>Exhibit C</I>, for deposit in the Escrow Account as security for the Indemnified Parties, as further provided herein. Upon the exercise of the DiGenova Warrant, DGSE shall deliver to the Escrow Agent, on behalf of DiGenova and for the benefit of the Indemnified Parties, including as beneficiaries and secured parties, stock certificates evidencing the number of shares of
DGSE Common Stock as determined in accordance with Section 6 of the DiGenova Warrant, issued in the name of the Escrow Agent, in its capacity as escrow agent hereunder, or its nominee, and containing the restrictive legend set forth on <I>Exhibit C</I>, for deposit in the Escrow Account as security for the Indemnified Parties, as further provided herein. The shares of DGSE Common Stock held in the Escrow Account from time to time shall collectively be referred to as the &#147;<B>Escrow Shares</B>&#148;.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1.3 <I>Investment of Escrow Cash</I>. Upon receipt of any cash, including upon the sale or liquidation of, or the declaration of any cash dividend or distribution (other than an Escrow Share Dividend) in respect of, any Escrow Shares (any such cash, the &#147;<B>Escrow Cash</B>&#148;), the Escrow Agent shall invest and re-invest such cash (i)&nbsp;solely at the risk of the beneficiaries of the Escrow Account; (ii) in the name of the Escrow Agent or its nominee; and (iii) in such amounts and in such Permitted Investments (as defined below) as DGSE may designate in writing from time to time. Income, if any, resulting from the investment of the Escrow Cash or the liquidation of Permitted Investments shall be retained by the Escrow Agent and will be considered, for all purposes of this Agreement, to be part of the Escrow Cash deposited in the Escrow Account. &#147;<B>Permitted Investments</B>&#148; means an investment in
any of the following accounts, securities and instruments: (i) demand deposits, certificates of deposit, bankers acceptances, time deposits and other deposit accounts with commercial banks organized under the laws of the United States of American, or any State thereof, having an aggregate capital and surplus in excess of $100,000,000 and, to the extent applicable, having a maturity of not more than 180 days from the date of investment therein; (ii) investments in marketable direct obligations of, or obligations unconditionally and fully guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America) and maturing not more than one year from the date of investment therein; (iii) open market commercial paper rated at least &#147;A1&#148; or &#147;P1&#148; or better by a nationally recognized statistical rating organization and maturing not more than one year from the issuance thereof; (iv) money
market and other mutual funds invested solely in (A) the types of Permitted Investments described in clauses (i) through (iii), inclusive, of this definition of Permitted Investments, and (B) investments pursuant to or arising under currency agreements or interest rate agreements entered into in the ordinary course of business. Any interest earnings from any Permitted Investment shall be credited upon receipt by the Escrow Agent to the Escrow Fund.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1.4 <I>Escrow Share Dividends, Etc</I>. Any dividends distributed by DGSE in respect of Escrow Shares, other than stockholder rights associated with a stockholder rights plan which by their terms are not separable from the Escrow Shares, (all such dividends, &#147;<B>Escrow Share Dividends</B>&#148;) shall not become Escrow Cash, Escrow Shares or Escrow Assets and shall not be deposited in the Escrow Account, but shall be promptly distributed in accordance with Section 2.7.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1.5 <I>Share Distributions, Etc</I>. Any shares of DGSE Common Stock or other equity securities issued or distributed (including shares issued in connection with a stock split or other reclassification or recapitalization) (&#147;<B>New Shares</B>&#148;) in respect of Escrow Shares that have not been released from the Escrow Account, other than Escrow Share Dividends, shall be deposited in the Escrow Account and become a part thereof, and shall be considered Escrow Shares for all purposes of this Agreement. New Shares issued in respect of shares of DGSE Common Stock that have been paid or released from the Escrow Account shall not be deposited in the Escrow Account, but shall be distributed to the respective record holders of such paid or released shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1.6 <I>Voting of Shares</I>. The Stockholders shall be entitled to vote their respective <I>pro rata</I> portion of Escrow Shares, based on their respective percentage interest as set forth on <I>Exhibit A</I> (which shall include, with respect to DiGenova, the shares deposited in the Escrow Account pursuant to the DiGenova Warrant). DGSE shall deliver any communications it distributes to its stockholders qua stockholders, including notices of meetings, annual reports and proxy statements, to the Stockholder Agent at the time such communications are delivered to its other stockholders. The Stockholder Agent shall deliver such communications to the respective Stockholders and, in accordance with the instructions received from the Stockholders, direct the Escrow Agent in writing as to the exercise of voting rights pertaining to the Escrow Shares as to which such voting instructions have been received, and not to act
with respect to any Escrow Shares for which no or invalid instructions have been received from any Stockholders, and the Escrow Agent shall comply with any such written instructions from the Stockholder Agent. To the extent of the absence of such instructions from the Stockholder Agent, the Escrow Agent shall not vote any Escrow Shares. Beyond the delivery of DGSE proxies or consents to the Stockholders as aforesaid, the Stockholder Agent shall have no obligation to solicit consents or proxies from the Stockholders for purposes of any such vote.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1.7 <I>Issued and Outstanding</I>. The Escrow Shares shall appear as issued and outstanding shares on the books and records of DGSE.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1.8 <I>Transferability of Interests by Stockholders</I>. The interests of the Stockholders in the Escrow Account, or the Escrow Cash, Escrow Shares, Permitted Investments and other assets from time to time held in the Escrow Account (collectively, the &#147;<B>Escrow Assets</B>&#148;), may not be sold, assigned or otherwise Transferred, other than strictly in accordance with the limited exceptions provided in Section 3.15 of the Merger Agreement. The applicable Stockholder effecting, or any Party who has actual notice of, any such permitted sale, assignment or other Transfer shall promptly provide notice thereof to the Escrow Agent, Stockholder Agent and DGSE thereof, and no such sale, assignment or other Transfer shall be valid or effective unless so made and until such notice has been duly provided.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2. <I>Escrow Account</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.1 <I>Escrow Period</I>. The Escrow Agent shall establish the Escrow Account immediately upon the effectiveness of this Agreement, and will terminate the Escrow Account at 5:00 p.m., Pacific time, on the date (as adjusted pursuant hereto, the &#147;<B>Expiration Date</B>&#148;) that is one calendar year after the Effective Time (such period of time, as adjusted pursuant hereto, the &#147;<B>Escrow Period</B>&#148;); <I>provided, however</I>, that in the event DGSE notifies the Escrow Agent that any Indemnified Party has made a claim under Article VIII of the Merger Agreement prior to the Expiration Date which claim has not yet been fully and finally resolved and settled on the Expiration Date (an &#147;<B>Unresolved Claim</B>&#148;), the Escrow Period shall be extended, the Expiration Date, the termination of the Escrow Account, and the release of shares of DGSE Common Stock having an aggregate value of the maximum
aggregate amount of all Unresolved Claims shall be delayed, until the earlier to occur of (i) ten Business Days after DGSE notifies the Escrow Agent and the Stockholder Agent that it has determined that each Unresolved Claim has been fully and finally resolved, settled and satisfied, and (ii) the date no Escrow Assets remain in or are due to the Escrow Account.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.2 <I>Funding</I>. The Escrow Agent shall deposit cash (if any) and shares of DGSE Common Stock in the Escrow Account as provided in Section 1.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.3 Use of Account.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(a) <I>Indemnified Party Claims</I>. The Stockholders have agreed to indemnify, defend and hold harmless DGSE and its Representatives and Affiliates (including the Surviving Corporation) (collectively, the &#147;<B>Indemnified Parties</B>&#148;) in Section 8.2 of the Merger Agreement from and against any Losses, as set forth in Article VIII of the Merger Agreement. DiGenova has additionally agreed to indemnify, defend and hold harmless the Indemnified Parties in Section 6 of the DiGenova Warrant. The Stockholder Agent, on behalf of the Stockholders, expressly agrees, and by virtue of the approval of the Merger and the Merger Agreement each Stockholder has agreed and consented, and by virtue of accepting the DiGenova Warrant DiGenova has agreed and consented, that the Escrow Assets (i) shall be available to satisfy, including as security for, such indemnity obligations, subject to the limitations and in the manner
provided for in this Agreement, and (ii) are subject to release and payment to DGSE or other Indemnified Parties upon the terms and subject to the conditions set forth herein and in the Merger Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(b) <I>Distributions</I>. The Escrow Agent shall establish and maintain the Escrow Account solely for the purposes of (i) satisfying the indemnification obligations of the stockholders of Superior and DiGenova under the Merger Agreement, and (ii) distributing any assets remaining in the Escrow Account upon the expiration of the Escrow Period as provided in Section 2.7.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.4 Claims.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(a) <I>Indemnified Party</I>. The Escrow Agent shall distribute assets from the Escrow Account to satisfy the claim of an Indemnified Party only upon receipt of: (i) joint instructions executed by DGSE and the Stockholder Agent; (ii) a final written decision of an arbitrator submitted by DGSE on behalf of the applicable Indemnified Party, or (iii) a final non-appealable order of a court of competent jurisdiction submitted by DGSE on behalf of the applicable Indemnified Party; in each case containing instructions to the Escrow Agent concerning the release of assets from the Escrow Account (including the name of the payee and the amount of the payment). Upon payment in full of a claim so received pursuant to Section 2.5, the Escrow Agent shall deem such claim finally resolved, settled and satisfied for purposes of this Agreement. In the event there are insufficient assets to pay the claims of all Indemnified Parties,
the claims made by DGSE shall be satisfied first and all other claims shall be satisfied on a <I>pro rata</I> basis from the remaining assets.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.5 <I>Payments from Escrow Account</I>. In the event any Indemnified Party is entitled to payment on a claim from the Escrow Account, the Escrow Agent shall make such payment:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(a) <I>first</I>, out of any Escrow Cash then held in the Escrow Account,</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(b) <I>second</I>, if commercially reasonable or upon the written request of DGSE, out of cash received upon the liquidation of any Permitted Investments or other assets (other than Escrow Shares) then held in the Escrow Account; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(c) <I>finally</I>, out of the Escrow Shares by delivering to such Indemnified Party a number of Escrow Shares from the Escrow Account having a value equal to the remaining amount of the payment due, with such shares being valued at the per-share value equal to $2.67 (the &#147;<B>Share Value</B>&#148;); <I>provided, however</I>, that in the event of any Capitalization Adjustment with respect to the DGSE Common Stock occurring after the Effective Time, the Share Value shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Section 2.5(c) prior to such Capitalization Adjustment (it being understood that DGSE shall promptly notify the Escrow Agent of any Capitalization Adjustment).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Any distribution of Escrow Assets to an Indemnified Party pursuant to this Section 2 shall be deemed paid by the Stockholders on a <I>pro rata</I> basis. calculated in accordance with the percentages set forth opposite the respective Stockholder names on <I>Exhibit A</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.6 <I>Release</I>. During the ten Business Days prior to the expiration of the Escrow Period, the Escrow Agent shall use its commercially reasonable efforts to liquidate all Escrow Assets (other than Escrow Shares and Escrow Cash) held in the Escrow Account so that no Escrow Assets other than Escrow Shares and Escrow Cash will remain in the Escrow Account upon the expiration of the Escrow Period. Upon the expiration of the Escrow Period, or as soon as reasonably practicable thereafter, subject to Section 4.12, the Escrow Agent shall distribute all of the Escrow Assets then held in the Escrow Account to the Stockholders pursuant to Section 2.7.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.7 <I>Distribution</I>. Any distribution of all or a portion of the Escrow Assets then held in the Escrow Account to the Stockholders pursuant to Section 2.6, or of any Escrow Share Dividends pursuant to Section 1.4, shall be distributed on a <I>pro rata</I> basis to the stockholders of Superior immediately prior to the Merger, and to DiGenova with respect to the Warrant Shares, in accordance with the percentages set forth opposite such stockholders&#146; respective names on <I>Exhibit A; provided, however</I>, that the Escrow Agent shall withhold the distribution of the portion of the Escrow Assets or Escrow Share Dividends otherwise distributable to any stockholder who is identified on <I>Exhibit A</I> as (i) being a Dissenting Stockholder, or (ii) not having prior to such distribution surrendered its stock certificates formerly representing Company Common Shares pursuant to the terms of the Merger Agreement (or
theretofore delivered the affidavit and bond, if any, specified in Section 3.4(i) of the Merger Agreement). Any such withheld Escrow Assets or Escrow Share Dividends shall be delivered to DGSE promptly after the expiration of the Escrow Period, and, with respect to such Stockholders other than Dissenting Stockholders, shall be delivered by DGSE to the Stockholders to whom such Escrow Assets or Escrow Share Dividends would have otherwise been distributed upon surrender of their certificates representing Company Common Shares (or delivery of such affidavit and bond, if any). The Escrow Agent shall distribute Escrow Assets or Escrow Share Dividends to the respective Stockholders by mailing a check representing the funds, or directing the transfer agent for the Escrow Shares to deliver a stock certificate representing such Escrow Shares or Escrow Share Dividends, due to such Stockholder at its address shown on <I>Exhibit A</I>. No fractional Escrow Shares shall be distributed to the Stockholders pursuant
to this Agreement and, upon notification of a permitted distribution to the Stockholders, DGSE shall provide, or cause its transfer agent to provide, stock certificates evidencing a number of shares that each Stockholder shall receive rounded up to the nearest whole number of shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.8 <I>Calculations</I>. Notwithstanding anything herein to the contrary, the Person requesting a distribution shall make any and all calculations required to be made pursuant to this Section 2, including the value of the Escrow Shares, and certify the same to the Escrow Agent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3. <I>Stockholder Agent</I>. The Parties acknowledge and accept the provisions of Section 8.5 of the Merger Agreement concerning the Stockholder Agent, which are incorporated herein by reference. Any successor Stockholder Agent under the Merger Agreement shall become the Stockholder Agent hereunder, as provided in such Section 8.5.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4. <I>Escrow Agent</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.1 <I>Appointment and Acceptance</I>. DGSE and the Stockholder Agent hereby appoint the Escrow Agent as escrow agent in relation to or in connection with this Agreement and the Merger Agreement. The approval of the Merger and the approval and adoption of the Merger Agreement by the stockholders of Superior constitutes, without any further action on the part of any such stockholders, the consent and authorization of each of such stockholders for the Escrow Agent to act as the escrow agent pursuant to the terms and provisions hereof. The Escrow Agent hereby accepts such appointments.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.2 <I>Duties</I>. The Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein, and as set forth in any additional written escrow instructions that the Escrow Agent may receive from DGSE and the Stockholder Agent from time to time as provided herein, upon which instructions the Escrow Agent may conclusively rely.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.3 <I>Compliance with Orders, Etc</I>. The Escrow Agent is authorized to comply with and obey orders, awards, judgments or decrees of any court of law or arbitration tribunal, notwithstanding any notices, warnings or other communications from any party hereto or any other Person to the contrary. In case the Escrow Agent obeys or complies with any such order, judgment or decree of any court or arbitration tribunal, the Escrow Agent shall not be liable to any of the parties hereto or to any other Person by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.4 <I>Certain Notices</I>. DGSE shall promptly notify the Escrow Agent of the Closing Date, any Capitalization Adjustment, and the expiration of the Escrow Period. Upon the expiration of the Escrow Period, DGSE shall update <I>Exhibit A</I> to indicate each Stockholder&#146;s name, current mailing address (as notified to DGSE by the applicable Stockholder) and how many Escrow Shares are to be distributed to each Stockholder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.5 <I>Additional Instructions</I>. The Escrow Agent may from time to time request further information, instructions or direction from DGSE or the Stockholder Agent, as the case may be, as it reasonably deems necessary in the performance of its duties hereunder, and DGSE or the Stockholder Agent, as applicable, shall use their respective commercially reasonable efforts promptly to provide such information, instructions or direction, upon which the Escrow Agent may conclusively rely.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.6 <I>Limitation of Liability</I>. In performing any duties hereunder, the Escrow Agent shall not be liable to any party hereto for damages, losses or expenses, except for gross negligence or willful misconduct on the part of the Escrow Agent. The Escrow Agent shall not incur any such liability for any action taken or omitted in reliance upon any instrument, including any written statement or affidavit provided for in this Agreement, that the Escrow Agent in good faith believes to be genuine, nor will the Escrow Agent be liable or responsible if acting in good faith for forgeries, fraud, impersonations or determining the scope of any representative authority. In addition, the Escrow Agent may consult with legal counsel (whether such counsel will be regularly retained or specifically employed) in connection with the Escrow Agent&#146;s duties under this Agreement and shall be fully protected in any act taken,
suffered, or permitted by it in good faith in accordance with the advice of counsel. The Escrow Agent is not responsible for determining and verifying the authority of any Person acting or purporting to act on behalf of any party hereto or beneficiary hereof. The Escrow Agent shall not be liable for the expiration of any rights under any statute of limitations with respect to this Agreement or any documents deposited with the Escrow Agent. IN NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES WHICH RESULT FROM THE ESCROW AGENT&#146;S FAILURE TO ACT IN ACCORDANCE WITH THE STANDARDS SET FORTH IN THIS AGREEMENT, OR (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.7 <I>Disputes</I>. If any controversy arises between the parties to this Agreement, or with any other Person, concerning the subject matter of this Agreement, the Escrow Agent shall not be required to determine the controversy or to take any action regarding it. Furthermore, the Escrow Agent may file an action of interpleader requiring the parties hereto to answer and litigate any claims and rights amongst themselves. The Escrow Agent is authorized to deposit with the clerk of the court all documents and Escrow Assets; <I>provided, however</I>, that all costs, expenses, charges and reasonable attorney fees incurred by the Escrow Agent due to the interpleader action shall be reimbursed equally by the Stockholders (subject to Section 4.13), on the one hand, and DGSE, on the other hand, it being agreed and understood that the Escrow Agent shall have a prior lien upon the Escrow Assets with respect to its costs,
expenses, charges and reasonable attorney fees incurred by the Escrow Agent due to the interpleader action, superior to the interests of any other Person. Upon initiating such action, the Escrow Agent shall be fully released and discharged of and from all obligations and liability imposed by the terms of this Agreement, except for any liability for obligations or acts or omissions that have already occurred, and only to the extent set forth herein.</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:18pt; text-indent:18pt">4.8</P>
<P style="margin:0pt; padding-left:18pt; text-indent:54pt"><I>Indemnification</I>. DGSE and the Stockholders (subject to Section 4.13), and their respective successors and assigns, shall jointly and severally indemnify and hold the Escrow Agent harmless against any and all losses, claims, damages, liabilities and expenses, including reasonable costs of investigation, attorneys fees and disbursements, that may be imposed on the Escrow Agent or incurred by the Escrow Agent in connection with the performance of its duties under this Agreement. Such indemnification shall survive the resignation or removal of the Escrow Agent, or the termination of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.9 <I>Resignation and Removal</I>. The Escrow Agent may resign at any time upon sixty days written notice to DGSE and the Stockholder Agent, and the duties of the Escrow Agent shall terminate at the time specified in such notice (but not less than sixty days after delivery to DGSE). The Escrow Agent may be removed at any time by notice from DGSE, and the duties of the Escrow Agent shall terminate at the time specified in such notice. Upon the termination of its duties hereunder, the Escrow Agent shall promptly deliver the balance of the Escrow Assets, and any documentation or notices or other communications relating to the Escrow Account, the Escrow Assets or this Agreement, then in its possession to a successor escrow agent, as identified by a written notice delivered by DGSE to the Escrow Agent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.10 <I>Successors</I>. DGSE may appoint the successor escrow agent (i) without the consent of the Stockholder Agent if such successor is a commercial bank organized under the laws of the United States of America, or any State thereof, having an aggregate capital and surplus in excess of $50,000,000 and being a &#147;securities intermediary&#148; for purposes of the applicable Uniform Commercial Code, or (ii) with the consent of the Stockholder Agent (which the Stockholder Agent may not unreasonably withhold, delay or condition). If DGSE shall have failed to appoint a successor escrow agent prior to the termination of the Escrow Agent&#146;s duties as provided in this Section 4.10, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief, with due regard to the qualifications for a successor escrow agent specified in clause (i)
next preceding, and any such resulting appointment shall be binding upon all of the parties hereto and beneficiaries hereof. The successor escrow agent shall execute and deliver an instrument accepting such appointment, and it shall, without further acts, be vested with all the estates, properties, rights, powers and duties (but not accrued liabilities) of the predecessor escrow agent as if originally named as escrow agent. Upon resignation in accordance with this Section 4.10, the Escrow Agent shall be discharged from any further duties and liability under this Agreement, except for any liability for obligations or acts or omissions that have already occurred, and only to the extent set forth herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.11 <I>Fees</I>. All fees of the Escrow Agent for performance of its duties under this Agreement shall be paid one-half by DGSE and (subject to Section 4.13) one-half by the Stockholders. <I>Exhibit B</I> sets forth the usual fees and charges agreed upon for services of the Escrow Agent as contemplated by this Agreement. In the event the Escrow Agent renders any service not provided for in <I>Exhibit B</I>, or if the parties request a substantial modification of its terms, or if the Escrow Agent is made a party to, or intervenes in, any litigation pertaining to the Escrow Account, the Escrow Agent&#146;s reasonable costs and expenses shall be paid (i) in the case the Escrow Agent is made a party to any litigation by DGSE or the Stockholder Agent, by DGSE or the Stockholders, as the case may be, or (ii) otherwise, one-half by DGSE and (subject to Section 4.13) one-half by the Stockholders.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.12 <I>Set-Off</I>. In the event that the Escrow Agent is authorized to make disbursements to any party to or beneficiary of this Agreement pursuant to and in accordance with the terms of this Agreement, and fees and expenses are due and payable to the Escrow Agent pursuant to the terms of this Agreement by the party or beneficiary receiving such disbursement, the Escrow Agent is hereby authorized to offset such amounts due and payable to it against such disbursement to such party or beneficiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.13 <I>Limitations on Stockholder Payments</I>. The obligations of the Stockholders to make payments to the Escrow Agent hereunder, other than pursuant to Section 5 (as to which the limitations of this Section 4.13 shall not apply), shall be strictly and exclusively limited to the Escrow Assets and Escrow Share Dividends. If the Escrow Assets and Escrow Share Dividends shall be insufficient to pay the fees of or other amounts due to the Escrow Agent hereunder, DGSE shall make such payments on behalf of the Stockholders (subject to reimbursement in the event any Escrow Assets or Escrow Share Dividends thereafter become available).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">5. <I>Tax Matters</I>. The Escrow Agent shall be responsible for reporting any interest earned, as of each calendar year-end, on the Escrow Cash or Permitted Investments, or any cash dividends or other distributions made in respect of the Escrow Shares, to the IRS, whether or not such income was distributed by the Escrow Agent during any particular year. The Stockholder Agent shall provide a completed IRS Form W 8 (an original W-8 is required) or Form W 9 to the Escrow Agent upon the signing of this Agreement. The Escrow Agent may delay accepting any Escrow Cash until the IRS forms shall have been provided. Notwithstanding Section 4.13, each Stockholder, severally but not jointly, covenants and agrees to indemnify and hold the Escrow Agent harmless against all liability for tax withholding or reporting for any payments made by the Escrow Agent to such Stockholder pursuant to this Agreement. The Escrow Agent shall have no responsibility
for the preparation and/or filing of any tax or information return, other than 1099-INT reporting, with respect to any transaction, whether or not related to the Agreement or any Related Agreements, that occurs outside of the Escrow Account.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">6. <I>Miscellaneous</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.1 <I>Construction</I>. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(a)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">all references in this Agreement to designated &#147;Articles,&#148; &#147;Sections&#148; and other subdivisions, or to designated &#147;Exhibits,&#148; &#147;Schedules&#148; or &#147;Appendices,&#148; are to the designated Articles, Sections and other subdivisions of, or the designated Exhibits, Schedules or Appendices to, this Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(b)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">references to any Person includes such Person&#146;s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(c)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">references to any agreement, document or instrument means such agreement, document or instrument as Amended and in effect from time to time in accordance with the terms thereof, and shall be deemed to refer as well to all addenda, annexes, appendices, exhibits, schedules and other attachments thereto;</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(d)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">references to &#147;dollars&#148; or &#147;cash&#148;, and the &#147;$&#148; symbol, are references to the lawful money of the United States of America;</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(e)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">with respect to the determination of any period of time, &#147;from&#148; means &#147;from and including&#148; and &#147;to&#148; means &#147;to but excluding&#148;;</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(f)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">the words &#147;include,&#148; &#147;includes,&#148; and &#147;including&#148; shall be deemed to be followed by &#147;without limitation&#148;;</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(g)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">the term &#147;or&#148; shall not be exclusive;</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(h)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">pronouns in masculine, feminine, and neuter genders shall be construed to include any other gender;</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(i)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">whenever the singular number is used, if required by the context, the same shall include the plural, and vice versa; and</P>
<P style="margin-top:6.65pt; margin-bottom:-12pt; padding-left:36pt; text-indent:18pt">(j)</P>
<P style="margin:0pt; padding-left:36pt; text-indent:36pt">the words &#147;this Agreement,&#148; &#147;herein,&#148; &#147;hereof,&#148; &#147;hereby,&#148; &#147;hereunder,&#148; and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.</P>
<P style="margin-top:5pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.2 <I>Titles and Headings</I>. The section and paragraph titles and headings contained herein are inserted purely as a matter of convenience and for ease of reference and shall be disregarded for all other purposes, including the construction, interpretation or enforcement of this Agreement or any of its terms or provisions.</P>
<P style="margin-top:5pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.3 <I>Voluntary Execution of Agreement</I>. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the parties hereto. Each of the parties hereto acknowledges, represents and warrants that (i) it has read and fully understood this Agreement and the implications and consequences thereof; (ii) it has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of its own choice, or it has made a voluntary and informed decision to decline to seek such counsel; and (iii) it is fully aware of the legal and binding effect of this Agreement.</P>
<P style="margin-top:5pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.4 <I>Assignment</I>. DGSE may assign any or all of its rights under this Agreement, in whole or in part, to any other Person without obtaining the consent or approval of any other party hereto or of any other Person. Without limiting the generality of Section 1.8, none of the Stockholders may assign any of its rights or interests or delegate any of its duties or obligations under this Agreement without the prior written consent of DGSE, which consent may be withheld in DGSE&#146;s sole and absolute discretion. The Stockholder Agent may assign and delegate its rights, powers, obligations and duties under this Agreement only as provided in Section 8.5 of the Merger Agreement. The Escrow Agent may assign and delegate its rights, powers, obligations and duties under this Agreement only as provided in Section 4.10. Any purported assignment not in full compliance with this Section 6.4 shall be null and void and of no force
or effect <I>ab initio</I>. Subject to the sentence next preceding, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and express beneficiaries hereof and their respective successors and permitted assigns</P>
<P style="margin-top:5pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.5 <I>Amendments and Modification</I>. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by DGSE, the Stockholder Agent and, if adversely affected thereby, the Escrow Agent; provided, however, that DGSE shall have the right to amend <I>Exhibit A</I> by written notice to the Escrow Agent and Stockholder Agent to the extent (i) <I>Exhibit A</I> does not accurately or completely list the Stockholders of Superior or their stock ownership immediately prior to the Merger, (ii) any Stockholder changes its current mailing address (it being agreed that the Stockholder Agent may certify to DGSE from time to time a new address of any Stockholder), (iii) any Stockholder delivers the required stock certificate or affidavit in lieu thereof, or (iv) a Stockholder sells, assigns or otherwise Transfers its interests in the Escrow Account, or any
Escrow Cash, Escrow Stocks, Permitted Investments or other assets from time to time held therein, as permitted by Section 1.8. Any modification, amendment, alteration or supplement to the Merger Agreement which has or may have an adverse effect upon the Escrow Agent shall not be effective for purposes of this Agreement absent the written consent of the Escrow Agent, such consent not to be unreasonably withheld.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.6 <I>Severability</I>. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any party or to any circumstance, is adjudged by a court, tribunal or other governmental body, arbitrator or mediator not to be enforceable in accordance with its terms, the parties agree that such governmental body, arbitrator or mediator making such determination shall have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.7 <I>No Waiver</I>. The failure of any party hereto to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, or any custom or practice of the parties at variance with the terms hereof shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance. No waiver by any party of any default, misrepresentation or breach hereunder, whether intentional or not, shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced, and no such waiver shall be deemed to extend to any prior or subsequent default, misrepresentation or breach hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; padding-left:18pt; text-indent:18pt">6.8 <I>Notices</I>. All notices, requests, instructions or other documents to be given under this Agreement shall be in writing and shall be deemed given, (i) upon receipt if sent via registered or certified mail, return receipt requested, in the U.S. mails, postage prepaid, (ii) when sent if sent by facsimile or email; <I>provided, however</I>, that the facsimile or email is promptly confirmed by telephone confirmation thereof, (iii) when delivered, if delivered personally to the intended recipient, and (iv) one business day following delivery to a reputable national courier service for overnight delivery; and in each case, addressed to a party at the following address:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=103.6></TD><TD width=12.5></TD><TD width=351.9></TD></TR>
<TR><TD valign=bottom width=138.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=469.2><P style="margin:0pt">If to DGSE, addressed to it at:</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">DGSE Companies, Inc.</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">2817 Forest Lane</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Dallas, Texas 75234</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Attn: Dr.&nbsp;L.S. Smith</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Facsimile: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.3pt; margin:0pt">with a copy (which shall not constitute notice and which shall not be<BR>
required for effective delivery) to:</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Sheppard, Mullin, Richter &amp; Hampton LLP</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">12275 El Camino Real, Suite 200</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">San Diego, California 92130-2006</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Attn: John J. Hentrich, Esq.</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Facsimile: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=138.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=right>(b)</P>
</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="margin:0pt">If to the Stockholder Agent, addressed to it at:</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Stanford International Bank Ltd.</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">c/o Stanford Financial Group</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">6075 Poplar Avenue</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Memphis, Tennessee 38119</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Attn: James M. Davis, Chief Financial Officer</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Facsimile: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=103.6></TD><TD width=12.5></TD><TD width=351.9></TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="margin:0pt">with a copy (which shall not constitute notice and which shall not be<BR>
required for effective delivery) to:</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Carlton Fields, P.A.</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">4000 Bank of America Tower at International Place</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">100 S.E. Second Street</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Miami, Florida 33131</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Attn: Seth P. Joseph, Esq.</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Facsimile: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=138.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</P>
</TD><TD valign=bottom width=16.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=469.2><P style="margin:0pt">If to the Escrow Agent, addressed to it at:</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">American Stock Transfer &amp; Trust Company</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">59 Maiden Lane</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">New York, New York 10038</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Attention: Herbert J. Lemmer</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Facsimile: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=138.133>&nbsp;</TD><TD valign=bottom width=16.667>&nbsp;</TD><TD valign=bottom width=469.2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:29.8pt; text-indent:-0.2pt">Email: [omitted]</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt">Or in each case to such other address, email address or fax number as the party to whom the notice, request, instruction or other document is given may have previously furnished to the other parties in writing in the manner set forth in this Section 6.8.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.9 <I>Governing Law</I>. This Agreement and the performance of the transactions and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Texas applicable to contracts negotiated, executed and to be performed entirely within such State.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.10 <I>Entire Agreement</I>. This Agreement, and to the extent of the definitions defined in the Merger Agreement and used herein, the Merger Agreement, constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated by this Agreement. In case of any conflict between the Merger Agreement and this Agreement, the terms and provisions of this Agreement shall prevail.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.11 <I>Third-Party Beneficiaries</I>. This Agreement is made solely for the benefit of the parties to this Agreement, the Indemnified Parties and the Stockholders, and their respective permitted successors and assigns, and no other Person shall have or acquire any right or remedy by virtue hereof except as otherwise expressly provided herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.12 <I>Jurisdiction; No Jury Trial; Service of Process</I>. The terms and provisions of Section 10.7 (d) (Waiver of Trial by Jury) of the Merger Agreement are hereby incorporated by reference herein and shall apply to this Agreement <I>mutatis mutandis</I>, as if expressly set forth herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.13 <I>Submission to Jurisdiction; No Jury Trial</I>. Any suit, action or proceeding with respect to this Agreement shall be brought exclusively in any court of competent jurisdiction in the County of Dallas, Texas. ALL PARTIES HERETO AND EXPRESS BENEFICIARIES HEREOF HEREBY IRREVOCABLY WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE PERSONAL JURISDICTION OR VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT BROUGHT IN ANY SUCH COURT AND HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE PARTIES HERETO AND EXPRESS BENEFICIARIES HEREOF HEREBY FURTHER IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.14 <I>Counterparts</I>. This Agreement may be executed in two or more original or facsimile counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same instrument.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.15 <I>Facsimile Execution</I>. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto, and an executed copy of this Agreement may be delivered by one or more parties hereto by facsimile or similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]</B></P>
<P style="margin-top:0pt; margin-bottom:6.65pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>B-2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day and year first above written.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=203.95></TD><TD width=18.05></TD><TD width=246></TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=352.067 colspan=2><P style="margin:0pt"><B>DGSE COMPANIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328><P style="margin:0pt">Dr. L.S. Smith <BR>
Chairman and Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=352.067 colspan=2><P style="margin:0pt"><B>STANFORD INTERNATIONAL BANK LTD.,<BR>
as Stockholder Agent</B></P>
</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328><P style="margin:0pt">James M. Davis<BR>
Chief Financial Officer</P>
</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=352.067 colspan=2><P style="margin:0pt"><B>AMERICAN STOCK TRANSFER &amp; TRUST COMPANY,<BR>
as Escrow Agent</B></P>
</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=328>&nbsp;</TD></TR>
<TR><TD valign=bottom width=271.933>&nbsp;</TD><TD valign=bottom width=24.067>&nbsp;</TD><TD valign=bottom width=328><P style="margin:0pt">Herbert J. Lemmer<BR>
Vice President</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>B-3</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT A</B></P>
<P style="margin-top:13.35pt; margin-bottom:6.65pt" align=center><B>SUPERIOR STOCKHOLDERS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=68.1></TD><TD width=11.85></TD><TD width=68.15></TD><TD width=11.9></TD><TD width=68.15></TD><TD width=11.9></TD><TD width=68.15></TD><TD width=11.9></TD><TD width=68.15></TD><TD width=11.9></TD><TD width=67.85></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=90.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Stockholder</B></P>
</TD><TD valign=bottom width=15.8>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=90.867><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Address</B></P>
</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=90.867><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Superior Share<BR>
Ownership</B></P>
</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=90.867><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>TIN</B></P>
</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=90.867><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Delivered Stock<BR>
Certificates or<BR>
Affidavit in<BR>
Lieu Thereof</B></P>
</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=90.467><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Dissenting<BR>
Stockholder</B></P>
</TD></TR>
<TR><TD valign=bottom width=90.8>&nbsp;</TD><TD valign=bottom width=15.8>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=90.8><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=90.867><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=90.867><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=90.867><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=90.867><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=90.467><P style="margin:0pt" align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=90.8>&nbsp;</TD><TD valign=bottom width=15.8>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867><P style="margin:0pt; font-family:Wingdings" align=center><FONT FACE="Wingdings">&#168;</FONT></P>
</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.467><P style="margin:0pt; font-family:Wingdings" align=center>&#168;</P>
</TD></TR>
<TR><TD valign=bottom width=90.8>&nbsp;</TD><TD valign=bottom width=15.8>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867><P style="margin:0pt; font-family:Wingdings" align=center>&#168;</P>
</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.467><P style="margin:0pt; font-family:Wingdings" align=center>&#168;</P>
</TD></TR>
<TR><TD valign=bottom width=90.8>&nbsp;</TD><TD valign=bottom width=15.8>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=90.8>&nbsp;</TD><TD valign=bottom width=15.8>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.867>&nbsp;</TD><TD valign=bottom width=15.867>&nbsp;</TD><TD valign=bottom width=90.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt" align=right><BR>
<BR></P>
<P style="margin:0pt" align=center><FONT FACE="Times New Roman">Exh. A</FONT></P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT B</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>ESCROW AGENT FEES</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Fee: $7,500, plus out-of-pocket expenses.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="margin:0pt" align=right><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. B</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>EXHIBIT C</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>RESTRICTIVE LEGEND</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE AND OTHER ESCROW PROVISIONS SET FORTH IN: (1) AN AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, MADE AND ENTERED INTO AS OF JANUARY 6, 2007, BY AND AMONG DGSE COMPANIES, INC., DGSE MERGER CORP., SUPERIOR GALLERIES, INC., AND STANFORD INTERNATIONAL BANK LTD., AS STOCKHOLDER AGENT (TOGETHER WITH ITS SUCCESSOR IN SUCH CAPACITY, THE &#147;STOCKHOLDER AGENT&#148;); AND (2) AN ESCROW AGREEMENT, BY AND AMONG DGSE COMPANIES, INC., AMERICAN STOCK TRANSFER &amp; TRUST COMPANY, AS ESCROW AGENT, AND THE STOCKHOLDER AGENT, MADE AND ENTERED INTO AS OF ________________, 2007. COPIES OF THE AFORESAID AGREEMENTS ARE ON FILE AT THE PRINCIPAL OFFICE OF DGSE COMPANIES, INC. AND SHALL BE PROVIDED TO THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST.</P>
<P style="margin:0pt" align=right><BR>
<BR></P>
<P style="margin:0pt" align=center>Exh. C</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX C</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS IS AN AMENDED AND RESTATED COMMERCIAL LOAN AND SECURITY AGREEMENT made this ____ day of ___________, 2007 (this &#147;Agreement&#148;), by and between:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Stanford Financial Group Company</B>, a company having its principal office at, 6075 Poplar Avenue, Memphis, Tennessee 38119 (hereinafter referred to as &#147;Lender&#148;), and <B>Superior Galleries, Inc.</B>, a Delaware corporation with a place of business at 9478 W. Olympic Blvd., Beverly Hills, California 90212 (hereinafter referred to as &#147;Borrower&#148;), with reference to the following facts:</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>RECITALS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">A. Pursuant to a Commercial Loan and Security Agreement originally dated October 1, 2003, as amended (the &#147;Existing Loan Agreement&#148;), Stanford Financial Group Company (&#147;SFG&#148;) has provided certain credit facilities to Borrower. On November 30, 2004, the Lender was assigned all of SFG&#146;s right, title and interest in the Existing Loan Agreement and the promissory note issued thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">B. Pursuant to the Existing Loan Agreement, Lender provides Borrower a revolving credit facility of up to Nineteen Million Eight Hundred Ninety Two Thousand Three Hundred and Forty Dollars ($19,892,340).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">C. Borrower and Lender wish to enter into this Agreement, which shall amend and restate the Existing Loan Agreement in its entirety and which hereinafter shall govern the terms and conditions under which Lender shall provide credit facilities to Borrower.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">NOW, THEREFORE, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS (reference being hereby made to Section 10 below for the definition of certain capitalized terms used herein):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 1. <I>The Loans, Advances, Interest, Security Interest, Financing Statements, Collateral, Subordinations.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.1 <I>Loan Authorization</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>The First Revolving Loan</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Subject to all the terms and conditions of this Agreement, including the preconditions to loan advances as herein provided and so long as there exists no Event of Default nor any event which with the passage of time, the giving of notice or both would constitute an Event of Default, Lender will make advances to Borrower (the &#147;First Revolving Loan&#148;) in an aggregate principal amount outstanding at any time not to exceed the lesser of (i) Five Million Five Hundred Thousand Dollars ($5,500,000) or (ii) the Borrowing Base. Advances under the First Revolving Loan shall be made in minimum amounts of One Hundred Thousand Dollars ($100,000) for each advance. The First Revolving Loan shall be evidenced by the First Revolving Loan Note in the form of <I>Schedule &#147;A-1&#148;</I> attached hereto and made a part hereof (referred to herein as the &#147;First Revolving Loan Note&#148;). The aforesaid First Revolving
Loan Note and advances thereunder may be continued or extended by mutual agreement of the parties; provided, however, the parties acknowledge that Lender is under no obligation to extend the term of the First Revolving Loan and whether or not to continue or extend the term of the First Revolving Loan is in the Lender&#146;s sole and absolute discretion. Notwithstanding the above provisions, the security interest granted to Lender in the Collateral as herein defined shall not in any way be limited to such amount or be dependent upon the use to which such funds are put but shall at all times fully secure the Obligations (as hereinafter defined).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The <I>Second Revolving Loan</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Subject to all the terms and conditions of this Agreement, including the preconditions to loan advances as herein provided and so long as there exists no Event of Default nor any event which with the passage of time, the giving of notice or both would constitute an Event of Default, Lender will make advances to Borrower (the &#147;Second Revolving Loan&#148;) in an aggregate principal amount outstanding at any time not to exceed Six Million Dollars ($6,000,000). Advances under the Second Revolving Loan shall be made in minimum amounts of One Hundred Thousand Dollars ($100,000) for each advance. The Second Revolving Loan shall be evidenced by a Second Revolving Loan Note in the form of <I>Schedule &#147;A-2&#148;</I> attached hereto and made a part hereof (referred to herein as the &#147;Second Revolving Loan Note&#148;). The aforesaid Second Revolving Loan Note and advances thereunder may be continued or extended by
mutual agreement of the parties; provided, however, the parties acknowledge that Lender is under no obligation to extend the term of the Second Revolving Loan and whether or not to continue or extend the term of the Second Revolving Loan is in the Lender&#146;s sole and absolute discretion. Notwithstanding the above provisions, the security interest granted to Lender in the Collateral (as hereinafter defined) shall not in any way be limited to such amount or be dependent upon the use to which such funds are put but shall at all times fully secure the Obligations (as hereinafter defined). It is the specific intent of the parties that advances under the Second Revolving Loan shall be made without regard to the Borrowing Base and that the entire principal amount of the Second Revolving Loan shall be available to Borrower.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.2 <I>Obligations</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">It is specifically agreed by Borrower and Lender that in the event that further financial accommodations of any type, including, but not limited to, letters of credit, coverage of overdrafts and the like, are now or hereafter extended by Lender to Borrower, the parties intend that this Agreement shall govern any and all such financial accommodations. An extension of the foregoing, all advances now or hereafter made by Lender to Borrower pursuant to this Agreement and/or any of the other Documents or any renewal or extensions thereof or otherwise, whether or not evidenced by notes, and all liability whether now existing or hereafter arising, absolute or contingent, direct or indirect with respect to or under letters of credit, banker&#146;s acceptances or guarantees now or hereafter established by Lender pursuant to this Agreement, together with all other obligations and indebtedness of every kind and nature, whether
now existing or hereafter arising, absolute or contingent, direct or indirect, under or pursuant to this Agreement or any of the other Documents or otherwise, of Borrower to Lender, to the extent the same are outstanding from time to time, are sometimes collectively referred to herein as the &#147;Obligations&#148;.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.3 <I>Interest</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">All amounts outstanding from time to time under either of the Notes shall bear interest at a per annum rate equal to a daily average of the Prime Rate as reported in the Wall Street Journal. Upon the occurrence of an Event of Default, interest shall accrue for the period of time for which any payment was due, during any applicable grace or cure period, and at all times while such default shall continue at a rate of five percent (5%) per annum greater than the rate then in effect. In the event that the total amount of any payment required under either of the Notes is not received by Lender within fifteen (15) days after its due date, Borrower shall pay to Lender a late charge equal to five percent (5%) of any such late payment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.4 <I>Repayment</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) The First Revolving Loan Note and the Second Revolving Loan Note shall provide that the payment of interest only for the actual number of days elapsed in each payment period on the daily outstanding principal balance of the First Revolving Loan and the Second Revolving Loan, respectively, shall be due and payable in monthly payments in arrears on the 10th day of each month commencing __________ 10, 2007 and continuing on the tenth (10th) day of each month thereafter until the entire outstanding principal balance and accrued interest has been paid in full.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) For all advances under the First Revolving Loan, Borrower shall repay said advances in full upon disposition of the Collateral on the basis of which such advances were made, with the understanding that &#147;disposition&#148; shall be defined as follows: (i) for auctions, the settlement date for the auction or whenever the Collateral is shipped, whichever is later, (ii) for dealer inventory financing, when Borrower receives good funds from the dealer; (iii) for loans to Borrower itself, as necessary to repay advances which are outstanding in an aggregate amount in excess of the limitations set forth in the first sentence of Section 1.1(a).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Notwithstanding anything herein, the entire outstanding principal balance of all advances under the First Revolving Loan and the Second Revolving Loan and accrued and unpaid interest thereon shall be due and payable on ____________, 2011 unless said maturity date shall be extended in writing by Lender in accordance with this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Payment of principal or interest shall be deemed received by Lender only upon receipt of good funds as determined by Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.5 <I>Limitation on Use of Funds</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Borrower may use advances of proceeds of the Loan only for (a) general corporate purposes of Borrower and (b) Permitted Inter-Company Transactions. Borrower agrees that to the extent any funds are made available to it under this Agreement, they shall be used in strict accordance with the policies set forth in <I>Schedule &#147;B&#148;</I> hereof, and that a material violation by Borrower of any such policy, which violation is not cured within ten (10) days after written notice of same is given by Lender to Borrower, shall be an Event of Default hereunder. Borrower shall certify to Lender quarterly, on each of the compliance certificates that Borrower delivers to Lender under clauses (i) and (ii) of Section 3.5, that Borrower has used the proceeds of each advance made to Borrower hereunder during the relevant fiscal quarter for purposes permitted under this Section 1.5. In addition, Borrower hereby agrees that Lender,
not more frequently than once each year, following at least thirty (30) days notice to Borrower, shall have the option to engage an independent accounting firm, at Borrower&#146;s expense, to conduct an independent compliance audit with respect to Borrower&#146;s obligations hereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.6 <I>Security</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">As security for the performance of Borrower&#146;s Obligations pursuant to this Agreement, and the other Documents, Borrower hereby mortgages, pledges and assigns to Lender, and gives and grants to Lender a security interest in all of its right, title and interest in and to the items and types of property described or referred to below, whether now owned or hereafter acquired, and the proceeds and products thereof (all of which property is herein collectively called the &#147;Collateral&#148;), which security interest has and shall remain first and prior to all other security interests therein and which Collateral shall remain free and clear of all mortgages, pledges, security interests, liens and other encumbrances and restrictions on the transfer thereof, except as specifically set forth below and in Schedule &#147;D&#148; attached hereto:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(i) <I>Accounts</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">All accounts (as such term is defined in the Uniform Commercial Code) of Borrower.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(ii) <I>Third-Party Owned Inventory</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">All inventories of every kind owned by third parties, presently existing or hereafter acquired, wherever located, including all goods intended for auction sale or owned by third parties, against which Borrower has loaned funds and which serve as collateral therefor, and all contract rights with respect to any of the same and all documents representing any of the same, all whether now or hereafter in Borrower&#146;s possession or in which Borrower may now have or may hereafter acquire any interest, all whether now existing or hereafter arising (the &#147;Third-Party-Owned Inventory&#148;). (For the avoidance of doubt, the Third-Party Owned Inventory shall not include inventory owned by third parties and consigned to Borrower, as to which Borrower has not made any loans to the consignor and with respect to which Borrower has no payment obligation to the consignor prior to the sale of such consigned inventory.) The
security interest in the Third-Party-Owned Inventory shall continue in all Collateral described in this paragraph (except goods sold as provided in Section 9-307(1) of the Uniform Commercial Code), notwithstanding the sale, exchange or other disposition hereof by Borrower (sale, exchange or other disposition of any of said Collateral is not authorized by Lender, other than sale in the ordinary course of business). </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iii) <I>Borrower-Owned Inventory</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">All items of Borrower&#146;s wholesale and retail inventory, presently existing or hereafter acquired, wherever located, and all contract rights with respect to any of the same and all documents representing any of the same, all whether now owned or hereafter acquired by Borrower or in which Borrower may now have or may hereafter acquire any ownership interest, all whether now existing or hereafter arising (the &#147;Borrower-Owned Inventory&#148;). The security interest in the Borrower-Owned Inventory shall continue in all Collateral described in this paragraph (except goods sold as provided in Section 9-307(1) of the Uniform Commercial Code), notwithstanding the sale, exchange or other disposition hereof by Borrower (sale, exchange or other disposition of any of said Collateral is not authorized by Lender, other than sale in the ordinary course of business).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iv) <I>Notes and Liens</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">All promissory notes and related loan and security documents relating to or evidencing any loans made by Borrower, whether presently existing or hereafter acquired by Borrower, or in which Borrower may now have or may hereafter acquire any interest, including without limitation, any ownership interest or security or collateral interest, all whether now existing or hereafter arising.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(v) <I>Documents</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">All documents and instruments relating to any and all loans made by Borrower, whether presently existing or hereafter acquired by Borrower, or in which Borrower may now have or may hereafter acquire any interest, including without limitation, any ownership interest or security or collateral interest, all whether now existing or hereafter arising.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(vi) <I>Records</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">All books, records and other documents of every nature relating to the above described types of property, including, without limitation, all tapes, cards, discs, cassettes, papers, documents and computer software in the possession or control of Borrower, or any Affiliate of Borrower, all whether now owned or hereafter acquired by Borrower or in which Borrower now has or may hereafter acquire any interest, including without limitation, any ownership interest or security or collateral interest, all whether now existing or hereafter arising.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(vii) <I>Insurance Policies</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">All rights in, to and under policies of insurance on said Inventory, including claims or rights to payment and proceeds heretofore or hereafter arising therefrom, with respect to the herein described types of property, all whether now owned or hereafter acquired by Borrower or in which Borrower may now have or may hereafter acquire any interest, including without limitation, any ownership interest or security or collateral interest, all whether now existing or hereafter arising.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(viii) <I>Proceeds and Products</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">All proceeds and all products of all Collateral described above. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.7 <I>Financing Statements</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower hereby authorizes Lender to file financing statements pursuant to the provisions of the Uniform Commercial Code with respect to the Collateral in which Lender has been granted a security interest by Borrower pursuant to the provisions of this Agreement and the other Documents. Borrower hereby agrees to execute any and all further documents deemed necessary by Lender, in its sole discretion, to perfect its security interest in the Collateral and authorizes the Lender to file any and all further documents deemed necessary by Lender, in its sole discretion, to perfect its interest in the Collateral, including without limitation, any UCC financing statements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.8 <I>[Intentionally Omitted.]</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1.9 <I>Insurance on the Collateral</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower is contemporaneously with the execution hereof delivering to Lender a Certificate or Certificates of Insurance (and shall deliver the originals of the policies referred to herein upon request of Lender), respecting hazard (including, but not limited to, fire and extended coverage including &#147;all risk&#148;), liability, loss of rental and flood (if any of the Borrower&#146;s tangible assets are located on premises in a special flood hazard area), with coverage for the fair market value at the time of a loss of the Collateral and in an amount of at least Two Million ($2,000,000) Dollars with no co-insurance. Borrower shall further be required to provide evidence to Lender of adequate property insurance for all Collateral, which shall list the Lender as loss payee as its interests may appear.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 2. <I>Representations and Warranties</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower hereby represents and warrants to Lender that: </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.1 <I>Incorporation and Qualification</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower is a corporation duly organized and validly existing and in good standing under the laws of Delaware, has the corporate power to own its assets and conduct its business as it is now being conducted and is qualified to do business in each jurisdiction wherein the nature of the business conducted by it or the property owned or held under lease by it make such qualification necessary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.2 <I>Capitalization, Business and Subsidiaries</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Except as disclosed on <I>Schedule &#147;F&#148;</I> attached hereto and made a part hereof, as of the date of this Agreement, Borrower does not own stock of any other corporation, active or inactive. The information set forth on <I>Schedule&nbsp;&#147;G&#148;</I> attached hereto with respect to Borrower and as to Borrower&#146;s authorized, issued and outstanding capital stock, all of which stock has been duly authorized and validly issued and is fully paid and non-assessable, the holders of such stock, the officers, the directors, the principal and other places of business, the place where its Inventory, Equipment and Records of its Accounts are kept, and Borrower&#146;s present business activities and status, is complete and accurate as of the date of this Agreement. As of the date of this Agreement, Borrower neither has a place of business nor maintains or stores any of the Collateral at any location other than those set forth in
<I>Schedule &#147;G&#148;</I> attached hereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.3 <I>Corporate Authorization</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower has the corporate power to execute, deliver, and carry out the terms and provisions of this Agreement and the other Documents to which it is a party and has taken all necessary corporate and legal action with respect thereto (including, without limitation, obtaining any consent of stockholders required by law or its Certificate of Incorporation or By-Laws), and this Agreement and such other Documents to which it is a party have been duly authorized, executed and delivered by it and constitute its valid, legal and binding agreement and obligation in accordance with the terms thereof and Lender is entitled to the benefits thereof in accordance with such terms.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.4 <I>Financial Statements</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">There have been furnished to Lender financial statements of Borrower described or referred to in <I>Schedule &#147;H&#148;</I> attached hereto and made a part hereof. Each such financial statement, including the comments and notes contained therein, fairly presents the financial position of the entity or business to which such statement applies at the date thereof and the results of its operations for the period purported to be covered thereby. Each such financial statement has been prepared in conformity with Generally Accepted Accounting Principles applied on a consistent basis throughout all periods involved, subject, in the case of unaudited statements, to normal year-end audit adjustments.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.5 <I>Indebtedness</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As of the date of this Agreement, Borrower has no material outstanding indebtedness except for liabilities reflected in said financial statements and liabilities incurred since the date thereof to trade creditors in the ordinary course of business and/or except as described or set forth in <I>Schedule &#147;I&#148;</I> attached and made apart hereof and has performed and complied with all of the terms of such Indebtedness and all instruments and agreements relating thereto and no default exists as of the date hereof nor does there exist any state of facts which would after notice or lapse of time, or both, constitute a default under or with respect to any such Indebtedness, instruments or agreements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.6 <I>Title to Properties and Assets; Liens, etc.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower has good and marketable title to its properties and assets, including, but not limited to the Collateral, free and clear of any mortgage, pledge, lien, lease, encumbrance or charge other than those set forth on <I>Schedule&nbsp;&#147;J&#148;</I> attached hereto and made a part hereof, with respect to assets (if any) other than the Collateral. No financing statement under the Uniform Commercial Code which names Borrower as debtor has been filed in any state or other jurisdiction which covers the Collateral and has not been terminated except as set forth on <I>Schedule &#147;J&#148;.</I> As of the date of this Agreement, Borrower has not signed any such financing statement or any security agreement authorizing any mortgagee or secured party thereunder to file any such financing statement on the Collateral or its assets except in connection herewith or as set forth on <I>Schedule &#147;J&#148;</I> attached hereto. As of the date
of this Agreement, Borrower is not a consignor or lessee under any consignment agreement or lease agreement, except as described in <I>Schedule &#147;J&#148;</I> attached hereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.7 <I>Patents, Trademarks, etc.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower owns or holds licenses for the use of or has the right to use all patents, trademarks, service marks, trade names, copyrights and rights necessary for the conduct of its business as now conducted and as contemplated, including those identified in <I>Schedule &#147;K&#148;</I> attached hereto and made a part hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.8 <I>Litigation, etc.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Except as set forth in <I>Schedule &#147;L&#148;</I> attached hereto and made a part hereof, as of the date of this Agreement, there are no actions, proceedings or investigations pending or to the knowledge of Borrower threatened (or any basis therefor known to it) which, either in any case or in the aggregate, might result in any material adverse change in Borrower&#146;s business, prospects, profits, properties, liabilities, operations, or conditions (financial or otherwise), or which might affect its ability to perform this Agreement or any other Documents executed by it.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.9 <I>Changes in Condition</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Since the date of the financial statements referred to in <I>Schedule &#147;H&#148;</I> there has been no material adverse change, by reason of any matter or cause whatsoever, in Borrower&#146;s business, prospects, profits, properties, liabilities, operations or condition (financial or otherwise).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.10 <I>Tax Returns and Payments</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">All tax returns and reports required by law to be filed by Borrower have been duly filed or the time for filing has been extended and all taxes, assessments, fees and other governmental charges (U.S., foreign, state or local or other) upon Borrower or upon any of its properties, assets, income or franchises, which are due and payable have been paid. To the best of Borrower&#146;s knowledge the provisions on Borrower&#146;s books respectively, regarding income taxes for all fiscal periods to date are adequate according to Generally Accepted Accounting Principles.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.11 <I>Compliance With Instruments, Charter and Law</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower is in full compliance with and is not in-violation or default of any term or provision of (a) its charter, Certificate of Incorporation or by-laws, if a corporation, (b) any loan agreement, debt instrument, mortgage or indenture, (c) any other material contract, agreement or instrument, (d) any judgment, decree or order, nor has it, he or she been notified of any violation of any statute, rule or regulation including but not limited to the Occupational Safety and Health Act and the Employee Retirement Income Security Act (&#147;ERISA&#148;), and the regulations issued by the Department of Environmental Protection and (e) any licensing or governmental requirement. The execution, delivery, performance of, and compliance with this Agreement or any of the other Documents will not result in any such violation or default or be in conflict with any such term or provision or result in the creation of any mortgage, lien, encumbrance or
charge upon any of Borrower&#146;s properties or assets except in favor of Lender and there is no such term or provision which materially adversely affects or in the future may materially adversely affect its business, prospects, profits, properties, liabilities, operations or condition (financial or otherwise) or its ability to perform this Agreement or any of the other Documents executed by Borrower. As of the date of this Agreement, all material contracts, agreements, mortgages, indentures, instruments, judgments, decrees and orders to which Borrower is a party or which are effective against it are listed in <I>Schedule &#147;M&#148;</I> attached except entered into in the normal course of business.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.12 <I>Governmental Consents, etc.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">No consent, approval or authorization for designation, declaration or filing with any governmental authority, federal, foreign or other is required in connection with the execution and delivery of this Agreement or the Documents or the consummation of any transaction contemplated hereby or thereby by Borrower. While no consent is required by the Securities and Exchange Commission, Borrower will be required to file a form 8-K, and will comply with such requirements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.13 <I>Solvency</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower is solvent, having assets of a value which exceeds the amount of its liabilities and is able to and will be able to meet its debts as they mature and has adequate capital to conduct the business in which it is engaged and is about to engage.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.14 <I>Change of name, etc.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As of the date of this Agreement, except as set forth on <I>Schedule &#147;N&#148;</I> attached hereto and made a part hereof, Borrower has not within five (5) years changed its name, been a party to any consolidation or merger other than the Merger, acquired all or a substantial portion of the assets of any Person or purchased any of its or his assets included in the Collateral from a Person not in the business of selling such assets.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.15 <I>Full Disclosure</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The financial statements referred to in Section 2.4 hereof do not, nor does this Agreement or any Schedule hereto or any other Document, certificate or statement furnished to Lender by Borrower in connection with this Agreement, contain any untrue statement of a material fact or omit to state a fact necessary in order to make the statements contained therein and herein not misleading. Borrower is not aware of any fact which materially adversely affects or in the future may materially and adversely affect its business, prospects, profits, properties, liabilities, operations or condition (financial or otherwise), or its ability to perform this Agreement or any other Document executed by it, which has not been set forth or referred to herein, in any report or statement filed by Borrower or Parent with the Securities and Exchange Commission or in a certificate or statement furnished by Borrower to Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2.16 <I>No Event of Default</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">No Event of Default or event or condition that with the passage of time or giving of notice or both might become an Event of Default has occurred or exists.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Section 3. <I>Affirmative Covenants</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Except with the prior written consent of Lender, Borrower covenants and agrees that so long as there is outstanding any portion of the First Revolving Loan or the Second Revolving Loan, or any agreement of Lender to make advances to Borrower, it will comply or cause compliance with the following provisions:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>3.1 <I>Punctual Payment</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower will duly and punctually pay all principal, interest, charges and other items included in the First Revolving Loan or the Second Revolving Loan which is owing by it in accordance with the provisions hereof and of the other Documents.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.2 <I>Prompt Payment of Taxes, Mortgages, Leases and Indebtedness</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower will promptly pay and discharge, or cause to be paid and discharged, on the date due so as to prevent the accruing of interest thereon, all lawful taxes, assessments, and governmental charges or levies imposed upon items of the Collateral owned by it, or in which it has an interest or upon its income, profits, property or business or of any of its Subsidiaries. Borrower will promptly pay or cause to be paid when due (or in conformity with customary trade terms) all of its other Indebtedness incident to its operations and will promptly pay and perform all of its obligations under leases of real and personal property and under material contracts and will promptly notify Lender of any default or notice of alleged default received with respect to any such Indebtedness, lease or contract.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.3 <I>Conduct of Business</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower will do all things necessary to preserve, renew and keep in full force and effect and in good standing, its current corporate existence, qualification and any franchises, licenses, patents, trademarks and items necessary to continue its business. It will maintain its properties and assets in good order and repair, all in compliance with applicable federal, state, and local judgments, decrees, orders, statutes, rules and regulations, including but not limited to state and federal environmental regulations and those of the Occupational Safety and Health Administration.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.4 <I>Insurance</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower will maintain insurance in amounts, coverage and with insurers satisfactory to Lender with respect to the Collateral owned by it, or in which they have an interest and their other properties and business against loss or damage to the extent that property of similar character is usually so insured by other companies engaged in a similar business. Without limiting the foregoing, such insurance shall include (a) liability insurance in such amounts and covering such risks as Lender may reasonably require, (b) all worker&#146;s compensation and other employees&#146; liability insurance as may be required by law, and (c) property insurance with respect to the items of the Collateral constituting tangible personal property and fixtures, and with respect to the other properties both real and personal, including, if necessary, flood insurance, to the full extent of the insurable value thereof, and covering such risks as Lender may
reasonably require. All of Borrower&#146;s property insurance policies with respect to the Collateral shall contain loss payable and/or mortgagee clauses in form and substance reasonably satisfactory to Lender, naming Lender as loss payee as appropriate and providing (i) that all proceeds thereunder shall be payable to Lender as its interests may appear, and (ii) that such insurance shall not be affected by any act or neglect of the insured or owner of the property described in said policy, and (iii) that such policy and loss payable clause may not be canceled, amended or terminated unless Lender has received written notice thereof at least thirty (30) days&#146; prior to the effective date of such cancellation, amendment or termination. Borrower will furnish a certificate with respect to the insurance at the time which is in force pursuant to this Section 3.4, specifying the amount and character of coverage, identifying the insurers and certifying as to no default in the payment of current premiums
thereon and will furnish Lender with original or duplicate original copies of all policies. All insurance proceeds for any occurrence or any series of related occurrences which exceed Ten Thousand Dollars ($10,000) and which are subject to a security interest under this Agreement may, upon Lender&#146;s request, in Lender&#146;s sole and absolute discretion, be paid to Lender and shall be applied by Lender to the payment of any of the principal, whether or not due, or interest or such other obligation or Indebtedness which constitutes a part of the Loan as Lender may determine in its sole discretion. Proceeds of Ten Thousand Dollars ($10,000) or less shall be payable to Borrower for general corporate purposes. Borrower does hereby grant Lender an Irrevocable Power of Attorney and appoint Lender as its attorney-in-fact (said power of Attorney being coupled with an interest) for the sole purpose of executing, negotiating and signing any drafts, checks, instruments or documents to carry out the terms
hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.5 <I>Accounting Financial Statements and Other Information</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower will maintain a system of accounts established and administered in accordance with Generally Accepted Accounting Principles consistently applied. Borrower will deliver or cause to be delivered to Lender:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Financial Reports</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(i) as soon as available and in any event within forty-five (45) days after the end of each of the first three (3) fiscal quarters of each fiscal year of Parent, consolidated and consolidating financial statements of Parent and its Subsidiaries (including, after the Merger, Borrower), including a balance sheet as of the end of period, and statements of income for the period(s) that have been included as part of the consolidated financial statement disclosure of Parent&#146;s SEC Form 10-Q filing, which in the case only of the consolidated financial statements of Parent, have been reviewed by Parent&#146;s appointed independent accounting firm, along with statements of cash flows for that period. In connection with the delivery of such quarterly financial statements, an officer, on behalf of Borrower, will provide written representation that there is no knowledge of an Event of Default or an event that with notice or
lapse of time or both could constitute and Even of Default, has occurred and is continuing or if in the opinion of said individual an Event of Default or such an event has occurred and is continuing a statement as to the nature thereof and the action which Borrower proposes to take with respect thereto (the provision for such a statement herein shall in no way be construed as a consent to the existence of such an Event of Default and of the granting of time to cure);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(ii) as soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Parent, consolidated and consolidating financial statements of Parent (including, after the Merger, Borrower), including a balance sheet as of the end of such fiscal year and statements of income for the year(s) that have been included as part of the consolidated financial statement disclosure of Parent&#146;s SEC Form 10-K filing, which in the case only of the consolidated financial statements of Parent, have been audited by Parent&#146;s appointed independent accounting firm, and statements of cash flow for that period. In connection with the delivery of such annual financial statements, an officer, on behalf of Borrower, will provide written representation that there is no knowledge of an Event of Default or an event that with notice or lapse of time or both could constitute an Event of Default, has
occurred and is continuing or if in the opinion of such accounting firm such an Event of Default has occurred and is continuing, a statement as to the nature thereof (the provisions for such a statement herein shall in no way be construed as a consent to the existence of such an Event of Default or the granting of time to cure).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iii) within ten (10) days after filing thereof copies of all federal and state income tax returns for Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iv) such financial information from Borrower as shall reasonably be requested by Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(v) as soon as reasonably practicable, upon reasonable request of Lender such other data and information (financial and otherwise) bearing upon or related to Borrower&#146;s financial condition, results of operations, assets and/or Borrower&#146;s projections of cash flow and profit and loss, all as Lender from time to time may reasonably request.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(vi) within fifteen (15) days after the end of each calendar month, a list of the Borrower&#146;s aged accounts receivable and a complete list of Borrower&#146;s inventory duly certified by the chief financial officer of Borrower and such other information relating to Borrower&#146;s accounts receivable as Lender shall request at such times as Lender shall request upon such forms and using such procedures as Lender shall reasonably require.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.6 <I>Inspection</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower will permit Lender and any authorized representatives of Lender, at Lender&#146;s sole cost and expense and upon reasonable notice to Borrower, to visit and inspect any of its offices or any of its or his Affiliates, including all items of Collateral and its and their books and records, including books and records relating to accounts receivable (and to make extracts therefrom), and to discuss its and their affairs, finances and accounts, with its and their employees with Borrower&#146;s consent, all at such times during normal business hours and as often and continuously as may be reasonably requested by Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.7 <I>Notice of Certain Events and Changes</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As soon as reasonably practicable after becoming aware of any condition, event or state of facts which constitutes an Event of Default under this Agreement or which, after notice or lapse of time, or both, would constitute an Event of Default, Borrower will give written notice to Lender specifying the nature and period of existence thereof. Borrower will promptly give Lender written notice of any condition, event or state of facts which causes or may cause material loss or depreciation in the value of the Collateral and of the commencement or threat of any action, proceeding or investigation, or the occurrence or existence of any other event, matter or cause whatsoever, which either in any case or in the aggregate results or might result in any material adverse change in its business, prospects, profits, properties, operations or condition (financial or otherwise). Borrower will give Lender written notice of any change in its place or
places of business, any change of location of any item of the Collateral having a book value in excess of Fifty Thousand Dollars ($50,000), except as items of Collateral may be moved in the ordinary course of business.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.8 <I>Application of Proceeds</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower agrees that it will apply the funds provided to it pursuant to this Agreement in accordance with the terms of this Agreement. Without limiting the generality of the foregoing, Borrower agrees that it will not, directly or indirectly, apply any part of such proceeds to the purchasing or carrying of any &#147;margin stock&#148; within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, or for any use which will cause a violation of any other regulation of the Board of Governors of the Federal Reserve System or of any regulations, interpretations or rulings thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.9 <I>Governmental Notices</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As soon as reasonably practicable upon the issuance thereof, Borrower will send to Lender a copy of all orders issued by any federal, state or municipal regulatory authority under any laws or regulations adopted thereby, which, if enforced, would have a material adverse effect upon its condition whether financial, operating, or otherwise, and further, Borrower will as soon as reasonably practicable send to Lender copies of all reports or other materials filed by it with or issued to it by the U.S. Securities and Exchange Commission, and all reports, notices or statements sent by Borrower to its stockholders.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.10 <I>Maintenance of Property and Collateral</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower shall maintain its properties and the Collateral in good repair, working order and condition and make all needed and proper repairs, renewals, replacements, additions or improvements thereto and immediately notify Lender of any event causing loss or depreciation in the value of the Collateral and the amount of such loss or depreciation. Borrower shall defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein, and in the event Lender&#146;s security interest in the Collateral or a part thereof would be impaired by an adverse decision, allow Lender to contest or defend any such claim or demand in Borrower&#146;s name, at Borrower&#146;s reasonable cost, charge and expenses, and pay to Lender upon demand all costs and expenses, including without limitation, attorney&#146;s fees incurred by Lender in connection therewith.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3.11 <I>Payment of Lender Expenses</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower shall pay to Lender on demand any and all reasonable expenses including attorneys fees incurred or expended by Lender in the collection or attempted collection of the Obligations, in protecting and/or enforcing the rights of Lender against Borrower, and in sustaining and/or enforcing the security interest and other liens, if any, granted to Lender hereunder and under all related agreements, instruments and documents. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 4. <I>Negative Covenants</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Except with the prior express written consent of Lender, Borrower covenants and agrees that so long as there is outstanding any portion of either of the Loans, or so long as this Agreement has not been terminated if there is no amount outstanding under either of the Loans, it will not:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.1 <I>Liens</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Directly or indirectly, create, incur, assume or permit to exist any mortgage, lien, charge or encumbrance on or pledge or deposit of or conditional sale, lease or other title retention agreement with respect to any Collateral, whether now owned or hereafter acquired, or be bound by or subject to any agreement or option to do so, provided that the foregoing restrictions shall not apply to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) liens for taxes, assessments or governmental charges or levies the payment of which is not at the time required by Section 3.2;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) liens incurred or deposits made in the ordinary course of business in connection with worker&#146;s compensation or unemployment insurance or to secure the performance of tenders, statutory obligations, surety and appeal bonds, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) liens, charges and encumbrances related to the conduct of its business or the ownership of its or his properties or assets which are not incurred in connection with the borrowing of money and which in the aggregate are not material;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) statutory or common law possessory liens for charges incurred in the ordinary course of business the payment of which is not yet due;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) the mortgages, liens and encumbrances referred to or described in <I>Schedules &#147;D&#148;</I> and <I>&#147;J&#148;</I> attached hereto;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) liens created hereunder;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.2 <I>Restrictions on</I> <I>Indebtedness</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Directly or indirectly, create, incur, assume, guarantee, agree to purchase or repurchase, pay or provide funds in respect of, or otherwise become or be or remain liable, contingently, directly or indirectly, with respect to any Indebtedness other than:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Indebtedness hereunder;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Current liabilities for trade and other obligations incurred in the ordinary course of its business not as a result of borrowing;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) presently existing indebtedness specifically described in <I>Schedule &#147;I&#148;</I> attached hereto, none of which shall be prepaid without Lender&#146;s prior written consent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Indebtedness in respect of endorsements made in connection with the deposit of items for credit or collection in the normal and ordinary course of business.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.3 <I>Restrictions on Investments, Loan, etc.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Purchase or otherwise acquire or own any stock or other securities or Indebtedness of any other Person, or make or permit to be outstanding any loan or advance or capital contribution to any other Person, other than:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) presently outstanding loans, advances and investments described in <I>Schedules &#147;H&#148;</I> and <I>&#147;I&#148;</I> attached hereto;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Indebtedness of customers for merchandise sold or services rendered in the ordinary course of business;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Indebtedness pursuant to Third Party Loans made in accordance with the policies listed in Schedule B;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) investments in bills or bonds issued by the government of the United States of America and/or Certificates of Deposit issued by a bank having a net worth of at least Fifty Million Dollars ($50,000,000) and/or securities issued by and purchased from Lender; and </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Permitted Inter-Company Transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.4 <I>Stock Issuance, Dividends, Distributions, Redemptions and Directors&#146; Fees</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Issue any additional shares of stock, directly or indirectly, declare, order, pay, make or set apart any sum or property for the redemption, retirement, purchase or other acquisition, direct or indirect, of any shares of its stock of any class now or hereafter outstanding or for the payment of any dividends on any of such stock, except for Permitted Inter-Company Transactions and quarterly dividends payable concurrently with payments to Lender under Section 9 hereof, or pay any directors&#146; fees.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.5 <I>Sale of Assets and Collateral, Consolidation, Merger or Acquisition of Assets</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Directly or indirectly, sell, abandon or otherwise dispose of the Collateral or any part thereof, except for sales and consignments of Inventory in the ordinary course of Borrower&#146;s business, or replacement with Collateral of like value and quality, or directly or indirectly sell, abandon or otherwise dispose of all or any portion of its properties or assets or, except pursuant to the Merger, consolidate with or merge into any other corporation, or permit any other corporation to consolidate with or merge into it or acquire all or a substantial portion of the assets of another Person or form or acquire any Subsidiary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.6 <I>Transactions With Affiliates</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Enter into any transaction with any Affiliate other than in the ordinary course of business and on terms not less favorable to it than are at the time available to it from any Non-Affiliate, except for Permitted Inter-Company Transactions and as otherwise authorized by this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.7 <I>Partnerships, Joint Ventures, Other Businesses</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Create or participate in the creation of any partnership, joint venture, corporation, or other entity (including but not limited to any subsidiaries) or engage in any business other than the business presently conducted by it, except in the ordinary course of business.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.8 <I>Subordinate Debt Payments</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Pay principal or interest on Subordinate Debt (present or future) except as authorized in this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.9 <I>Expenditures for Capital Assets</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Make any expenditure for capital assets (other than for routine repairs and maintenance which are not required to be capitalized as hereinafter set forth) unless, immediately after giving effect thereto the aggregate amount expended or to be expended on account of all such expenditures by the Borrower in any fiscal year commencing with the current fiscal year of Borrower would not exceed the amount of One Hundred Thousand Dollars ($100,000). The following shall be deemed to be expenditures for capital assets as subject to the limitations of this Section 4.10:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Expenditures for acquisition, major repairs and maintenance which, in accordance with generally accepted accounting principles, are or should be capitalized, and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) All lease rentals and other amounts payable under leases entered into after the date hereof whether &#147;true leases&#148; or finance leases other than renewals and extensions of leasing existing on the date hereof and all amounts payable under contracts or arrangements for the purchase of property for payment of the purchase price for such property as deferred in whole or in part.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4.10 <I>Changes in Locations, Name, etc.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower shall give written notice as soon as practicable, and shall take such steps as Lender may deem necessary or advisable to continue the perfection and priority of the security interest granted pursuant hereto, prior to taking any of the following actions: (i) changing the location of its chief executive office; (ii) permitting any Inventory to be kept at a location other than that specified in <I>Schedule G</I>; (iii) changing its name, existence as a corporation, jurisdiction of incorporation or formation, or corporate structure to such an extent that any financing statement filed by Lender in connection with this Agreement would become seriously misleading.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 5. <I>Events of Default</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If any one or more of the following events (&#147;Events of Default&#148;) shall occur:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) If Borrower shall fail to make payment of any part or installment of principal or interest on any advance made under either of the Loans or on any other Obligations when any such payment shall be due and payable, whether at any stated maturity or by demand, acceleration or otherwise; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) If Borrower shall be in default in the performance of or compliance with any other term, covenant or condition applicable to it contained in this Agreement or contained in any other Documents, and shall have failed to cure such default for thirty (30) days after receipt of written notice from the Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) If any representation or warranty made by or on behalf of Borrower in this Agreement or in the Schedules hereto, or in any of the other Documents, or in connection with the transactions contemplated hereby and thereby shall be false or incorrect in any material respect; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) If Borrower shall default in the payment of any Indebtedness for borrowed money, including, but not limited to, the indebtedness which is referred to in <I>Schedule &#147;I&#148;</I> attached hereto or shall default with respect to any of the terns of any evidence of such Indebtedness or of any indenture or other agreement relating thereto, or if Borrower shall commit any material breach or be in default under any contract set forth in <I>Schedule &#147;M&#148;</I> attached hereto; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) If Borrower shall make an assignment for the benefit of creditors, or shall admit in writing an inability to pay debts as they become due, or shall file a voluntary petition in bankruptcy, or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future statute, law or regulation, or shall file any answer admitting or shall fail to deny the material allegations of a petition filed against it for any such relief, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of itself or of all or any substantial part of its properties, or its directors or majority stockholders shall take any action looking to its dissolution or liquidation, or it shall cease doing business as a going concern; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) If, within ninety (90) days after the commencement of any proceeding against Borrower seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such proceeding shall not have been dismissed, or if, within ninety (90) days after the appointment, without its consent or acquiescence of any trustee, receiver or liquidator of itself or himself or of all or any substantial part of its properties, such appointment shall not have been vacated;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) If an event of default shall occur under a Third Party Loan and is continuing or an event which pursuant to the provisions of the Third Party Loan Documents with the lapse of time and/or notice specified therein would become such an event of default has occurred and is continuing; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt">then, and in any such event, in addition to its rights and remedies under this Agreement, the other Documents and any other instruments, Lender may at its option declare the Notes and the Obligations or any portion thereof to be immediately due and payable, whereupon the same shall forthwith mature together with interest accrued thereon and together with any and all costs of collection, including, but not limited to, reasonable attorney&#146;s fees without notice and without presentment, demand or protest, all of which are hereby waived.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 6. <I>Payment Terms</I>. </B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Payment of all sums due hereunder shall become due and shall be payable on __________, 2011. Borrower shall make each payment of principal of, and interest on, the Loans and of fees and all other amounts payable by Borrower under this Agreement, in good funds no later than 5:00 p.m. (Eastern time) on the date when due and payable, without condition or deduction for any counterclaim, defense, recoupment or setoff, in Federal or other funds immediately available to Lender at its address referred to herein and in the Note. All payments received by Lender after 5:00 p.m. (Eastern time) shall be deemed to have been received by Lender on the next succeeding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon at the then applicable rate, shall be payable for such extended time. Notwithstanding the foregoing, upon the occurrence and continuance of an Event of Default, all sums
due hereunder shall, at the option of the Lender, become immediately due and payable upon written notice to Borrower.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 7. <I>Remedies, Provisions re: Collateral, etc.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In the event of an occurrence of an Event of Default which has not been cured or waived within thirty (30) days after notice from Lender to Borrower of such occurrence, Lender:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) may proceed to protect and enforce its rights if Lender deems necessary to do so by suit in equity, action at law or other appropriate proceedings, whether for the specific performance of any agreement contained herein or in any other Document, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any right, power or remedy granted thereby or by law, equity or otherwise.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) without limitation of any rights and remedies of Lender as a secured party under the Uniform Commercial Code and any rights or remedies set forth in any of the Documents, Lender shall have all of the following rights and remedies with respect to the Collateral or any portion thereof:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(i) Lender may, at any time and from time to time, with or without judicial process and the aid or assistance of others, reasonably enter upon any premises in which any of the Collateral may be located and, without resistance or interference by Borrower, take possession of the Collateral and/or dispose of any part or all of the Collateral on any such premises; and/or require Borrower to assemble and make available to Lender at the expense of Borrower any part or all of the Collateral at any place or time designated by Lender which is reasonably convenient to Borrower and Lender; and/or remove any part or all of the Collateral from any premises on which any part may be located for the purpose of effecting sale or other disposition thereof and/or sell, resell, lease, assign and deliver, grant options for or otherwise dispose of any or all of the Collateral in its then condition or following any commercially reasonable
preparation or processing, at public or private sale or proceedings, by one or more contracts, in one or more parcels, at the same or different times, with or without having the Collateral at the place of sale or other disposition, for cash and/or credit and upon any reasonable and customary terms, at such place(s) and time(s) and to such Persons as Lender shall deem best, all without demand for performance or any notice or advertisement whatsoever, except that the owner of the items to be sold shall be given fifteen (15) business days&#146; written notice of the place and time of any public sale or of the time after which any private sale or other intended disposition is to be made, which notice Borrower hereby agrees shall be reasonable notice thereof. If any of the Collateral is sold by Lender upon credit or for future delivery, Lender shall not be liable for the failure of the purchaser to pay for same and in such event Lender may resell such Collateral. Lender may buy any part or all of the
Collateral at any public sale and if any part or all of the Collateral is of a type customarily sold in a recognized market or is of the type which is the subject of widely distributed in standard price quotations Lender may buy at private sale and may make payment therefor by application of all or a part of either Loan.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(ii) Lender shall apply the cash proceeds from any sale or other disposition of the Collateral <I>first</I>, to the reasonable expenses of retaking, holding, preparing for sale, selling, leasing and otherwise disposing of such Collateral, and to reasonable attorneys&#146; fees and all legal expenses, travel and other expenses which are to be paid or reimbursed to Lender pursuant hereto or pursuant to the other Documents, <I>second</I>, to all accrued interest, fees and charges outstanding with respect to the Loans, <I>third</I>, to all other outstanding portions of the Loans, <I>fourth</I>, if there is any surplus, to any other secured parties having an interest in the Collateral known to Lender in accordance with their interests, and fifth, if there is any surplus, to Borrower; provided, however, that Borrower shall remain liable with respect to unpaid portions of the Loans.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iii) Any of the proceeds of the Collateral received by Borrower after demand by Lender for repayment of all or any part of the Loans, shall not be commingled with any other of its property but shall be segregated, held by Borrower in trust as the exclusive property of Lender, and it will immediately deliver to Lender the identical checks, monies, or other proceeds of Collateral.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iv) At its option, Lender may pay for insurance on the Collateral and taxes, assessments or other charges which Borrower fails to pay in accordance with the provisions hereof or of any related agreement, instrument or document and may discharge any security interest or lien upon the Collateral. No such payment or discharge of any such security interest or lien shall be deemed to constitute a waiver by Lender of the violation of any covenant by Borrower as a result of Borrower&#146;s failure to make any such payment or Borrower&#146;s suffering of any such security interest or lien. Any payment made or expense incurred by Lender pursuant to this or any other provisions of this Agreement shall be added and become a part of the Obligations of Borrower to Lender, shall bear interest at a rate per annum as provided for in the Notes, and shall be payable on demand.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 8. <I>Cumulative Remedies; No Waivers, etc.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">No right, power or remedy granted to Lender in this Agreement or in the other Documents is intended to be exclusive, but each shall be cumulative and in addition to any other rights, powers or remedies referred to in this Agreement, in the other Documents or otherwise available to Lender at law or in equity, and the exercise or beginning of exercise by Lender of any one or more of such rights, powers or remedies, shall not preclude the simultaneous or later exercise by Lender of any or all of such other rights, powers or remedies. No waiver by, nor any failure or delay on the part of Lender in any one or more instances to insist upon strict performance or observance of one or more covenants or conditions hereof, or of the other Documents shall in any way be, or be construed to be, a waiver thereof or to prevent Lender&#146;s rights to later require the strict performance or observance of such covenants or conditions, or otherwise
prejudice Lender&#146;s rights, powers or remedies.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 9. <I>Partial Invalidity, Waivers</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) If any term or provision of this Agreement or any of the other Documents or the application thereof to any Person or circumstance shall, to any extent, be invalid or unenforceable by reason of any applicable law, the remainder of this Agreement and the other Documents, or application of such term or provision to Persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement and the other Documents shall be valid and be enforced to the fullest extent permitted by law. To the full extent, however, that the provisions of any such applicable law may be waived, they are hereby waived by Borrower to the end that this Agreement and the other Documents shall be deemed to be valid and binding obligations enforceable in accordance with their terms.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) To the extent permitted by applicable law, Borrower hereby waives presentment, demand, protest, notice of protest, notice of default or dishonor, notice of payments and non-payments, or of any default.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE, JUDICIAL HEARING OR PRIOR COURT ORDER TO WHICH IT MIGHT OTHERWISE HAVE THE RIGHT UNDER ANY FEDERAL OR STATE STATUTE OR REGULATION IN CONNECTION WITH THE OBTAINING BY LENDER OF ANY PREJUDGMENT REMEDY BY REASON OF THIS AGREEMENT, OR BY REASON OF BORROWER&#146;S OBLIGATIONS OR ANY RENEWALS OR EXTENSIONS OF THE SAME. BORROWER ALSO WAIVES ANY AND ALL OBJECTION WHICH IT MIGHT OTHERWISE ASSERT, NOW OR IN THE FUTURE, TO THE EXERCISE OR USE BY LENDER OF ANY RIGHT OF SET-OFF, REPOSSESSION OR SELF HELP AS MAY PRESENTLY EXIST UNDER STATUTE OR COMMON LAW.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 10. <I>Definitions</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As used herein, the following terms have the following meanings:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Account Debtor</B>: means a Person who is obligated on an account.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Agreement</B>: this Amended and Restated Loan and Security Agreement, as it may be amended, amended and restated, renewed or supplemented from time to time.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Affiliate</B>: with reference to any Person, any director, officer or employee of such Person, any corporation, association, firm or other entity in which such Person has a direct or indirect substantial interest or by which such Person is directly or indirectly controlled or is under direct or indirect substantial common control with such Person. For purposes of this Agreement, Borrower, Parent and the Parent Subsidiaries are Affiliates of one another.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Bankruptcy Code</B>: Title 11 of the United States Code (11 U.S.C. Section 101 <I>et seq.</I>), as amended from time to time, or any successor statute.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Borrower</B>: the meaning specified on page 1.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Borrowing Base</B>: as of any date, an amount equal to the sum of: (a) seventy percent (70%) of Eligible Accounts on such date, plus (b) seventy percent (70%) of the value of Eligible Inventory, based upon the lower of cost (computed on a first-in-first-out basis), fair market value or orderly liquidation value as determined by Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Borrowing Base Certificate</B>: a certificate in the form of <I>Schedule &#147;O&#148;</I> attached hereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Collateral</B>: the meaning specified in Section 1.6.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Documents</B>: this Agreement, the Notes, all collateral assignments of the notes and liens described in Section 1.6(a)(iv), all UCC-1 Financing Statements, and all other agreements, documents and instruments heretofore, now or hereafter executed and delivered pursuant to this Agreement or pursuant to any of the aforesaid documents.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Eligible Accounts</B>: all accounts of Borrower that are deemed by Lender in the exercise of its sole and absolute discretion to be eligible for inclusion in the calculation of the Borrowing Base net of any and all interest, finance charges, sales tax, fees, returns, discounts, claims, credits, charges, contra accounts, exchange contracts or other allowances, offsets and rights of offset, deductions, counterclaims, disputes, rejections, shortages or other defenses and all credits owed or allowed by Borrower upon any of its accounts and further reduced by the aggregate amount of all reserves, limits and deductions provided for in this definition and elsewhere in this Agreement. Eligible Accounts shall not include the following:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) accounts which remain unpaid more than ninety (90) days past their invoice dates;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) accounts which are not due and payable within sixty (60) days after their invoice dates;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) accounts owing by a single Account Debtor if twenty percent (20%) or more of the aggregate balance owing by said Account Debtor is ineligible pursuant to clauses (a) or (b) above;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) accounts with respect to which the obligation of payment by the Account Debtor is or may be conditional for any reason whatsoever including, without limitation, accounts arising with respect to goods that were (i) not sold on an absolute basis, (ii) sold on a bill and hold sale basis, (iii) sold on a consignment sale basis, (iv) sold on a guaranteed sale basis, (v) sold on a sale or return basis, or (vi) sold on the basis of any other similar understanding;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) accounts with respect to which the Account Debtor is not a resident or citizen of, or otherwise located in, the continental United States of America, or with respect to which the Account Debtor is not subject to service of process in the continental United States of America, unless such accounts are backed in full by irrevocable letters of credit or insurance in form and substance satisfactory to Lender issued or confirmed by a domestic commercial bank acceptable to Lender;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) accounts with respect to which the Account Debtor is the United States of America or any other federal governmental body unless such accounts are duly assigned to Lender in compliance with all applicable governmental requirements (including, without limitation, the Federal Assignment of Claims Act of 1940, as amended, if applicable);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) accounts with respect to which Borrower is or may be liable to the Account Debtor for goods sold or services rendered by such Account Debtor, but only to the extent of such liability to such Account Debtor; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) accounts with respect to which the goods giving rise thereto have not been shipped and delivered to and accepted as satisfactory by the applicable Account Debtor or with respect to which the services performed giving rise thereto have not been completed and accepted as satisfactory by the Account Debtor thereon;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) accounts which are not invoiced within thirty (30) days after the shipment and delivery to and acceptance by said Account Debtor of the goods giving rise thereto or the performance of the services giving rise thereto; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) accounts which are not subject to a first priority perfected security interest in favor of Lender;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) that portion of an account balance owed by a single Account Debtor which exceeds fifteen percent (15%) of total accounts otherwise deemed eligible hereunder; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(l) accounts with respect to which the Account Debtor is located in any state requiring the filing of a Notice of Business Activities Report or similar report in order to permit a Borrower to seek judicial enforcement in such state of payment of such account, unless such Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Eligible Inventory</B>: as at any date of determination, all inventory owned by and in the possession of Borrower and located in the United States of America that Lender, in its sole and absolute discretion, deems to be eligible for borrowing purposes. Without limiting the generality of the foregoing, unless otherwise agreed by Lender, the following is not Eligible Inventory:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) work-in-process;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) finished goods which do not meet the specifications of the purchase order for such goods;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) inventory with respect to which Lender does not have a valid, first priority and fully perfected security interest;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) inventory with respect to which there exists any security interest or lien in favor of any Person other than Lender;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) packaging and shipping materials, products and labels; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) inventory that is obsolete;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) inventory produced in violation of the Fair Labor Standards Act, in particular provisions contained in Title 29 U.S.C. 215 (a)(i); and </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) inventory located at a location for which Lender does not have a valid landlord&#146;s or warehouseman&#146;s waiver or subordination on terms and conditions acceptable to Lender in its sole discretion and inventory located at any location other than those listed on <I>Schedule &#147;G&#148;</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Financial Statements</B>: the reports, statements and other information to be delivered to Lender pursuant to Section 3.5.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>First Revolving Loan</B>: the meaning specified in Section 1.1(a).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>First Revolving Loan Note</B>: the meaning specified in Section 1.1(a).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Generally Accepted Accounting Principles</B>: generally accepted accounting principles and practices in the United States of America, consistently applied.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Indebtedness</B>: as applied to a Person, (a) all items, except items of capital stock or of surplus or of unappropriated retained earnings or of amounts accrued for deferred income taxes if in compliance with Section 3.2, which in accordance with Generally Accepted Accounting Principles would be included in determining total liabilities as shown on the liability side of a balance sheet of such person as at the date of which Indebtedness is to be determined, (b) all indebtedness secured by any mortgage, pledge, lease, lien or conditional sale or other title retention agreement existing on any property or asset owned or held by such person subject thereto, whether or not such indebtedness shall have been assumed, and (c) all indebtedness of others which such Person has directly or indirectly guaranteed, endorsed, discounted or agreed contingently or otherwise to purchase or repurchase or otherwise acquire, or in respect of which such
Person has agreed to supply or advance funds (whether by way of loan, stock purchase, capital contribution or otherwise) or otherwise to become liable directly or indirectly with respect thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Lender</B>: the meaning specified on page 1. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Loans</B>: collectively, the First Revolving Loan and the Second Revolving Loan.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Merger</B>: the merger of DGSE Merger Corp., a Delaware corporation (&#147;Merger Corp.&#148;) and wholly-owned subsidiary of Parent, with and into Borrower, by which Borrower shall become a wholly-owned Subsidiary of Parent, on the terms and conditions set forth in that certain Amended and Restated Agreement and Plan of Merger and Reorganization, dated as of January 6, 2007, by and among Parent, Merger Corp., Borrower and the stockholder agent named therein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Notes</B>: collectively, the First Revolving Loan Note and the Second Revolving Loan Note.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Obligations</B>: the meaning specified in Section 1.2.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Parent</B>: DGSE Companies, Inc., a Nevada corporation and, following the consummation of the Merger, the sole stockholder of Borrower.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Parent Subsidiary</B>: a Subsidiary of Parent other than Borrower.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Permitted Inter-Company Transaction</B>: a cash dividend or distribution made by Borrower to Parent in accordance with any applicable restrictions of the General Corporation Law of the State of Delaware or a loan by Borrower to Parent or to a Parent Subsidiary, in each case with the proceeds of advances made by Lender to Borrower under the First Revolving Loan or the Second Revolving Loan, <I>provided</I> that:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Parent has executed and delivered to Lender a limited continuing guaranty of the Obligations, in form and substance reasonably satisfactory to Lender, covering an amount of the Obligations not to exceed the <I>sum of</I> (x) the aggregate amount of all such dividends or distributions to Parent, <I>less</I> all amounts contributed by Parent to Borrower as capital in return for such dividends or distributions, and (y) the aggregate outstanding principal balance of all such inter-company loans to Parent or any Parent Subsidiary; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Parent has executed and delivered to Lender a security agreement in form and substance reasonably satisfactory to Lender, pursuant to which Parent has granted Lender a second-priority security interest in all Stanford Collateral (as defined in the Intercreditor Agreement, dated as of July ___, 2006, entered into by and between Texas Capital Bank, National Association, a national banking association Lender (&#147;TCB&#148;), Lender and Parent), subject only to the first-priority security interest of TCB.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Person</B>: a corporation, an association, a partnership, an organization, a business, an individual or a government or political subdivision thereof or any governmental agency.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Second Revolving Loan</B>: the meaning specified in Section 1.1(b).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Second Revolving Loan Note</B>: the meaning specified in Section 1.1(b).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Subsidiary</B>: with reference to any Person, a corporation, or similar association or entity of which not less than a majority of the outstanding shares of the class or classes of stock, have by the terms thereof ordinary voting power to elect a majority of the directors, managers or trustees of such corporation, association or entity, of which are at the time owned or controlled, directly or indirectly, by such Person or by a Subsidiary of such Person.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Third Party Loan Documents</B>: all agreements, documents and instruments heretofore, now or hereafter executed and delivered pursuant to any Third Party Loans made by Borrower.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Uniform Commercial Code</B>: the Uniform Commercial Code as in effect from time to time in the State of Texas, including, without limitation, any amendments thereto which are effective after the date hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 11. <I>Expenses</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower agrees to indemnify and save Lender harmless from, and to pay or reimburse Lender for, all reasonable charges, costs, damages, liabilities and expenses, including, without limitation, reasonable attorneys&#146; fees, if any, incurred by Lender in defending or protecting the security interests and liens granted pursuant to this Agreement or the other Documents, or the priority of any thereof, or in the performance of any obligation of Borrower in connection with the Collateral or in the attempted enforcement or enforcement of this Agreement or the other Documents, or in the collection or attempted collection of any of the obligations owing under any thereof, or in the realization or attempted realization upon the Collateral.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 12. <I>Further Assurances; Possession of Collateral; Custodians</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower will deliver to Lender such financing statements and other instruments constituting or evidencing items of the Collateral as may be reasonably requested by Lender to better assure it with respect to the security interests granted to it pursuant to this Agreement and the other Documents. To the extent permitted by applicable law, Borrower hereby authorizes Lender to file, in the name of Borrower, financing statements which Lender in its sole discretion deems necessary to further perfect the security interests granted under this Agreement and the other Documents.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 13. <I>Survival of Agreements, Representations and Warranties etc.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">All agreements, representations and warranties contained herein or made in writing by or on behalf of Borrower, in connection with the transactions contemplated hereby shall survive the execution and delivery of this Agreement and the other Documents shall survive any investigation at any time made by Lender and any disposition of the Loans by Lender and, to the extent applicable, shall be deemed to be made a new by each of them each time an advance is made pursuant hereto or pursuant to the other Documents. All statements contained in any certificate or other instrument delivered by or on behalf of Borrower pursuant hereto or in connection with the transactions contemplated hereby shall be deemed representations and warranties made hereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 14. <I>Failure to Perform</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If Borrower shall fail to observe or perform any of the covenants hereof, Lender may pay such reasonable amount or incur reasonable liabilities to remedy or attempt to remedy any such failure, and all such payments made and liabilities incurred shall be for the account of Borrower and shall be in Lender&#146;s sole discretion or shall be withdrawn from Borrower&#146;s accounts maintained with Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 15. <I>Notices, etc.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to be duly delivered upon actual receipt if by facsimile, email or over night courier, and five (5) days after mailing if by first class registered mail, return receipt requested</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) if to Lender:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=50.35></TD><TD width=73></TD><TD width=12.55></TD><TD width=332.1></TD></TR>
<TR><TD valign=bottom width=67.133><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=97.333><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=442.8><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=top width=97.333><P style="margin:0pt">Lender: </P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=442.8><P style="margin:0pt">Stanford International Bank Ltd.</P>
<P style="margin:0pt">No. 11 Pavilion Drive,<BR>
St. John&#146;s, Antigua, West Indies</P>
<P style="margin:0pt">Attn: James M. Davis, Chief Financial Officer</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
</TABLE>
<P style="line-height:8pt; margin:0pt; font-size:12pt">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=50.35></TD><TD width=73></TD><TD width=12.55></TD><TD width=332.1></TD></TR>
<TR><TD valign=bottom width=67.133><P style="line-height:6pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=97.333><P style="line-height:6pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.733><P style="line-height:6pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=442.8><P style="line-height:6pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333><P style="margin:0pt">with a copy to:</P>
</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=442.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=442.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD><TD valign=bottom width=442.8 rowspan=6><P style="margin:0pt">Adorno &amp; Yoss LLP</P>
<P style="margin:0pt">225 Ponce de Leon Boulevard, Suite 400 </P>
<P style="margin:0pt">Coral Gables, FL 33134 </P>
<P style="margin:0pt">Attn: Seth P. Joseph, Esq.</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">or at such other address as may have been furnished in writing by Lender to Borrower; or </P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>C-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt; page-break-before:always">(b) if to Borrower:</P>
<P style="line-height:8pt; margin:0pt; font-size:12pt">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=50.35></TD><TD width=73></TD><TD width=12.55></TD><TD width=332.1></TD></TR>
<TR><TD valign=bottom width=67.133><P style="line-height:6pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=97.333><P style="line-height:6pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=16.733><P style="line-height:6pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=442.8><P style="line-height:6pt; margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333><P style="margin:0pt">Borrower:</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=top width=442.8><P style="margin:0pt">Superior Galleries, Inc.</P>
<P style="margin:0pt">9478 W. Olympic Blvd.</P>
<P style="margin:0pt">Beverly Hills, California 90212</P>
<P style="margin:0pt">Attn: Chief Executive Officer</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: &nbsp;[omitted]</P>
</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=top width=442.8>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333><P style="margin:0pt">with a copy to:</P>
</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=top width=442.8>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=top width=442.8>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=top width=442.8 rowspan=6><P style="margin:0pt">DGSE Companies, Inc.</P>
<P style="margin:0pt">2817 Forest Lane</P>
<P style="margin:0pt">Dallas, TX 75234</P>
<P style="margin:0pt">Attn: Dr. L.S. Smith</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=top width=442.8>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=556.867 colspan=3><P style="margin:0pt">with an additional copy to:</P>
</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=top width=442.8>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD><TD valign=top width=442.8 rowspan=6><P style="margin:0pt">Sheppard, Mullin, Richter &amp; Hampton, LLP</P>
<P style="margin:0pt">12275 El Camino Real, Suite 200</P>
<P style="margin:0pt">San Diego, California 92130-2006</P>
<P style="margin:0pt">Attn: John J. Hentrich, Esq.</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD></TR>
<TR><TD valign=top width=67.133>&nbsp;</TD><TD valign=top width=97.333>&nbsp;</TD><TD valign=top width=16.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=67.133>&nbsp;</TD><TD valign=bottom width=97.333>&nbsp;</TD><TD valign=bottom width=16.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">or at such other address as may have been furnished in writing by Borrower to Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 16. <I>Amendments and Waivers</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Neither this Agreement nor any other Document nor any term hereof or thereof may be changed, waived, discharged or terminated except by a writing signed by the party to be charged. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 17. <I>Term</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The term of this Agreement and the other Documents shall be from the date hereof and continue until all amounts due hereunder are paid in full. Any expiration or termination of this Agreement shall not affect any rights of Lender under this Agreement or under the other Documents and upon any such expiration or termination Borrower shall be obligated to forthwith pay all of the Loans and Borrower shall continue to be bound by all of the provisions of this Agreement until all of the Loans shall have been paid in full.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 18. <I>Conditions Precedent</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">18.1 The obligation of Lender to make the Loans and advances to be made by it hereunder is subject to the following conditions precedent;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Approval of Lender Counsel</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">All legal matters incident to the transactions hereby contemplated shall be satisfactory to counsel for Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Proof of Corporate Action</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Lender shall have received certified copies of all corporate action taken by Borrower to authorize the execution and delivery of this Agreement and the Notes and Loans hereunder, and such other documents as Lender or its counsel shall reasonably request.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Corporate Documents and Opinions</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Borrower is furnishing to Lender a certificate of good standing of the state of its incorporation, resolutions, incumbency certificates, and other documents which Borrower acknowledges are being relied upon by Lender, and such other documents are to be in the form and of the content as may be satisfactory to Lender and its counsel.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Loan Documents</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Receipt by Lender of the Notes fully executed by Borrower, UCC-1 Financing Statements in form satisfactory for filing with the Delaware Secretary of State and other material documents required by Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <I>Insurance</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Receipt by Lender of the policies of insurance in compliance with Section 1.9.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) <I>Opinion of Counsel</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Lender shall have received from counsel to Borrower a written opinion, reasonably satisfactory to Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) <I>Representations and Warranties</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">The Representations and Warranties contained in Section 2 herein shall be true on and as of the date of closing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) <I>Collateral</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Receipt by Lender of any of the Collateral where possession by Lender is necessary to perfect its security interest therein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) <I>Merger</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Lender shall have received satisfactory evidence that the Merger has been consummated.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) <I>Parent Approval</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Lender shall have received satisfactory written approval by Parent of the terms and provisions of this Agreement and the other Documents.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">18.2 The obligation of the Lender to make each subsequent advance to be made by it hereunder is subject to the conditions precedent that:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>No Event of Default</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">No Event of Default specified in Section 5 hereof, and no event which pursuant to the provisions of Section 5 with the lapse of time and/or notice specified therein would become such an Event of Default, has occurred and is continuing; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>No Material Adverse Change</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">There has been no material adverse change in the consolidated financial condition of Borrower and its consolidated subsidiaries; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Representations and Warranties</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">The Representations and Warranties contained in Section 2 are true and correct.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Lender shall have received a certificate of the CEO and CFO of Borrower certifying as of the date of the current advance that (i) no Event of Default specified in Section 5 hereof exists or is continuing, (ii) no material change has taken place with regard to its financial condition as represented to Lender and (iii) the Representations and Warranties contained in Section 2 are still true and correct.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">18.3 By delivering the Notes and each other Document to Lender and receiving the Loans and advances, Borrower represents that no Event of Default specified in Section 5 hereof exists or is continuing and no material adverse change has taken place with regard to its financial condition as represented to Lender.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">18.4 <I>Loan Administration.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Advances made under the Loans shall be as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) A request for an advance shall be made by Borrower giving Lender notice of its intention to borrow, in which notice Borrower shall specify the amount of the proposed borrowing, whether such proposed borrowing will be a borrowing under this First Revolving Loan or the Second Revolving Loan, and the proposed borrowing date, not later than 2:00 p.m. Eastern time one (1) business day prior to the proposed borrowing date; provided, however, that no such request may be made at a time when there exists an Event of Default.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) In the case of each request for an advance under the First Revolving Loan, Borrower shall deliver to Lender, concurrently with delivery of the notice of borrowing required by clause (a) of this Section 18.4, a Borrowing Base Certificate executed by Borrower and prepared as of a date not more than thirty (30) business days prior to the date of such requested advance.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Borrower hereby authorizes Lender to disburse the proceeds of each revolving credit advance requested by wire transfer to such bank account as may be agreed upon by Borrower and Lender from time to time or elsewhere if pursuant to written direction from Borrower.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) All revolving credit advances and other extensions of credit to or for the benefit of Borrower shall constitute one general Obligation of Borrower and shall be secured by Lender&#146;s lien upon all of the Collateral.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Lender shall enter all revolving credit advances as debits to a loan account in the name of Borrower and shall also record in said loan account all payments made by Borrower on any Obligations and all proceeds of Collateral which are indefeasibly paid to Lender, and may record therein, in accordance with customary accounting practice, other debits and credits, including interest and all charges and expenses properly chargeable to Borrower. All payments and collections shall be applied first to fees, costs and expenses due and owing under the Documents, then to interest due and owing under the Documents, and then to principal outstanding under the Loan.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Lender will account to Borrower monthly with a statement of the Loans, charges and payments made pursuant to this Agreement, and such accounting rendered by Lender shall be deemed final, binding and conclusive upon Borrower unless Lender is notified by Borrower in writing to the contrary within thirty (30) days of the date each accounting is mailed to Borrower. Such notices shall be deemed an objection to those items specifically objected to therein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Borrower shall establish one or more bank accounts for deposits of advances made under the Loans and for deposits of repayments of Third Party Loans, and shall assign such accounts to Lender. Borrower shall not deposit advances from Lender or repayments from borrowers under Third Party Loans into any other accounts.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 19. <I>Setoff</I>.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Borrower hereby gives Lender a security interest in, and a right of set-off for the Loans upon or against, all the deposits, credits, Collateral, and property of Borrower, now or hereafter in the possession or control of Lender or in transit to it. Lender may at any time apply or set-off the same, or any part thereof, to either of the Loans even though unmatured.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 20. <I>Miscellaneous</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) This Agreement and each other document granting Lender a security interest in the Collateral is a security agreement within the meaning of the Uniform Commercial Code. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. To the extent there is any inconsistency between the terms of this Agreement and any of the other Documents, this Agreement shall control. All of the terms of this Agreement and the other Documents shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, successors and assigns of the parties hereto, whether so expressed or not, and by any other holder or holders at the time of the Loan or any part thereof. The headings in this Agreement are for the purposes
of reference only and shall not limit or otherwise affect any of the terms hereof. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, and by the several parties hereto in separate counterparts, but all of which together shall constitute one and the same instrument.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) This Agreement is between the Lender and the Borrower only and shall not be relied upon by any third party. Without limiting the foregoing, Lender shall have no liability to any third party whatever (including without limitation Borrower or anyone conducting business with any of the foregoing) in the event Lender for any reason and at any time determines not to advance sums under the Notes and/or for any reason or otherwise exercises its rights under this Agreement and/or the other Documents.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Subject to Section 552(a) of the Bankruptcy Code, the security interests granted hereby extends to the Collateral, whether acquired before or after the commencement of a case under the Bankruptcy Code.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 21. <I>CHOICE OF LAW; CONSENT TO JURISDICTION</I>. </B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE NOTES IS COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF TEXAS OR IN THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF TEXAS. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT THE ADDRESS DESCRIBED IN SECTION 15 HEREOF. ANY MATTERS AFFECTING THE ENFORCEMENT OR INTERPRETATION OF LENDER&#146;S SECURITY INTEREST IN THE COLLATERAL SHALL (TO THE EXTENT NOT GOVERNED BY TEXAS LAW PURSUANT TO THE AGREEMENT SET FORTH HEREIN) BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE OR CALIFORNIA, AS APPLICABLE.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=center><I>[REST OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]</I></P>
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<P style="margin:0pt; text-indent:18pt; page-break-before:always"><B>IN WITNESS WHEREOF</B>, each of the parties hereto has executed this Agreement on the day first above mentioned.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt">SIGNED, SEALED AND DELIVERED<BR>
IN THE PRESENCE OF:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=179.95></TD><TD width=39.8></TD><TD width=14.45></TD><TD width=233.8></TD></TR>
<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>BORROWER<BR>
Superior Galleries, Inc.</B></P>
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<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">Name:<BR>
Title:</P>
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<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>LENDER<BR>
Stanford Financial Group Company</B></P>
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<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">James M. Davis<BR>
Its Chief Executive Officer</P>
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<TR><TD valign=bottom width=239.933>&nbsp;</TD><TD valign=bottom width=53.067>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
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<P style="margin:0pt; page-break-before:always" align=center><B>COMMERCIAL LOAN AND SECURITY AGREEMENT SCHEDULES</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=center>[ TO COME ]</P>
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<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX D</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>NOTE EXCHANGE AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS NOTE EXCHANGE AGREEMENT is made and entered into as of ________ __, 2007 (this &#147;<B>Agreement</B>&#148;), by and between Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (the &#147;<B>Company</B>&#148;), and Stanford International Bank Ltd., a corporation organized under the laws of Antigua and Barbuda (together with its successors, &#147;<B>SIBL</B>&#148;). Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in that certain Amended and Restated Agreement and Plan of Merger and Reorganization, made and entered into as of January 6, 2007 (the &#147;<B>Merger Agreement</B>&#148;), by and among the Company, DGSE Companies, Inc., a Nevada corporation (&#147;<B>Parent</B>&#148;), DGSE Merger Corp., a Nevada corporation (&#147;<B>Merger Sub</B>&#148;), and SIBL, as stockholder agent.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>RECITALS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have approved and declared advisable the Merger Agreement and the merger of Merger Sub with and into the Company (the &#147;<B>Merger</B>&#148;), with the Company being the surviving corporation, upon the terms and subject to the conditions of the Merger Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, in the Merger, one hundred percent (100%) of the issued and outstanding shares of capital stock of the Company will be converted into the right to receive shares of Common Stock of Parent (as set forth in Article III of the Merger Agreement), on the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the General Corporation Law of the State of Delaware (the &#147;<B>DGCL</B>&#148;) and Chapters 78 and 92A of Title 7 of the Nevada Revised Statutes (the &#147;<B>NPCA</B>&#148;);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, pursuant to that certain Commercial Loan and Security Agreement originally dated October 1, 2003 (as amended as of March 29, 2005 and as further amended as of April 6, 2006 and on January 6, 2007, the &#147;<B>Loan Agreement</B>&#148;), Stanford Financial Group Company, a Florida corporation (&#147;<B>SFG</B>&#148;), has provided certain credit facilities to the Company;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, on November 30, 2004, SIBL was indirectly assigned all of SFG&#146;s right, title and interest in the Loan Agreement, and the Note issued thereunder;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the obligation of Parent and Merger Sub to consummate the Merger is conditioned on SIBL exchanging Eight Million Three Hundred Ninety-Two Thousand Three Hundred Forty Dollars ($8,392,340) of principal and interest outstanding under the Loan Agreement (such amount, the &#147;<B>Exchanged Debt</B>&#148;) into 4,936,671 shares (the &#147;<B>Exchanged Shares</B>&#148;) of the common stock of the Company (the &#147;<B>Common Shares</B>&#148;) in accordance with the terms and conditions set forth herein, and SIBL is willing to agree to do so subject to the satisfaction of the conditions herein and all conditions to the obligations of the Company and Parent set forth in the Merger Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, in consideration of SIBL entering into this Agreement and certain amendments to the Loan Agreement, as contemplated in the Merger Agreement, Parent has agreed to issue to SIBL and its designees, at the Effective Time, certain A Warrants and B Warrants; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, SIBL desires to exchange the Exchanged Debt for the Exchanged Shares to induce Parent and Merger Sub to enter into the Merger Agreement and to consummate the Merger and other Transactions, including the issuance of the afore-referenced warrants.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto (collectively, the &#147;<B>Parties</B>&#148;), intending to be legally bound, hereby agree as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1. <B>Exchange of Debt</B>. SIBL and the Company hereby agree, subject to (i) the issuance of the Exchanged Shares as provided in Section 2, (ii) the consummation of the Merger pursuant to the Merger Agreement immediately after the Exchange Time, (iii) the issuance of the A Warrants and the B Warrants pursuant to the Merger Agreement (subject to Section 3 of the Limited Joinder Agreement), and (iv) the tendering by SIBL of the notes evidencing the Exchanged Debt to the Company; to exchange the Exchanged Debt for the Exchanged Shares, such exchange to occur immediately prior to the Effective Time (the &#147;<B>Exchange Time</B>&#148;) and simultaneously with, and conditioned upon, the issuance of the Exchanged Shares. Upon the issuance of such Exchanged Shares, the Exchanged Debt shall automatically be cancelled and retired and shall cease to exist, and the holder of the portion of any note that, immediately prior to the Exchange Time,
represented issued and outstanding Exchanged Debt shall cease to have any rights with respect thereto, including any claims for any default occurring or other liability arising prior to the Exchange Time, except the right to receive, upon the surrender of such portion of the note, the certificates for the Exchanged Shares contemplated by Section 2.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2. <B>Issuance of Shares</B>. At the Exchange Time and simultaneously with the exchanges contemplated by Section 1, and subject to the conditions thereof, the Company shall issue to SIBL the Exchanged Shares in exchange for the cancellation of the Exchanged Debt. All Common Shares issued and paid upon exchange of the Exchanged Debt in accordance with the terms hereof shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to the Exchanged Debt.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3. <B>Capitalization Adjustments to Shares</B>. In the event of any Capitalization Adjustment with respect to the Common Shares occurring after the date of this Agreement and prior to the Exchange Time, all references in this Agreement to specified numbers of Common Shares affected thereby, and all calculations provided for that are based upon numbers of Common Shares, shall be equitably adjusted to the extent necessary to provide the Parties the same economic effect as contemplated by this Agreement prior to such Capitalization Adjustment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4. <B>Representations and Warranties</B>. SIBL represents and warrants to the Company as follows: </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Investment Purpose</I>. SIBL is acquiring the Common Shares issuable upon the exchange of the Exchanged Debt (collectively, the &#147;Securities&#148;) for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Accredited Investor Status</I>. SIBL is an &#147;accredited investor&#148; as that term is defined in Rule 501(a) of Regulation D under the Securities Act, and it has not been formed solely for the purpose of acquiring the Securities. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Reliance on Exemptions</I>. SIBL understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the Securities Act and state securities laws and that the Company is relying in part upon the truth and accuracy of, and SIBL&#146;s compliance with, the representations, warranties, agreements, acknowledgments and understandings of SIBL set forth herein in order to determine the availability of such exemptions and the eligibility of SIBL to acquire the Securities. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Transfer or Resale</I>. SIBL understands that the Securities have not been registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned, pledged, hypothecated or transferred unless (A) subsequently registered thereunder, (B) SIBL shall have delivered to the Company an opinion of counsel, in a form reasonably satisfactory to the Company, to the effect that such Securities may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) SIBL provides the Company with such documents and certificates as the Company may reasonably request to demonstrate to its satisfaction that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the Securities Act (or a successor rule thereto). </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <I>No General Solicitation</I>. SIBL is not acquiring the Securities as a result of any advertisement, article, notice or other communication regarding any Securities published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) <I>Adequate Information</I>. SIBL is aware of the Company&#146;s business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire the Securities.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) <I>Sophistication and Experience</I>. SIBL, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities and has so evaluated the merits and risks of such investment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) <I>Ability to Bear Risk</I>. SIBL is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) <I>Relationship</I>. SIBL either has a preexisting personal or business relationship with the Company or any of its officers, directors or controlling persons, or by reason of its business or financial experience or the business or financial experience of its professional advisers who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly, has the capacity to protect its own interests in connection with the exchange of the Exchanged Debt and the acquisition of the Securities.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) <I>Legend</I>. SIBL understands that the stock certificates representing the Common Shares shall bear a restrictive legend in substantially the following form (or another legend substantially in such form as the transfer agent for the Company may from time to time use generally on certificates evidencing restricted securities of the Company): </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE &#147;ACT&#148;), OR APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL, IN A FORM REASONABLY SATISFACTORY TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">5. <B>Governing Law; Jurisdiction</B>. This Agreement shall be governed in all respects by the laws of the State of Texas applicable to contracts negotiated, executed and to be performed entirely within such State. All suits, actions or proceedings arising out of, or in connection with, this Agreement or the transactions contemplated by this Agreement shall be brought in any federal or state court of competent subject matter jurisdiction sitting in Dallas County, Texas. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">6. <B>Construction</B>. The rules of construction specified in Section 1.3 (Construction) of the Merger Agreement are hereby incorporated by reference herein and shall apply to this Agreement <I>mutatis mutandis</I>, as if expressly set forth herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">7. <B>Titles and Headings</B>. The section and paragraph titles and headings contained herein are inserted purely as a matter of convenience and for ease of reference and shall be disregarded for all other purposes, including the construction, interpretation or enforcement of this Agreement or any of its terms or provisions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">8. <B>Counterparts</B>. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the Parties actually executing such counterparts, and all of which together shall constitute one instrument. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">9. <B>Facsimile Execution</B>. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more Parties, and an executed copy of this Agreement may be delivered by one or more Parties by facsimile, email or similar electronic or digital transmission pursuant to which the signature of or on behalf of such Party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any Party, all Parties agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">10. <B>Entire Agreement</B>. This Agreement and the Merger Agreement constitute the entire agreement among the Parties with respect to the subject matter hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">11. <B>Notices</B>. All notices, requests, instructions or other documents to be given or delivered under this Agreement shall be given in the manner, with the effect and to the address, email address or fax number to be used for such Party as provided in Section 10.1 of the Merger Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">12. <B>Amendment; Waiver</B>. This Agreement and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Party against which enforcement of the same is sought and by Parent. This Agreement may be amended only by a writing executed by all Parties and by Parent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">13. <B>Binding Effect</B>. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and permitted assigns.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">14. <B>Specific Performance; Injunctive Relief</B>. Each of the Parties acknowledges and agrees that any breach or non-performance of, or default under, any of the terms and provisions hereof would cause substantial and irreparable damage to the other parties hereto, and that money damages would be an inadequate remedy therefor. Accordingly, each of the Parties agrees that each of them shall be entitled to seek equitable relief, including specific performance and injunctive relief, in the event of any such breach, non-performance or default in any Action instituted in any court of the United States or any state having competent jurisdiction, or before any arbitrator, in addition to any other remedy to which such Party may be entitled, at law or in equity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">15. <B>Severability</B>. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof; <I>provided</I> that if any provision of this Agreement, as applied to any Party or to any circumstance, is adjudged by a court, tribunal or other governmental body, arbitrator or mediator not to be enforceable in accordance with its terms, the Parties agree that such governmental body, arbitrator or mediator making such determination shall have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">16. <B>Further Assurances</B>. At any time, and from time to time, after the effective date, each Party will execute such additional instruments and take such action as may be reasonably requested by any other Party to confirm or perfect title to any property interests transferred hereunder or otherwise to carry out the intent and purposes of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">17. <B>Third-Party Beneficiaries</B>. This Agreement is made solely for the benefit of the Parties and Parent, and their respective permitted successors and assigns, and no other Person shall have or acquire any right or remedy by virtue hereof except as otherwise expressly provided herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">18. <B>Voluntary Execution of Agreement</B>. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties. Each of the Parties hereby acknowledges, represents and warrants that (i) it has read and fully understood this Agreement and the implications and consequences thereof; (ii) it has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of its own choice, or it has made a voluntary and informed decision to decline to seek such counsel; and (iii) it is fully aware of the legal and binding effect of this Agreement.</P>
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<P style="margin-top:0pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=14.45></TD><TD width=205.3></TD><TD width=14.45></TD><TD width=233.8></TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>SUPERIOR GALLERIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">Name:<BR>
Title:</P>
</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>STANFORD INTERNATIONAL BANK LTD.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">James M. Davis<BR>
Chief Financial Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293 colspan=2>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=624 colspan=4><P style="margin:0pt"><B>ACKNOWLEDGED AND ACCEPTED:</B></P>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><B>DGSE COMPANIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=604.733 colspan=3>&nbsp;</TD></TR>
<TR><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=604.733 colspan=3>&nbsp;</TD></TR>
<TR><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=604.733 colspan=3><P style="margin:0pt">Dr. L.S. Smith<BR>
Chairman and Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=604.733 colspan=3>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>D-2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX E</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>TERMINATION AND RELEASE AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS TERMINATION AND RELEASE AGREEMENT is made and entered into as of _______ __, 2007 (this &#147;<B>Agreement</B>&#148;), by and among (i) DGSE Companies, Inc., a Nevada corporation (together with its successors and permitted assigns, &#147;<B>Parent</B>&#148;), (ii) DGSE Merger Corp., a Delaware corporation and a direct wholly-owned subsidiary of Parent (together with its successors and permitted assigns, &#147;<B>Merger Sub</B>&#148;), (iii) Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (together with its predecessors and successors, the &#147;<B>Company</B>&#148; or &#147;<B>Superior</B>&#148;), (iv) Stanford International Bank Ltd., a company organized under the laws of Antigua and Barbuda (together with its successors, &#147;<B>SIBL</B>&#148;), (v) Stanford Financial Group Company, a corporation organized under the laws of the State of Florida (together with its
successors, &#147;<B>SFG</B>&#148;), and (vi) Stanford Venture Capital Holdings, Inc., a corporation organized under the laws of the State of Delaware (together with its successors, &#147;<B>SVCH</B>&#148;, and, together with SIBL and SFG, the &#147;<B>Stanford Parties</B>&#148;). Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in that certain Amended and Restated Agreement and Plan of Merger and Reorganization, made and entered into as of January 6, 2007 (the &#147;<B>Merger Agreement</B>&#148;), by and among Parent, Merger Sub, Superior, and the stockholder agent.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>RECITALS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have approved and declared advisable the Merger Agreement and the merger of Merger Sub with and into the Company (the &#147;<B>Merger</B>&#148;), with the Company being the surviving corporation;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, SIBL is a key stockholder of Superior, SFG is the primary lender to Superior, and SVCH is a consultant to Superior;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, Parent has requested various Parties to terminate various Contracts in place among various of them and Superior as a condition to Parent consummating the Merger; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, each Stanford Party desires to execute and deliver this Agreement to induce Parent and Merger Sub to consummate the Merger and the other Transactions; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the execution and delivery of this Agreement by the Stanford Parties and the Company is a condition precedent to Parent and Merger Sub consummating the Merger and the other Transactions.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto (collectively, the &#147;<B>Parties</B>&#148;), intending to be legally bound, hereby agree as follows as of the Effective Time:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 1. <I>Release</I>.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Release</I>. Each of the Stanford Parties, on behalf of itself and its Affiliates (all of the foregoing, individually, a &#147;<B>Releasor</B>&#148;, and, collectively, the &#147;<B>Releasors</B>&#148;), hereby irrevocably and forever releases and discharges Parent, the Company and Merger Sub, and each of their respective individual, joint or mutual, past, present and future stockholders, Affiliates, controlling persons, directors, officers, managers, employees, consultants, contractors, agents, financial, banking and legal advisors and other representatives, and the respective successors and assigns of each of them, (all of the foregoing, individually, a &#147;<B>Releasee</B>&#148; and, collectively, the &#147;<B>Releasees</B>&#148;) from any and all claims, demands, actions, orders, obligations, contracts, debts, and Liabilities whatsoever, whether absolute or contingent, matured or unmatured, disputed or
undisputed, secured or unsecured, conditional or unconditional, accrued or unaccrued, liquidated or unliquidated, vested or unvested, joint or several, due or to become due, executory, determined, determinable or otherwise, both at law and in equity, (collectively, &#147;<B>Claims</B>&#148;) which any Stanford Party or any other Releasor now has, has ever had or may hereafter have against the respective Releasees arising contemporaneously with or prior to the Effective Time or on account of or arising out of any matter, cause or event occurring, whether in any Stanford Party&#146;s or any other Releasor&#146;s capacity as a direct or indirect stockholder of the Company, as a beneficial owner or record holder of any Equity Interests of the Company, as an consultant or adviser to the Company or in any other capacity or due to any relationship with the Company or any of its Subsidiaries, contemporaneously with or prior to the Effective Time, including (a) any dissenter&#146;s, appraisal or similar rights
under applicable Law, (b) any rights to bring any lawsuit or claim action against any Person in the name or on behalf of the Company or Merger Sub, (c) any right pursuant to any Contract or any Releasee&#146;s Organizational Documents, (d) any claim pursuant to the Securities Act, Exchange Act, the SEC Rules or other securities or &#147;blue sky&#148; Laws, (e) any rights to indemnification or reimbursement from any Releasee, whether pursuant to their respective Organizational Documents or pursuant to any Contracts, applicable Law or otherwise, and whether or not relating to claims pending on, or asserted after, the Closing Date; provided, however, that nothing contained herein shall operate to release: (i) any indebtedness, together with interest thereon, of the Company under the Stanford LOC; (ii) any obligations or Liabilities of the Surviving Corporation under the Amended and Restated Stanford LOC; (iii) any obligations or Liabilities of Parent under the limited guaranty and security agreement
entered into in connection with the Amended and Restated Stanford LOC; (iv) any contractual Liabilities of Parent or Merger Sub under the Merger Agreement or any Related Agreement; or (v) any statutory or regulatory Liabilities of Parent or Merger Sub under the Securities Act, Exchange Act or the SEC Rules in connection with the Merger and other Transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>No Actions</I>. Upon the Closing, each Stanford Party irrevocably covenants to refrain, and to cause its Affiliates to refrain, from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced, any Action of any kind against any Releasee, based upon any matter purported to be released by Section 1(a).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Indemnity</I>. Without in any way limiting any of the rights and remedies otherwise available to any Releasee, the Stanford Parties shall jointly and severally indemnify and hold harmless each Releasee from and against all Losses, Liabilities, Claims, damages (including incidental and consequential damages) or expense (including costs of investigation and defense and reasonable attorney fees), whether or not involving third party claims, arising directly or indirectly from or in connection with (i) the assertion by or on behalf of any Stanford Party or any Releasor of any claim or other matter sought to be released pursuant to Section 1(a), (ii) the assertion by any third party of any Claim or demand against any Releasee which Claim or demand arises directly or indirectly from, or in connection with, any assertion by or on behalf of any Stanford Party or any other Releasor against such third party of any Claims
or other matters sought to be released pursuant to Section 1(a), or (iii) the breach by any Stanford Releasor of the terms of Section 1(b).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Unknown Claims</I>. It is the intention of the Parties that the release provisions in Section 1(a) and Section 1(b) shall be effective as a bar to each and every Claim, demand and action specified in Section 1(a) and Section 1(b). In furtherance of this intention, each Stanford Party hereby waives and relinquishes all rights and benefits under Section 1542 of the Civil Code of the State of California, and any and all statutes of other jurisdictions to the same or similar effect. Section 1542 of the Civil Code of the State of California provides:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MIGHT HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Each Stanford Party acknowledges that it may, after execution of this Agreement, discover facts different from or in addition to those now known or believed to be true with respect to such claims, demands or action, and agrees that the release provisions in Section 1(a) and Section 1(b) shall be and remain in full force and effective in all respects notwithstanding any such differences or additional facts.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 2. <I>Terminations</I>. </B>Without limitation of Section 1, the Parties agree as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Consulting Agreement</I>. SVCH and the Company hereby covenant and agree (i) to terminate that certain Consulting Agreement, dated January 31, 2003 (as Amended from time to time, the &#147;<B>Consulting Agreement</B>&#148;), by and between the Company and SVCH, in its entirety, including, notwithstanding anything to the contrary in the Consulting Agreement, Sections 4 and 7 thereof, except for the confidentiality obligations set forth in Sections 5(b), 5(c) and 5(d) thereof, which shall survive, and (ii) that neither SVCH nor the Company has any Liabilities to the other of them under the Consulting Agreement. SVCH hereby warrants that it has complied with its obligations under Section 5 of the Consulting Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 3. <I>Representations</I>. </B>Each Party hereby represents and warrants to each other Party that:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) It has the full power, capacity, authority and right to execute and deliver this Agreement and to perform its obligations hereunder, and under the Merger Agreement as affected hereby.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) This Agreement has been duly authorized by all necessary action and constitutes such Party&#146;s valid and binding agreement, enforceable against such Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors&#146; rights and to general equity principles.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) No approval, authorization, consent or filing (other than any obligation to file certain information pursuant to the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder) is required in connection with its execution, delivery and performance of this Agreement which has not heretofore been obtained or made.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 4. <I>Effectiveness</I>. </B>Notwithstanding any provision hereof to the contrary, it is the intention of the Parties that this Agreement shall become effective at the Effective Time, and the terms and provisions of Section 1 and Section 2 shall apply as of the Effective Time. If the Merger Agreement is terminated prior to the consummation of the Merger, the covenants contained herein shall be deemed abandoned and this Agreement shall forthwith become null and void and without force or effect.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 5. <I>Voluntary Execution of Agreement</I>.</B> This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties. Each of the Parties hereby acknowledges, represents and warrants that (i) it has read and fully understood this Agreement and the implications and consequences thereof; (ii) it has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of its own choice, or it has made a voluntary and informed decision to decline to seek such counsel; and (iii) it is fully aware of the legal and binding effect of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>Section 6. <I>Miscellaneous</I>.</B> The terms and provisions of Section 1.3 and Article X of the Merger Agreement are hereby incorporated by reference herein and shall apply to this Agreement <I>mutatis mutandis</I>, as if expressly set forth herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=center><I>[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]</I></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>E-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=219.75></TD><TD width=14.45></TD><TD width=233.8></TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>DGSE COMPANIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">Dr. L.S. Smith <BR>
Chairman and Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>DGSE MERGER CORP.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">William H. Oyster<BR>
Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>SUPERIOR GALLERIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">Silvano DiGenova<BR>
Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>STANFORD INTERNATIONAL BANK LTD.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">James M. Davis<BR>
Chief Financial Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>STANFORD FINANCIAL GROUP COMPANY</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">James M. Davis<BR>
Chief Financial Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>STANFORD VENTURE CAPITAL HOLDINGS, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">James M. Davis<BR>
Chief Financial Officer</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=right><BR>
<BR></P>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX F</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>DGSE COMPANIES, INC.<BR>
<I>A Nevada Corporation</I></B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>REGISTRATION RIGHTS AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS REGISTRATION RIGHTS AGREEMENT, dated as of ___________ __, 2007 (this &#147;<B>Agreement</B>&#148;), is entered into by and between DGSE COMPANIES, INC, a Nevada corporation (the &#147;<B>Company</B>&#148;), and STANFORD INTERNATIONAL BANK LTD. and its successors (&#147;<B>SIBL</B>&#148;) as the proposed purchaser of certain shares of the Company&#146;s capital stock. </P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>RECITALS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Company, Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (&#147;<B>Superior</B>&#148;), DGSE Merger Corp., a Delaware corporation (&#147;<B>Merger Sub</B>&#148;), and SIBL, as stockholder agent, have entered into that certain Amended and Restated Agreement and Plan of Merger and Reorganization, dated as of January 6, 2007 (the &#147;<B>Merger Agreement</B>&#148;); </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the respective Boards of Directors of the Company, Merger Sub and Superior have approved and declared advisable the Merger Agreement and the merger of Merger Sub with and into Superior (the &#147;<B>Merger</B>&#148;), with Superior being the surviving corporation;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, in the Merger, one hundred percent (100%) of the issued and outstanding shares of capital stock of Superior will be converted into the right to receive shares of Common Stock of the Company (as set forth in Article III of the Merger Agreement), on the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the General Corporation Law of the State of Delaware (the &#147;<B>DGCL</B>&#148;) and Chapters 78 and 92A of Title 7 of the Nevada Revised Statutes (the &#147;<B>NPCA</B>&#148;);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Board of Directors of the Company has resolved to recommend to its stockholders the adoption and approval of the Merger Agreement; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, Superior has informed the Company that the affirmative vote of the holders of a majority of all issued and outstanding shares of common stock of Superior entitled to vote on the Merger has been obtained with respect to the adoption of the Merger Agreement and approval of the Merger;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, pursuant to that certain Conversion Agreement, dated as of January 6, 2007 (the &#147;<B>Conversion</B> <B>Agreement</B>&#148;), by and between Superior and SIBL, SIBL has agreed to convert and exchange all of the 7,500,000 shares of preferred stock of Superior previously held by SIBL into 3,600,806 shares of the common stock, $0.001 par value per share, of Superior (the &#147;<B>Superior Common Stock</B>&#148;);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, pursuant to a Commercial Loan and Security Agreement originally dated October 1, 2003 (as amended as of March 29, 2005 and as further amended as of March 31, 2006 and on January __, 2007, the &#147;<B>Loan</B> <B>Agreement</B>&#148;), by and between Superior and SIBL, SIBL has provided certain credit facilities to the Company;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, pursuant to that certain Note Exchange Agreement, dated as of the date hereof (the &#147;<B>Note</B> <B>Exchange Agreement</B>&#148;), by and between Superior and SIBL, SIBL has agreed to exchange $8,392,340 of the amount outstanding under the Loan Agreement into 4,936,671 shares of Superior Common Stock;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, in connection with the Merger, all shares of Superior Common Stock held by SIBL (including the shares of Superior Common Stock received upon conversion of the preferred shares and upon exchange of the debt, as described above) will be converted into and exchanged for shares of the Company&#146;s common stock, $0.01 par value per share (the &#147;<B>Common Stock</B>&#148;); </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, pursuant to an amendment and restatement of the Loan Agreement, to be made effective immediately prior to the Merger (as so amended and restated, the &#147;<B>New Loan Agreement</B>&#148;), SIBL has agreed to provide certain credit facilities to Superior and, indirectly, to the Company;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, in connection with the transactions contemplated by the Note Exchange Agreement and the New Loan Agreement, the Company has agreed in Section 6.17(c) of the Merger Agreement to grant to SIBL, and its assignees, &#147;A&#148; warrants and &#147;B&#148; warrants (collectively, the &#147;<B>Warrants</B>&#148;) to purchase an aggregate of 1,708,634 shares of Common Stock (collectively, the &#147;<B>Warrant Shares</B>&#148;);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, SIBL has assigned Warrants (collectively, the &#147;<B>Assignee Warrants</B>&#148;) exercisable for an aggregate of 854,317 Warrant Shares (collectively, the &#147;<B>Assignee Warrant Shares</B>&#148;) to DANIEL T. BOGAR, RONALD M. STEIN, WILLIAM R. FUSSELMANN, CHARLES M. WEISER and OSVALDO PI (each, an &#147;<B>Assignee</B>&#148;, and, collectively, the &#147;<B>Assignees</B>&#148;), as provided in the Merger Agreement; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Company desires to grant to SIBL and to each of the Assignees, as applicable, the registration rights set forth herein with respect to Warrants, the Warrant Shares, the shares of Common Stock issuable upon the exercise of the warrants issuable in the event of a registration default pursuant to Section 5(f) hereof (the &#147;<B>Default</B> <B>Warrant Shares</B>&#148;) and the shares of Common Stock issued as a dividend or other distribution with respect to the Warrant Shares (the &#147;<B>Distribution Shares</B>&#148;) (the Warrant Shares, the Default Warrant Shares and the Distribution Shares, collectively and interchangeably, are referred to herein as the &#147;<B>Securities</B>&#148;).</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">NOW, THEREFORE, the parties hereto mutually agree as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>1. RECITALS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The foregoing recitals are true and accurate and hereby incorporated into this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>2. CERTAIN DEFINITIONS </B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As used herein:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) &#147;<B>Commission</B>&#148; means the Securities and Exchange Commission. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) &#147;<B>Holder</B>&#148; means any Person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 11 hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) &#147;<B>Merger Shares</B>&#148; means the shares of Common Stock issued to SIBL or an Assignee in connection with the Merger; <I>provided</I>, <I>however</I>, that Merger Shares shall not include any such shares sold, assigned or otherwise transferred or disposed of by the Holder (i) to the public either pursuant to a registration statement or Rule 144, or (ii) in a private transaction. In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be deemed to be made in the definition of &#147;Merger Shares&#148; as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) &#147;<B>Registrable Security</B>&#148; means collectively, the Warrant Shares, the Default Warrant Shares and the Distribution Shares; <I>provided</I>, <I>however</I>, that Registrable Securities shall not include any such shares sold, assigned or otherwise transferred or disposed of by the Holder (i) to the public either pursuant to a registration statement or Rule 144, or (ii) in a private transaction. In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be deemed to be made in the definition of &#147;Registrable Security&#148; as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) &#147;<B>Rule 144</B>&#148; means Rule 144 (or any similar provision then in force) promulgated under the Securities Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) &#147;<B>Securities Act</B>&#148; means the Securities Act of 1933, as amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) &#147;<B>SIBL Warrant Shares</B>&#148; means, collectively, all Warrant Shares other than Assignee Warrant Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) &#147;<B>SIBL Warrants</B>&#148; means, collectively, all Warrants other than Assignee Warrants.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) &#147;<B>Trading Day</B>&#148; means any business day on which the primary market on which the Common Stock trades is open for business. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>3. RESTRICTIONS ON TRANSFER</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">SIBL acknowledges and understands that prior to the registration of the Securities as provided herein, and upon the expiration of the registration period provided for herein, the Securities are and will be, as the case may be, &#147;restricted securities&#148; as defined in Rule 144. SIBL understands that no disposition or transfer of the Securities may be made by SIBL in the absence of (i) an opinion of counsel to SIBL, in form and substance reasonably satisfactory to the Company, that such transfer may be made without registration under the Securities Act, or (ii) such registration. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>4. COMPLIANCE WITH REPORTING REQUIREMENTS </B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&nbsp;As long as SIBL or any Assignee owns any Securities, until the seventh anniversary of the date hereof, (i) if the Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the &#147;<B>Exchange Act</B>&#148;), the Company covenants to use its commercially reasonable efforts to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act which are required to be filed in order to satisfy the current public information requirements of Rule 144(c)(1), or (ii) otherwise, if Rule 144(k) is not available to SIBL or any Assignee with respect to any Securities then held, the Company will prepare and furnish to SIBL or any Assignee, as applicable, and make publicly available in accordance with Rule 144(c)(2), such information as is required for SIBL or
any Assignee to sell such Registrable Securities under Rule 144.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>5. REGISTRATION RIGHTS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) If the Company shall not have prepared and filed with the Commission a registration statement under the Securities Act registering the Registrable Securities for resale by SIBL and the Assignees prior to the Effective Time (as such term is defined in the Merger Agreement), the Company shall prepare and file such a registration statement with the Commission on Form S-3 (or such other form under the Securities Act as the Company shall then be entitled to use) to register the resale of the Registrable Securities within five (5) calendars days of the Effective Time. The registration statement registering the Registrable Securities for resale, including the prospectus included therein and as amended or supplemented from time to time, is hereinafter referred to as the &#147;<B>Registration Statement</B>&#148;.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) If the Registration Statement has not become effective prior to the Effective Time, the Company shall use its commercially reasonable efforts to cause the Registration Statement to become effective not later than 90 calendar days after the Effective Time. The Company will notify the Holders and its transfer agent of the declaration by the Commission of the effectiveness of the Registration Statement within a reasonable time thereafter.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) The Company will maintain the Registration Statement or post-effective amendment filed under this Section 5 effective under the Securities Act until the earliest of (i) the date that none of the Registrable Securities covered by such Registration Statement are or may become issued and outstanding, (ii) the date that all of the Registrable Securities have been sold pursuant to such Registration Statement, (iii) the date that the Registrable Securities may be sold under the provisions of Rule 144 without limitation as to volume, (iv) the date all Registrable Securities have been otherwise transferred to persons who may trade such shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a restrictive legend, and (v) three years from the date the Registration Statement became effective. Thereafter, if SIBL or any
Assignee owns any Registrable Securities, the Company shall, if it continues to be eligible to use a Form S-3 and at the expense of SIBL and such Assignees (including, notwithstanding the provisions of Section 5(d), the payment by SIBL and such Assigns of all Registration Expenses), maintain the Registration Statement effective under the Securities Act to register the resale of Registrable Securities. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) All fees, disbursements and out-of-pocket expenses and costs incurred by the Company in connection with the preparation and filing of the Registration Statement under this Section 5, or filing any amendments or supplements thereto, and in complying with applicable securities and blue sky laws (including, without limitation, all attorneys&#146; and auditors&#146; fees of the Company) (the &#147;<B>Registration Expenses</B>&#148;) shall be borne by the Company. The Holders shall bear the cost of underwriting and/or brokerage discounts, fees and commissions, if any, applicable to the Registrable Securities being registered. The Holders and their counsel shall have a reasonable period, not to exceed 7 Trading Days, to review the proposed Registration Statement or any amendment thereto, prior to filing with the Commission, and the Company shall provide the Holders with copies of any comment letters received from the
Commission with respect thereto within a reasonable time following receipt thereof, if in the Company&#146;s judgment it is lawful to do so without requiring public disclosure of the same under Regulation FD or breaching any of its obligations under any agreement with SIBL or its affiliates. The Company shall qualify any of the Registrable Securities for sale in such states as the Holders reasonably designate and shall furnish indemnification in the manner provided in Section 8 hereof. However, the Company shall not be required to qualify in any state which will require an escrow or other restriction relating to the Company and/or the Holders, or which will require the Company to qualify to do business in such state or require the Company to file therein any general consent to service of process. The Company at its expense will supply SIBL or the Assignees, as applicable, with copies of the Registration Statement and the prospectus included therein and other related documents in such quantities as may
be reasonably requested by SIBL or the Assignees.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) The Company shall not be required by this Section 5 to include the Registrable Securities in the Registration Statement which is to be filed if, in the opinion of counsel for both the Holders and the Company (or, should they not agree, in the opinion of another counsel experienced in securities law matters acceptable to counsel for the Holders and the Company) the proposed offering or other transfer as to which such registration is requested is exempt from applicable federal and state securities laws and would result in all purchasers or transferees obtaining securities which are not &#147;restricted securities,&#148; as defined in Rule 144.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Subject to Section 5(i) hereof, in the event that (i) a Registration Statement is not filed by the Company in a timely manner as set forth in this Section 5, (ii) such Registration Statement is not declared effective by the Commission in the period set forth in Section 5(b) hereof, or (iii) such Registration Statement is not maintained as effective by the Company for the applicable period set forth in Section 5(c) hereof (each a &#147;<B>Registration</B> <B>Default</B>&#148;), then the Company will issue to each Holder as of the first day of such Registration Default and for every consecutive quarter in which such Registration Default is occurring, as liquidated damages, and not as a penalty, warrants to purchase five percent (5%) of the aggregate number of shares of Common Stock of the Company issuable upon the exercise in full of the A Warrants then held by such Holder upon the same terms and conditions therein
stated (&#147;<B>Default Warrants</B>&#148;) until such corresponding Registration Default no longer exists (&#147;<B>Liquidated Damages</B>&#148;); <I>provided, however</I>, that the issuance of such Default Warrants shall not relieve the Company from its obligations to register the Registrable Securities pursuant to this Section 5(f). As used herein, the &#147;<B>A Warrants</B>&#148; means the seven-year warrants, exercisable at $1.89 per share, issued to SIBL and its assignees pursuant to the Merger Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">If the Company does not issue the Default Warrants to the Holders as set forth above, the Company will pay any Holder&#146;s reasonable costs of any action in a court of law to cause compliance with this Section 5(f), including reasonable attorneys&#146; fees, in addition to the Default Warrants. The registration of the Registrable Securities pursuant to this Section 5 shall not affect or limit a Holder&#146;s other rights or remedies as set forth in this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Upon the occurrence of an Incidental Registration Event (as defined below), the Company shall send to each Holder written notice of such determination and, if within 20 days after receipt of such notice, such Holder shall so request in writing (which request shall specify the Incidental Registrable Securities (as defined below) intended to be disposed of by such Holder and the intended method of disposition thereof), the Company shall use its commercially reasonable efforts to include in such registration statement all or any part of such Holder&#146;s Incidental Registrable Securities that such Holder requests to be registered; <I>provided</I> that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay
registration of all such securities, the Company may, at its election, give written notice of such determination to each requesting Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Incidental Registrable Securities in connection with such registration and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Incidental Registrable Securities, for the same period as the delay in registering such other securities. Notwithstanding the foregoing, if, in connection with any offering involving an underwriting of the Common Stock to be issued by the Company, the managing underwriter shall impose a limitation on the number of shares of the Common Stock included in any such registration statement because, in such underwriter&#146;s judgment, such limitation is necessary based on market conditions: (A) if the registration statement is for a public offering of common stock on a &#147;firm
commitment&#148; basis with gross proceeds to the Company of at least $15,000,000 (a &#147;<B>Qualified Public</B> <B>Offering</B>&#148;), the Company may exclude, to the extent so advised by the underwriters, the Incidental Registrable Securities from the underwriting; provided, however, that if the underwriters do not entirely exclude the Incidental Registrable Securities from such Qualified Public Offering, the Company shall be obligated to include in such registration statement, with respect to any requesting Holder, only an amount of Incidental Registrable Securities equal to the product of (i) the total number of Incidental Registrable Securities that remain available for registration after the underwriter&#146;s cutback and (ii) such Holder&#146;s percentage of ownership of all the Incidental Registrable Securities then outstanding (on an as-converted basis) (the &#147;<B>Registrable</B> <B>Percentage</B>&#148;); and (B) if the registration statement is not for a Qualified Public Offering, the
Company shall be obligated to include in such registration statement, with respect to the requesting Holder, only an amount of Incidental Registrable Securities equal to the product of (i) the number of Incidental Registrable Securities that remain available for registration after the underwriter&#146;s cutback and (ii) such Holder&#146;s Registrable Percentage. For purposes of determining the underwriter&#146;s cutback and each Holder&#146;s Registrable Percentage, any shares of Common Stock beneficially owned by Smith which are included in any registration statement referred to in the preceding sentence shall be included in such calculation and such shares of Common Stock beneficially owned by Smith shall be subject to the underwriter&#146;s cutback on a <I>pro rata</I> basis. If any Holder disapproves of the terms of any underwriting referred to in this paragraph, it may elect to withdraw therefrom by written notice to the Company and the underwriter. No incidental right under this Section 5(g)
shall be construed to limit any registration required under the other provisions of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) &#147;<B>Incidental Registration Event</B>&#148; means the Company determines to register under the Securities Act (including pursuant to a demand of any stockholder of the Company exercising registration rights) any shares of its Common Stock (i) at a time when any Registrable Securities that are required to be included in an effective Registration Statement hereunder are not covered by any effective Registration Statement, or (ii) beneficially owned by Dr. L.S. Smith (&#147;<B>Smith</B>&#148;) for resale other than shares acquired by Smith upon the exercise of options outstanding on the date hereof, or granted subsequent to the date hereof pursuant to a Company employee benefit plan, at a time when any Registrable Securities or Merger Shares are outstanding and are not covered by any effective Registration Statement; other than, in either case, on a registration statement on Form S-4 or Form S-8 or any similar
or successor form or any other registration statement relating to a merger or other business combination transaction, an exchange offer, an offering of securities solely to the Company&#146;s existing security holders or employees, or to securities issued pursuant to a dividend reinvestment plan. &#147;<B>Incidental Registrable</B> <B>Securities</B>&#148; means (i) with respect to an Incidental Registration Event specified in clause (i) of the definition of Incidental Registration Event, the Registrable Securities required to be included in an effective Registration Statement hereunder which are not so covered, and (ii) with respect to an Incidental Registration Event specified in clause (ii) of the definition of Incidental Registration Event, the outstanding Registrable Securities or Merger Shares which are not covered by any effective Registration Statement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) Notwithstanding the foregoing provisions of this Section 5, if in the good faith judgment of the Company, following consultation with legal counsel, the Company (i) delivers a Blackout Notice (as defined below) to the Holders, or determines that it would be detrimental to the Company or its stockholders for the Registration Statement (or any amendment or supplement thereto) to be filed or for resales of Registrable Securities to be made pursuant to the Registration Statement due to the existence of a material development or potential material development involving the Company that the Company would be obligated to disclose in the Registration Statement, which disclosure (i) would be premature or otherwise inadvisable at such time, (ii) cannot then be made by the Company despites its commercially reasonable efforts, or (iii) is reasonably likely to have a material adverse effect on the Company or its stockholders;
then in each such case, the Company shall have the right to (A) immediately defer such filing for a period of not more than sixty (60) days beyond the date by which the Registration Statement was otherwise required hereunder to be filed, or (B) suspend use of the Registration Statement for a period of not more than thirty (30) consecutive days (any such deferral or suspension period, a &#147;<B>Blackout Period</B>&#148;). Each Holder acknowledges that it would be seriously detrimental to the Company and its stockholders for the Registration Statement to be filed (or remain in effect) during a Blackout Period and therefore essential to defer such filing (or suspend the use thereof) during such Blackout Period and agrees to cease any disposition of the Registrable Securities during such Blackout Period. The Company may not designate more than two Blackout Periods in any twelve (12) month period. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>6. COVENANTS OF HOLDERS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) Each Holder will cooperate with the Company in all respects in connection with this Agreement, including timely supplying all information (including a Registration Statement Questionnaire) reasonably requested by the Company from time to time (which shall include all information regarding such Holder and proposed manner of sale of the Registrable Securities required to be disclosed in any Registration Statement) and executing and returning all documents reasonably requested in connection with the registration and sale of the Registrable Securities and entering into and performing its obligations under any underwriting agreement, if the offering is an underwritten offering, in usual and customary form, with the managing underwriter or underwriters of such underwritten offering, including any confirmation of, or additional or supplemental, information or documents the Company may request for purposes of filing
amendments to such registration statement or amendments or supplements to the prospectus contained therein. Nothing in this Agreement shall obligate any Holder to consent to be named as an underwriter in any Registration Statement unless required by the Commission (in which case the applicable Holder may withdraw its Registrable Securities from the Registration Statement). Notwithstanding anything to the contrary herein, (i) any delay or delays caused by a Holder by failure to cooperate as required hereunder shall not constitute a breach of the terms hereof as to such Holder, and (ii) the Company shall have no obligation to register, or to maintain the registration, of any Registrable Securities of any Holder on any registration statement if such Holder has not timely provided any such information or documents to the Company in connection with such registration statement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Each Holder shall comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to any registration statement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Upon receipt of a notice from the Company of the occurrence of any event or passage of time that (i) makes the financial statements included in a registration statement ineligible for inclusion therein, (ii) makes any statement made in a registration statement or any prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect, or (iii) requires any revisions to a registration statement, any prospectus contained therein or any other documents so that, in the case of such registration statement or such prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (each such notice, a &#147;<B>Blackout Notice</B>&#148;); each Holder who has
Registrable Securities registered under such registration statement shall forthwith discontinue disposition of such Registrable Securities under such registration statement until such Holder&#146;s receipt of the copies of the supplemented prospectus or amended registration statement or until it is advised in writing (the &#147;<B>Advice</B>&#148;) by the Company that the use of the applicable prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such prospectus or registration statement. The Company may provide appropriate stop orders to enforce the provisions of this Section 6(c).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Each Holder agrees not to take any action with respect to any distribution deemed to be made pursuant to any registration statement which would constitute a violation of Regulation M under the Exchange Act or any other applicable rule, regulation or law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>7. REGISTRATION PROCEDURES </B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If and whenever the Company is required by any of the provisions of this Agreement to effect the registration of any of the Registrable Securities under the Securities Act, the Company shall (except as otherwise provided in this Agreement), use commercially reasonable efforts to, subject to the Holders&#146; assistance and cooperation as reasonably required with respect to the Registration Statement:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) (i) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act during the applicable period with respect to the sale or other disposition of all Registrable Securities covered by such Registration Statement in accordance with the intended methods of distribution by the Holders thereof set forth in the Registration Statement or prospectus (including prospectus supplements with respect to the sales of Registrable Securities from time to time in connection with a registration statement pursuant to Rule 415 promulgated under the Securities Act) and (ii) take all lawful action such that each of the Registration Statement and any amendment thereto does not, when it becomes effective, and any prospectus or
prospectus supplement thereafter filed, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) (i) prior to the filing with the Commission of any Registration Statement (including any amendments thereto) and the distribution or delivery of any prospectus (including any supplements thereto), provide draft copies thereof to the Holders as required by Section 5(d) hereof and reflect in such documents all such comments as the Holders (and their counsel) reasonably may propose (provided that the Company shall not be liable under Section 5(f) or otherwise for any delay in filing or effectiveness if such delay is fairly attributable to such comments); (ii) furnish to each of the Holders such numbers of copies of a prospectus including a preliminary prospectus or any amendment or supplement to any prospectus, as applicable, in conformity with the requirements of the Securities Act, and such other documents, as any of the Holders may reasonably request in order to facilitate the public sale or other disposition of
the Registrable Securities owned by such Holder; and (iii) provide to the Holders copies of any comments and communications from the Commission relating to the Registration Statement, if in the Company&#146;s judgment it is lawful to do so without requiring public disclosure of the same under Regulation FD or breaching any of its obligations under any agreement with SIBL or its affiliates;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or blue sky laws of such jurisdictions as any of the Holders shall reasonably request (subject to the limitations set forth in Section 5(d) hereof), and do any and all other acts and things which may be necessary or advisable to enable such Holder to consummate the public sale or other disposition in such jurisdiction of the Registrable Securities owned by such Holder;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) list such Registrable Securities on the primary trading market where the Common Stock of the Company is listed as of the effective date of the Registration Statement, if the listing of such Registrable Securities is then permitted under the rules of such market;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) notify the Holders at any time when a prospectus relating thereto covered by the Registration Statement is required to be delivered under the Securities Act, of the happening of any event of which it has knowledge as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and the Company shall prepare and use is commercially reasonable efforts to file a curative amendment under Section 7(a) hereof as soon as reasonably practicable and during such period, the Holders shall not make any sales of Registrable Securities pursuant to the Registration Statement; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) after becoming aware of such event, notify each of the Holders who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the Commission of any stop order or other suspension of the effectiveness of the Registration Statement as soon as reasonably practicable and take all reasonable action to effect the withdrawal, rescission or removal of such stop order or other suspension;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) cooperate with the Holders to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts, as the case may be, as any of the Holders reasonably may request and registered in such names as any of the Holders may request; and, within three Trading Days after a Registration Statement which includes Registrable Securities is declared effective by the Commission, deliver and cause legal counsel selected by the Company to deliver to the transfer agent for the Registrable Securities (with copies to the Holders) an appropriate instruction and, to the extent necessary, an opinion of such counsel;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) in the event of an underwritten offering, promptly include or incorporate in a prospectus supplement or post-effective amendment to the Registration Statement such information as the managers reasonably agree should be included therein and to which the Company does not reasonably object and make all required filings of such prospectus supplement or post-effective amendment as soon as reasonably practicable after it is notified of the matters to be included or incorporated in such prospectus supplement or post-effective amendment; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) maintain a transfer agent and registrar for the Common Stock.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>8. INDEMNIFICATION</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) To the maximum extent permitted by law, the Company agrees to indemnify and hold harmless each of the Holders, each person, if any, who controls any of the Holders within the meaning of the Securities Act, and each director, officer, shareholder, employee or agent of the foregoing (each of such indemnified parties, a &#147;<B>Distributing Investor</B>&#148;) against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys&#146; fees and expenses), to which the Distributing Investor may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any
Registration Statement, or any related final prospectus or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; <I>provided, however</I>, that the Company will not be liable in any such case to the extent, and only to the extent, that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by any Distributing Investor, its counsel, affiliates or agents, specifically for use in the preparation thereof or by any Distributing Investor&#146;s failure to deliver to a purchaser a copy of the most recent prospectus (including any amendments or
supplements thereto). This indemnity agreement will be in addition to any liability which the Company may otherwise have.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) To the maximum extent permitted by law, each Distributing Investor agrees that it will indemnify and hold harmless the Company, and each officer, director, employee or agent of the Company or person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys&#146; fees and expenses) to which the Company or any such officer, director, employee, agent or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, or any related final prospectus or
amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, final prospectus or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by such Distributing Investor, its counsel or affiliates, specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the Distributing Investor may otherwise have under this Agreement. Notwithstanding anything to the contrary herein, the Distributing Investor shall be liable under this Section 8(b) for only that amount as does not exceed the net proceeds to such Distributing Investor as a result of the sale of Registrable
Securities pursuant to a Registration Statement. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action against such indemnified party, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party except to the extent the failure of the indemnified party to provide such written notification actually prejudices the ability of the indemnifying party to defend such action. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified parties shall have the right to employ one or more separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party unless (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such action (including any interpleaded parties) include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by its counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the indemnified party or any other indemnified party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for the indemnified party, which firm shall be designated in writing by the indemnified
party). No settlement of any action against an indemnified party shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld so long as such settlement includes a full release of claims against the indemnified party.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">All fees and expenses of the indemnified party (including reasonable costs of defense and investigation in a manner not inconsistent with this Section 8 and all reasonable attorneys&#146; fees and expenses) shall be paid to the indemnified party, as incurred, within 10 Trading Days of written notice thereof to the indemnifying party; provided, that the indemnifying party may require such indemnified party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such indemnified party is not entitled to indemnification hereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>9. CONTRIBUTION</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In order to provide for just and equitable contribution under the Securities Act in any case in which (i) the indemnified party makes a claim for indemnification pursuant to Section 8 hereof but is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of Section 8 hereof provide for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any indemnified party, then the Company and the applicable Distributing Investor shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and
all reasonable attorneys&#146; fees and expenses), in either such case (after contribution from others) on the basis of relative fault as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the applicable Distributing Investor on the other hand, and the parties&#146; relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Distributing Investor agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by <I>pro rata</I> allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Notwithstanding any other provision of this Section 9, in no event shall (i) any of the Distributing Investors be required to undertake liability to any person under this Section 9 for any amounts in excess of the dollar amount of the proceeds received by such Distributing Investor from the sale of such Distributing Investor&#146;s Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) pursuant to any Registration Statement under which such Registrable Securities are registered under the Securities Act and (ii) any underwriter be required to undertake liability to any person hereunder for any amounts in excess of the aggregate discount, commission or other compensation payable to such underwriter with respect to the Registrable Securities underwritten by it and distributed pursuant to such Registration Statement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>10. NOTICES</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile or email (upon receipt of confirmation of error-free transmission or mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or two business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by five days advance written notice to each of the other parties hereto.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=76.25></TD><TD width=102.75></TD><TD width=16.55></TD><TD width=272.45></TD></TR>
<TR><TD valign=top width=101.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=137><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Company:</P>
</TD><TD valign=top width=22.067><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=363.267><P style="margin:0pt">DGSE Companies, Inc.</P>
<P style="margin:0pt">2817 Forest Lane</P>
<P style="margin:0pt">Dallas, Texas 75234</P>
<P style="margin:0pt">Attn: Dr. L. S. Smith</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267>&nbsp;</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">With a copy to:</P>
</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267><P style="margin:0pt">Sheppard, Mullin, Richter &amp; Hampton LLP</P>
<P style="margin:0pt">12275 El Camino Real, Suite 200</P>
<P style="margin:0pt">San Diego, California 92130-2006</P>
<P style="margin:0pt">Attn: John J. Hentrich, Esq.</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267>&nbsp;</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">SIBL:</P>
</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267><P style="margin:0pt">Stanford International Bank Ltd.</P>
<P style="margin:0pt">6075 Poplar Avenue</P>
<P style="margin:0pt">Memphis, TN 38119</P>
<P style="margin:0pt">Attention: James M. Davis, Chief Financial Officer</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267>&nbsp;</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">With a copy to:</P>
</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267><P style="margin:0pt">Adorno &amp; Yoss, P.A.</P>
<P style="margin:0pt">2525 Ponce de Leon Blvd., Suite 400</P>
<P style="margin:0pt">Miami, Florida 33134</P>
<P style="margin:0pt">Attention: Seth P. Joseph, Esquire</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267>&nbsp;</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">If to the Assignees:</P>
</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267><P style="margin:0pt">William R. Fusselmann</P>
<P style="margin:0pt">[omitted]</P>
<P style="margin:0pt">Key Biscayne, Florida 33149</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267>&nbsp;</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267><P style="margin:0pt">Daniel T. Bogar </P>
<P style="margin:0pt">[omitted]</P>
<P style="margin:0pt">Hollywood, Florida 33021</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267>&nbsp;</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267><P style="margin:0pt">Ronald M. Stein </P>
<P style="margin:0pt">[omitted]</P>
<P style="margin:0pt">Miami Beach, Florida 33141</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267>&nbsp;</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267><P style="margin:0pt">Osvaldo Pi </P>
<P style="margin:0pt">[omitted]</P>
<P style="margin:0pt">Pinecrest, Florida 33156 </P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267>&nbsp;</TD></TR>
<TR><TD valign=top width=101.667>&nbsp;</TD><TD valign=top width=137>&nbsp;</TD><TD valign=top width=22.067>&nbsp;</TD><TD valign=top width=363.267><P style="margin:0pt">Charles M. Weiser</P>
<P style="margin:0pt">[omitted]</P>
<P style="margin:0pt">Hollywood, Florida 33021</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt; padding-left:18pt"><B>11. ASSIGNMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned without the prior written consent of (i) the Company, in the case of an assignment by a Holder, or (ii) Holders owning a majority of the shares of Company common stock constituting the outstanding Registrable Securities from time to time (a &#147;<B>Majority of Holders</B>&#148;), in the case of an assignment by the Company. Any assignment in violation of the preceding sentence shall be null and void and of no force or effect.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>12.</B> <B>GOVERNING LAW; JURISDICTION</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">This Agreement shall be governed by and interpreted in accordance with the laws of the State of Texas, without regard to its principles of conflict of laws. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any party in the federal courts of Texas or the state courts of the State of Texas, and each of the parties consents to the jurisdiction of such courts and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>13. NO DELAY OF REGISTRATION</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">No Holder shall have any right, and each Holder covenants and agrees not to commence any action or proceeding, to obtain or seek an injunction restraining or otherwise delaying any registration by the Company as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>14.</B> <B>TERMINATION OF REGISTRATION RIGHTS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">A Holder shall not be entitled to exercise any rights provided herein after the first date on which all Registrable Securities then held by such Holder may immediately be sold under Rule 144 during any 90-day period taking into consideration the volume restrictions specified in Rule 144.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>15.</B> <B>MISCELLANEOUS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <I>Entire Agreement.</I> This Agreement, including any certificate, schedule, exhibit or other document delivered pursuant to their terms, constitutes the entire agreement among the parties hereto with respect to the subject matters hereof and thereof, and supersedes all prior agreements and understandings, whether written or oral, among the parties with respect to such subject matters.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <I>Amendments.</I> This Agreement may not be amended except by an instrument in writing signed by the Company and a Majority of Holders. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of certain Holders and that does not directly or indirectly affect the rights of other Holders must be given by Holders of all of the Registrable Securities which such waiver or consent affects.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <I>Waiver.</I> No waiver of any provision of this Agreement shall be deemed a waiver of any other provisions or shall a waiver of the performance of a provision in one or more instances be deemed a waiver of future performance thereof. No waiver by any party of any default, misrepresentation or breach hereunder, whether intentional or not, shall be effective unless in writing and signed by (i) the Company, if the waiver is sought to be enforced by any Holder, or (ii) a Majority of Holders, if the waiver is sought to be enforced by the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <I>Construction.</I> This Agreement has been entered into freely by each of the parties, following consultation with their respective counsel, and shall be interpreted fairly in accordance with its respective terms, without any construction in favor of or against either party. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <I>Binding Effect of Agreement.</I> This Agreement shall inure to the benefit of, and be binding upon the successors and permitted assigns of each of the parties hereto. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f)<I> Severability.</I> If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or unenforceability of this Agreement in any other jurisdiction. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g)<I> Attorneys&#146; Fees. </I>If any action should arise between the parties hereto to enforce or interpret the provisions of this Agreement, the prevailing party in such action shall be reimbursed for all reasonable expenses incurred in connection with such action, including reasonable attorneys&#146; fees.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h)<I> Third-Party Beneficiaries. </I>This Agreement is made solely for the benefit of the parties to this Agreement and their respective successors and permitted assigns, and no other person or entity shall have or acquire any right or remedy by virtue hereof except as otherwise expressly provided herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i)<I> Headings. </I>The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of this Agreement. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j)<I> Counterparts.</I> This Agreement may be signed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, will be deemed to constitute one and the same agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k)<I> Facsimile Execution</I>. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto, and an executed copy of this Agreement may be delivered by one or more parties by facsimile, email or similar electronic or digital transmission pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=center><I>[ THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK ]</I></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed, as of the date first written above.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=219.75></TD><TD width=14.45></TD><TD width=233.8></TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>DGSE COMPANIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">Dr. L.S. Smith <BR>
Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>STANFORD INTERNATIONAL BANK LTD.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">James M. Davis<BR>
Chief Financial Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>F-2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX G</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>CORPORATE GOVERNANCE AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS CORPORATE GOVERNANCE AGREEMENT is made and entered into as of __________ __, 2007 (this &#147;<B>Agreement</B>&#148;), by and among (i) DGSE Companies, Inc., a Nevada corporation (together with its successors and permitted assigns, &#147;<B>DGSE</B>&#148;), (ii) Stanford International Bank, Ltd., a company organized under the laws of Antigua and Barbuda (together with its successors and permitted assigns, &#147;<B>SIBL</B>&#148;), and (iii) Dr. L.S. Smith, an individual resident of the State of Texas (together with his heirs and assigns, &#147;<B>Smith</B>&#148; and, together with SIBL, the &#147;<B>Stockholders</B>&#148;). </P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>RECITALS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, DGSE, its wholly-owned subsidiary, DGSE Merger Corp., a Delaware corporation (&#147;<B>Merger</B> <B>Sub</B>&#148;), Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (&#147;<B>Superior</B>&#148;), and SIBL, as stockholder agent, made and entered into that certain Amended and Restated Agreement and Plan of Merger and Reorganization as of January 6, 2007 (as amended, modified or supplemented from time to time, the &#147;<B>Merger Agreement</B>&#148;);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the Merger Agreement provides for the merger of Superior with and into Merger Sub, with Superior as the surviving company and a wholly-owned subsidiary of DGSE (the &#147;<B>Merger</B>&#148;);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, pursuant to the Merger, all outstanding capital stock of Superior may be exchanged for shares of common stock, par value $0.01 per share, of DGSE (the &#147;<B>DGSE Common Stock</B>&#148;), subject to the terms and conditions set forth in the Merger Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, SIBL is currently the largest stockholder of Superior and Smith is currently the largest stockholder of DGSE;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the stockholders of Superior and DGSE need to approve the Merger Agreement in order for the Merger to be consummated and Smith and SIBL desire to induce each other to support and approve the Merger Agreement and to enter into support agreements in relation thereto; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, Smith and SIBL desire to establish in this Agreement certain terms and conditions concerning the post-Merger board of directors of DGSE (the &#147;<B>DGSE Board</B>&#148;).</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto (collectively, the &#147;<B>Parties</B>&#148;), intending to be legally bound, hereby agree as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1. <I>Certain Definitions.</I> Unless otherwise expressly provided herein, the following terms, whenever used in this Agreement, shall have the meanings ascribed to them below:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Affiliate</B>&#148; means, with respect to any specified Person, (1) any other Person who, directly or indirectly, owns or controls, is under common ownership or control with, or is owned or controlled by, such specified Person, (2) any other Person who is a director, officer, managing member or general partner or is, directly or indirectly, the Beneficial Owner of ten percent (10%) or more of any class of equity securities, of the specified Person or a Person described in clause (1) next above, (3) another Person of whom the specified Person is a director, officer or partner or is, directly or indirectly, the Beneficial Owner of ten percent (10%) or more of any class of equity securities, (4) another Person in whom the specified Person has a substantial beneficial interest or as to whom the specified Person serves as trustee or in a similar capacity, or (5) if applicable, any member of the Immediate Family of the specified
Person. As used in this definition, the term &#147;control&#148; means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Associate</B>&#148; shall have the meaning ascribed to such term in Rule 12b-2 promulgated under the Exchange Act (or any successor regulation thereto).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Beneficially Own</B>&#148; means, with respect to any Person, any securities:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(a) which such Person or any of such Person&#146;s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants, options or otherwise;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(b) which such Person or any such Person&#146;s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has &#147;beneficial ownership&#148; of (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act as such rule is in effect on the date of this Agreement), including pursuant to any agreement, arrangement or understanding, whether or not in writing; <I>provided, however</I>, that a Person shall not be deemed to &#147;Beneficially Own&#148; any security under this subparagraph (b) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding arises solely from a revocable proxy given in response to a public proxy or consent solicitation made by DGSE pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations promulgated under the Exchange Act; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(c) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person&#146;s Affiliates or Associates) has an agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subparagraph (b) next above) or disposing of any voting securities of DGSE; <I>provided, however</I>, that nothing in this subparagraph (c) shall cause a person engaged in business as an underwriter of securities to &#147;Beneficially Own&#148; any securities acquired through such Person&#146;s participation in good faith in a firm commitment underwriting under the Securities Act until the expiration of forty days after the date of such acquisition.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">The related term &#147;<B>Beneficial Owner</B>&#148; shall have the correlative meaning.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Common Stock</B>&#148; means the common stock, par value $0.01 per share, of DGSE, or any capital stock into which such common stock may be converted or exchanged.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>DGSE Shares</B>&#148; means, with respect to any Stockholder, all shares of DGSE capital stock (or any capital stock into which such capital stock may be converted or exchanged) Beneficially Owned by such Stockholder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Director</B>&#148; means any director on the DGSE Board.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Effective Time</B>&#148; means the effective time of the consummation of the Merger.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Entity</B>&#148; means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm, labor organization, unincorporated organization, or other enterprise, association, organization or business entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Exchange Act</B>&#148; means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Executive Officer</B>&#148; means an &#147;officer&#148; (as such term is defined in Rule 16a-1(f) promulgated under the Exchange Act on the date hereof) of DGSE.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Immediate Family</B>&#148; means, with respect to any individual, such individual&#146;s (i) children, stepchildren, grandchildren, parents, stepparents, grandparents, spouse, former spouses, siblings, nieces, nephews, or current or former mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law or sisters-in-law, including in each case by adoption, and (ii) any other individual sharing such individual&#146;s household (other than a tenant or employee).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Independent Director</B>&#148; means a Director or Nominee (i) who is not and has never been an officer or employee of DGSE, Superior or SIBL or their respective Affiliates or Associates, or of any Entity that derived 5% or more of its revenues or earnings in any of its three most recent fiscal years from transactions involving DGSE, Superior, SIBL or any Affiliate or Associate of any of them, (ii) who has no affiliation, compensation, consulting or contracting arrangement with DGSE, Superior or SIBL or their respective Affiliates or Associates or any other Entity such that a reasonable person would regard such individual as likely to be unduly influenced by management of DGSE, Superior or SIBL, respectively, or their respective Affiliates or Associates, and (iii) who is a Director the DGSE Board has determined, or a Nominee the DGSE Board is reasonably likely to determine, to be &#147;independent&#148; within the meaning of
the applicable listing rules of DGSE&#146;s principal trading market from time to time and Section 10A(m)(3) of the Exchange Act and Rule 10A-3(b)(1) promulgated thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Person</B>&#148; means any (i) individual, (ii) group (within the meaning of Section 13 of the Exchange Act), (iii) supranational, national, federal, state, local, municipal, foreign or other governmental or quasi-governmental authority of any nature (including any legislature, agency, board, body, bureau, branch, department, division, commission, instrumentality, court, tribunal, magistrate, justice or other entity exercising governmental or quasi-governmental powers, or (iv) any Entity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>SEC</B>&#148; means the United States Securities and Exchange Commission.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>SEC Rules</B>&#148; means the rules and regulations promulgated by the SEC under the Securities Act, the Exchange Act or SOX.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Securities Act</B>&#148; means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>SOX</B>&#148; means the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2. <I>Board of Directors</I>. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.1 <I>Nominations</I>. From and after the Effective Time, (i) for so long as SIBL shall Beneficially Own at least 15% of the outstanding shares of Common Stock as of the record date for the applicable meeting at which directors are to be elected to the DGSE Board, SIBL shall have the right to nominate up to two Independent Directors for election to the DGSE Board, (ii) for so long as Smith shall Beneficially Own at least 10% of the outstanding shares of Common Stock as of the record date for the applicable meeting at which directors are to be elected to the DGSE Board, Smith shall have the right to nominate up to two Independent Directors for election to the DGSE Board, (iii) for so long as Smith is an executive officer of DGSE, Smith shall have the right to be nominated for election to the DGSE Board, and (iv) as long as William H. Oyster (&#147;<B>Oyster</B>&#148;) is an executive officer of DGSE, Oyster shall have
the right to be nominated for election to the DGSE Board (all of the foregoing six nominees, collectively, the &#147;<B>Nominees</B>&#148;). All Nominees shall be individuals at least 18 years of age.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.2 <I>Audit Committee Financial Expert</I>. The Stockholders shall use their reasonable efforts to nominate at least one Independent Director who is qualified as an &#147;audit committee financial expert&#148;, as such term is defined for purposes of Item 401(h)(2) of Regulation S-K of the SEC Rules (or satisfies the applicable requirements of any successor rule or regulation thereto).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.3 <I>Notice of Elections, Etc</I>. DGSE shall provide to each Stockholder entitled to nominate Nominees hereunder and to each executive officer entitled to be nominated as a Nominee hereunder 15 days prior written notice of any intended mailing of notice to its stockholders for a meeting at which directors are to be elected, and any such Stockholder or executive officer, as the case may be, shall notify DGSE in writing, prior to such mailing, of each Nominee nominated by such Stockholder or whether such executive officer requests to be nominated, as the case may be. If any such Stockholder or executive officer fails to give notice to DGSE as set forth in this Section 2.3, it shall be deemed that the Nominee of such Stockholder then serving as a Director shall be its Nominees for reelection or that such executive officer requests to be nominated, as the case may be.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.4 <I>DGSE Solicitation and Voting of Shares</I>. Subject to the applicable fiduciary duties of the DGSE Board, or any applicable committee thereof, and compliance by DGSE and the DGSE Board, or such committee, in good faith with applicable law, including the SEC Rules and the listing rules of DGSE&#146;s principal trading market, DGSE and the DGSE Board shall, in connection with any vote or meeting of DGSE stockholders at which directors to the DGSE Board are to be elected, (i) cause each Nominee to be included in the slate of nominees recommended by the DGSE Board to DGSE&#146;s stockholders for election as directors, and (ii) use its reasonable efforts to cause the election of each Nominee, including (A) including each Nominee in DGSE&#146;s proxy statement (provided such Nominee promptly provides any information DGSE reasonably requests in connection with the preparation of its proxy statement, including a duly
completed director&#146;s questionnaire in such form as DGSE may reasonably provide to such Nominee), (B) recommending a vote for each Nominee, and (C) soliciting proxies in favor of each Nominee&#146;s election to the DGSE Board.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.5 <I>SIBL Voting</I>. As long as SIBL Beneficially Owns any Common Stock of DGSE, SIBL shall, in its capacity as a stockholder of DGSE, take all reasonable actions, including voting all DGSE Shares which are Beneficially Owned by SIBL in person or by proxy at any annual or special meeting of DGSE stockholders called for the purpose of voting on the election of directors, or executing a written consent in lieu thereof in respect of such DGSE Shares, to elect (i) Smith as a Director if nominated and then an Executive Officer, and (ii) Oyster as a Director if nominated and then an Executive Officer. SIBL shall take all such other actions, including providing instructions to its nominated Directors and causing its Affiliates and Associates to vote all DGSE Shares respectively owned or controlled by them, as may be required to effectuate the intents and purposes of the foregoing.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.6 <I>Non-Qualified Nominees</I>. If the DGSE Board determines in good faith that a Nominee elected as a Director who is required to be an Independent Director does not qualify as an Independent Director or is otherwise not qualified to serve as a Director pursuant to Section 2.1, the nominating Stockholder shall take all action necessary to cause such Director to resign from office and the DGSE Board may, in compliance with DGSE&#146;s Bylaws as in effect from time to time, remove such Director from office.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.7 <I>Replacement of Directors</I>. If (i) any Nominee shall fail to be elected as a Director, or (ii) any Nominee elected as a Director shall cease to serve as a Director, whether by virtue of death, resignation (including because such Nominee is required to resign pursuant to the last sentence of Section 2.1), removal or otherwise, before his or her successor has been duly elected and qualified at a meeting of DGSE stockholders at which Directors are to be elected; and in either case a vacancy exists on the DGSE Board, then the Stockholder who had nominated such Nominee or former Director, as the case may be, shall have the right to nominate a replacement Nominee who satisfies the applicable qualifications of such unelected Nominee or former Director, as the case may be, to fill such vacancy within 30 days of the date of such vacancy. In any such case, subject to the applicable fiduciary duties of the DGSE Board,
or any applicable committee thereof, and compliance by DGSE and the DGSE Board, or such committee, in good faith with applicable law, including the SEC Rules and the listing rules of DGSE&#146;s principal trading market, the remaining Directors shall act to elect such replacement Nominee to fill such vacancy.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3. <I>Miscellaneous</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.1 <I>Construction</I>. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(a) all references in this Agreement to designated &#147;Articles,&#148; &#147;Sections&#148; and other subdivisions, or to designated &#147;Exhibits,&#148; &#147;Schedules&#148; or &#147;Appendices,&#148; are to the designated Articles, Sections and other subdivisions of, or the designated Exhibits, Schedules or Appendices to, this Agreement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(b) references to any Person includes such Person&#146;s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(c) the words &#147;include,&#148; &#147;includes,&#148; and &#147;including&#148; shall be deemed to be followed by &#147;without limitation&#148;;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(d) the term &#147;or&#148; shall not be exclusive;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(e) pronouns in masculine, feminine, and neuter genders shall be construed to include any other gender;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(f) whenever the singular number is used, if required by the context, the same shall include the plural, and vice versa; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(g) the words &#147;this Agreement,&#148; &#147;herein,&#148; &#147;hereof,&#148; &#147;hereby,&#148; &#147;hereunder,&#148; and words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.2 <I>Titles and Headings</I>. The section and paragraph titles and headings contained herein are inserted purely as a matter of convenience and for ease of reference and shall be disregarded for all other purposes, including the construction, interpretation or enforcement of this Agreement or any of its terms or provisions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.3 <I>Voluntary Execution of Agreement</I>. This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties. Each of the Parties acknowledges, represents and warrants that (i) it has read and fully understood this Agreement and the implications and consequences thereof; (ii) it has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of its own choice, or it has made a voluntary and informed decision to decline to seek such counsel; and (iii) it is fully aware of the legal and binding effect of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.4 <I>Assignment</I>. None of the Parties may assign any of its rights or interests or delegate any of its duties or obligations under this Agreement without the prior written consent of the other Parties, which consent may be withheld in each Party&#146;s sole discretion. Any purported assignment not in full compliance with this Section 3.4 shall be null and void and of no force or effect <I>ab initio</I>. Subject to the sentence next preceding, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Parties and express beneficiaries hereof and their respective heirs, executors, administrators, successors and permitted assigns</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.5 <I>Amendments and Modification</I>. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by each of the Parties.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.6 <I>Severability</I>. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof; provided that if any provision of this Agreement, as applied to any Party or to any circumstance, is adjudged by a court, tribunal or other governmental body, arbitrator or mediator not to be enforceable in accordance with its terms, the Parties agree that such governmental body, arbitrator or mediator making such determination shall have the power to modify the provision in a manner consistent with its objectives such that it is enforceable, and to delete specific words or phrases, and in its reduced form, such provision shall then be enforceable and shall be enforced.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.7 <I>No Waiver</I>. The failure of any Party to exercise any right, power or remedy provided under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other Party with its obligations hereunder, or any custom or practice of the Parties at variance with the terms hereof shall not constitute a waiver by such Party of its right to exercise any such or other right, power or remedy or to demand such compliance. No waiver by any Party of any default, misrepresentation or breach hereunder, whether intentional or not, shall be effective unless in writing and signed by the Party against whom such waiver is sought to be enforced, and no such waiver shall be deemed to extend to any prior or subsequent default, misrepresentation or breach hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.8 <I>Arbitration</I>. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in Dallas, Texas before one arbitrator. The arbitration shall be administered by the Judicial Arbitration and Mediation Services (&#147;<B>JAMS</B>&#148;) pursuant to its Streamlined Arbitration Rules and Procedures. Judgment on any award may be entered in any court having jurisdiction. This clause shall not preclude Parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction. The arbitrator may, in the award, allocate all or part of the costs of the arbitration, including the fees of the arbitrator and the reasonable attorneys&#146; fees of the prevailing party.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.9 <I>Specific Performance</I>. The Parties declare that it is impossible to measure in money the damages that would accrue to a Party by reason of another Party&#146;s failure to perform any of the obligations hereunder. Each Party therefore consents to an order of specific performance with respect to any of its obligations hereunder. Any Party against whom an order for specific performance is sought hereby waives any claim or defense therein that the moving party has an adequate remedy at law or that money damages would provide an adequate remedy. It shall, however, be the election of the moving party as to whether or not to seek specific performance. An order for specific performance shall be among the remedies that can be granted pursuant to an arbitration instituted under Section 3.8 and enforced by any court of competent jurisdiction. Additionally, solely for the purpose of provisional relief prior to the
commencement of the arbitration process provided for in Section 3.8 or pending a determination on the merits pursuant to such arbitration process, any Party may seek from an appropriate court injunctive relief, trustee process, attachments, equitable attachments or similar relief.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.10 <I>Notices</I>. All notices, requests, instructions or other documents to be given under this Agreement shall be in writing and shall be deemed given, (i) upon receipt if sent via registered or certified mail, return receipt requested, in the U.S. mails, postage prepaid, (ii) when sent if sent by facsimile or email; <I>provided, however</I>, that the facsimile or email is promptly confirmed by telephone confirmation thereof, (iii) when delivered, if delivered personally to the intended recipient, and (iv) one business day following delivery to a reputable national courier service for overnight delivery; and in each case, addressed to a Party at the following address for such Party:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(a) &nbsp;If to DGSE, addressed to it at:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:72pt">DGSE Companies, Inc.<BR>
2817 Forest Lane<BR>
Dallas, Texas 75234<BR>
Attn: Dr. L.S. Smith<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:54pt; text-indent:18pt">with a copy (which shall not constitute notice and which shall not be required for delivery to be effective) to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:72pt">Sheppard, Mullin, Richter &amp; Hampton LLP<BR>
12275 El Camino Real, Suite 200<BR>
San Diego, California 92130-2006<BR>
Attn: John J. Hentrich, Esq.<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(b) &nbsp;If to Smith, addressed to him at:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:72pt">Dr. L.S. Smith<BR>
519 Interstate 30, #243<BR>
Rockwall, Texas 75087<BR>
Facsimile: &nbsp;<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(c) &nbsp;If to SIBL, addressed to it at:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:72pt">Stanford International Bank Ltd.<BR>
c/o Stanford Financial Group<BR>
6075 Poplar Avenue<BR>
Memphis, Tennessee 38119<BR>
Attn: James M. Davis, Chief Financial Officer<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:54pt; text-indent:18pt">with a copy (which shall not constitute notice and which shall not be required for delivery to be effective) to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:72pt">Adorno &amp; Yoss LLP<BR>
2525 Ponce de Leon Blvd., Suite 400<BR>
Miami, Florida 33134-6012<BR>
Attn: Seth P. Joseph, Esq.<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Or in each case to such other address, email address or fax number as the Party to whom the notice, request, instruction or other document is given may have previously furnished to the other Parties in writing in the manner set forth in this Section 3.10.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.11 <I>Governing Law</I>. This Agreement and the performance of the transactions and obligations of the Parties hereunder shall be governed by and construed in accordance with the laws of the State of Texas applicable to contracts negotiated, executed and to be performed entirely within such State by residents thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.12 <I>Entire Agreement</I>. This Agreement constitutes the entire agreement and understanding of the Parties in respect of the subject matter hereof and supersedes all prior understandings, agreements or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated by this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.13 <I>Third-Party Beneficiaries</I>. This Agreement is made solely for the benefit of the Parties and their respective permitted successors and assigns, and, except to the extent provided in Section 2 regarding Oyster, no other Person shall have or acquire any right or remedy by virtue hereof except as otherwise expressly provided herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.14 <I>Submission to Jurisdiction; No Jury Trial</I>. Any suit, action or proceeding with respect to this Agreement shall be brought exclusively in any court of competent jurisdiction in the County of Dallas, Texas. ALL PARTIES HERETO HEREBY IRREVOCABLY WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE PERSONAL JURISDICTION OR VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT BROUGHT IN ANY SUCH COURT AND HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE PARTIES HERETO HEREBY FURTHER IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.15 <I>Counterparts</I>. This Agreement may be executed in two or more original or facsimile counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same instrument.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.16 <I>Facsimile Execution</I>. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more Parties, and an executed copy of this Agreement may be delivered by one or more Parties by facsimile or similar electronic transmission device pursuant to which the signature of or on behalf of such Party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any Party, all Parties agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=center><I>[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>G-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day and year first above written.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=219.75></TD><TD width=14.45></TD><TD width=233.8></TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>DGSE COMPANIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">Dr. L.S. Smith <BR>
Chairman and Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>STANFORD INTERNATIONAL BANK, LTD.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">James M. Davis<BR>
Chief Financial Officer</P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>DR. L.S. SMITH</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=19.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>G-2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX H</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>NEITHER THIS WARRANT NOR THE WARRANT SHARES (AS HEREINAFTER DEFINED) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE &#147;ACT&#148;), OR THE SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE WARRANT SHARES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT AND SUCH LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=right><B>Warrant No. ____</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>WARRANT<BR>
For the Purchase of Common Stock of<BR>
DGSE COMPANIES, INC. <BR>
a Nevada corporation</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center>VOID AFTER 5:00 P.M., EASTERN STANDARD TIME, ON ________, 2014.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=233.95></TD><TD width=234.05></TD></TR>
<TR><TD valign=bottom width=311.933><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0.85pt; padding-left:6pt; text-indent:-6pt">_________ Shares</P>
</TD><TD valign=bottom width=312.067><P style="margin-top:0pt; margin-bottom:0.85pt" align=right>_________, 2007</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">FOR VALUE RECEIVED, DGSE COMPANIES, INC., a Nevada corporation (together with its successors, the &#147;<B>Company</B>&#148;), hereby certifies that STANFORD INTERNATIONAL BANK LTD. (the &#147;<B>Holder</B>&#148;) is entitled, subject to the provisions of this Warrant, to purchase from the Company up to ___________ shares of common stock (the &#147;<B>Common Shares</B>&#148;), par value $0.01 per share (&#147;<B>Common Stock</B>&#148;), of the Company, at an initial exercise price equal to $______ per Common Share (the &#147;<B>Exercise Price</B>&#148;), during the period commencing ________, 2007 (the &#147;<B>Date of Issuance</B>&#148;) and expiring at 5:00 P.M., Eastern Standard time, on ________, 2014 (the &#147;<B>Expiration Date</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The number of Common Shares to be received upon the exercise of this Warrant may be adjusted from time to time as hereinafter set forth. The Common Shares deliverable upon such exercise, or the entitlement thereto upon such exercise, and as so adjusted from time to time, are hereinafter sometimes referred to as &#147;Warrant Shares&#148;. The warrants issued on the same date hereof bearing the same terms and conditions as this Warrant shall be collectively referred to as the &#147;Warrants&#148;.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Holder agrees with the Company that this Warrant is issued, and all the rights hereunder shall be held subject to, all of the conditions, limitations and provisions set forth herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>1. EXERCISE OF WARRANT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <B>By Payment of Cash</B>. This Warrant may be exercised by its presentation and surrender to the Company at its principal office (or such office or agency of the Company as it may designate in writing to the Holder hereof), commencing on the Date of Issuance and expiring at 5:00 P.M., Eastern Standard time, on the Expiration Date, with the Warrant Exercise Form attached hereto duly completed and executed and accompanied by payment (either in cash or by certified or official bank check or by wire transfer, payable to the order of the Company) of the Exercise Price for the number of shares specified in such form.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company agrees that the Holder hereof shall be deemed the record owner of such Common Shares as of the close of business on the date on which this Warrant shall have been presented and payment made for such Common Shares as aforesaid whether or not the Company or its transfer agent is open for business. Certificates for the Common Shares so purchased shall be delivered to the Holder hereof within a reasonable time, not exceeding 15 days, after the rights represented by this Warrant shall have been so exercised. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant of like tenor evidencing the rights of the Holder hereof to purchase the balance of the shares purchasable hereunder as soon as reasonably practicable. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Notwithstanding anything to the contrary set forth above, each exercise of this Warrant shall cover at least the lesser of (i) 10,000 Common Shares (as adjusted for stock splits, stock dividends, combinations and the like), and (ii) the total number of Common Shares then subject to the Warrant.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <B>Cashless Exercise</B>. In lieu of the payment method set forth in Section 1(a) above, if the Common Stock is then traded or listed on a Principal Market (as defined below), the Holder may elect to exchange all or some of this Warrant for the Common Shares equal to the value of the amount of this Warrant being exchanged on the date of exchange. If the Holder elects to exchange this Warrant as provided in this Section 1(b), the Holder shall tender to the Company this Warrant for the amount being exchanged, along with the Warrant Exercise Form attached hereto duly completed and executed indicating the Holder&#146;s election to exchange some or all of this Warrant, and the Company shall issue to the Holder the number of Common Shares computed using the following formula:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=17.5></TD><TD width=2.5></TD><TD width=50></TD></TR>
<TR><TD valign=bottom width=23.333><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=3.333>&nbsp;</TD><TD valign=bottom width=66.667><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD></TR>
<TR><TD width=23.333 rowspan=2><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=right>X&nbsp;=</P>
</TD><TD valign=bottom width=3.333 rowspan=2><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667><P style="margin:0pt">Y&nbsp;&#215;&nbsp;(A&nbsp;&#8722;&nbsp;B)</P>
</TD></TR>
<TR><TD valign=bottom width=66.667><P style="margin:0pt" align=center>A</P>
</TD></TR>
</TABLE>
<P style="margin:0pt; font-size:12pt">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=20></TD><TD width=47.3></TD><TD width=5></TD><TD width=15.4></TD><TD width=5></TD><TD width=375.3></TD></TR>
<TR><TD valign=bottom width=26.667><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=63.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Where:&nbsp;X&nbsp;=</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=527.6 colspan=3><P style="margin:0pt">The number of Common Shares to be issued to the Holder.</P>
</TD></TR>
<TR><TD valign=bottom width=26.667>&nbsp;</TD><TD valign=bottom width=63.067>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=20.533>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=500.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26.667>&nbsp;</TD><TD valign=bottom width=63.067>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=top width=20.533><P style="margin:0pt" align=right>Y&nbsp;=</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=500.4><P style="margin:0pt">The number of Common Shares for which this Warrant is being exercised (as adjusted to the date of such calculation).</P>
</TD></TR>
<TR><TD valign=bottom width=26.667>&nbsp;</TD><TD valign=bottom width=63.067>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=top width=20.533>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=500.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26.667>&nbsp;</TD><TD valign=bottom width=63.067>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=top width=20.533><P style="margin:0pt" align=right>A&nbsp;=</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=500.4><P style="margin:0pt">The Market Price (as defined below) of one Common Share.</P>
</TD></TR>
<TR><TD valign=bottom width=26.667>&nbsp;</TD><TD valign=bottom width=63.067>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=top width=20.533>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=500.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=26.667>&nbsp;</TD><TD valign=bottom width=63.067>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=top width=20.533><P style="margin:0pt" align=right>B&nbsp;=</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=500.4><P style="margin:0pt">The Exercise Price (as adjusted to the date of such calculation).</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Warrant exchange shall take place on the date specified in the form of notice or if the date the notice is received by the Company is later than the date specified in the notice, on the date the notice is received by the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As used herein, the term &#147;<B>Market Price</B>&#148; at any date shall be the arithmetic mean of the last reported sale price or closing price for the most recent five consecutive Trading Days ending on such date (or, if such date is not a Trading Day, the next preceding Trading Day) on which trading occurred on such Principal Market in the Common Stock; the term &#147;<B>Trading Day</B>&#148; means any day other than a Saturday or a Sunday on which the Company&#146;s Principal Market is open for trading in equity securities; and the term &#147;<B>Principal Market</B>&#148; means the Nasdaq Capital Market, the New York Stock Exchange, the Nasdaq Global Market, the American Stock Exchange, the OTC Bulletin Board or any other national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the &#147;<B>Exchange Act</B>&#148;), whichever is at the time the principal trading exchange, market or
inter-dealer or automated quotation system for the Common Stock.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <B>&#147;Easy Sale&#148; Exercise</B>. In lieu of the payment method set forth in Section 1(a) above, when permitted by law and applicable regulations (including rules of the Nasdaq and National Association of Securities Dealers (&#147;<B>NASD</B>&#148;)), the Holder may pay the aggregate Exercise Price (the &#147;<B>Exercise Amount</B>&#148;) through a &#147;same day sale&#148; commitment from the Holder (and if applicable a broker-dealer that is a member of the NASD (an &#147;<B>NASD</B> <B>Dealer</B>&#148;)), whereby the Holder irrevocably elects to exercise this Warrant and to sell a portion of the shares so purchased to pay the Exercise Amount and the Holder (or, if applicable, the NASD Dealer) commits upon sale (or, in the case of the NASD Dealer, upon receipt) of such shares to forward the Exercise Amount directly to the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>2. COVENANTS BY THE COMPANY</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Company covenants and agrees as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <B>Reservation of Shares</B>. During the period within which the rights represented by this Warrant may be exercised, the Company shall, at all times, reserve and keep available out of its authorized capital stock, solely for the purposes of issuance upon exercise of this Warrant, such number of its Common Shares as shall be issuable upon the exercise of this Warrant. If at any time the number of authorized Common Shares shall not be sufficient to effect the exercise of this Warrant, the Company will take such corporate action as may be necessary to increase its authorized but unissued Common Shares to such number of shares as shall be sufficient for such purpose. The Company shall have analogous obligations with respect to any other securities or property issuable upon exercise of this Warrant.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <B>Valid Issuance, etc</B>. All Common Shares which may be issued upon exercise of the rights represented by this Warrant included herein will be, upon payment in full thereof, validly issued, fully paid, non-assessable and free from all liens of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <B>Taxes</B>. All original issue taxes payable in respect of the issuance of Common Shares upon the exercise of the rights represented by this Warrant shall be borne by the Company, but in no event shall the Company be responsible or liable for income taxes or transfer taxes upon the issuance or transfer of this Warrant or the Warrant Shares. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for Common Shares in any name other than that of the Holder of this Warrant, and in such case the Company shall not be required to issue or deliver any stock certificate or security until such tax or other charge has been paid, or it has been established to the Company&#146;s reasonable satisfaction that no tax or other charge is due.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <B>Fractional Shares</B>. The Company shall not be required to issue certificates representing fractions of Common Shares. In lieu of any fractional interests, the Company shall make a cash payment equal to the Exercise Price multiplied by such fraction.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>3. EXCHANGE OR ASSIGNMENT OF WARRANT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company for other warrants of like tenor but different denominations, entitling the Holder to purchase in the aggregate the same number of Common Shares then purchasable hereunder. Subject to the provisions of this Warrant and the receipt by the Company of any required representations and agreements, upon surrender of this Warrant to the Company with the Warrant Assignment Form annexed hereto duly completed and executed and funds sufficient to pay any transfer tax or charge, the Company shall, without additional charge, execute and deliver a new warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. In the event of a partial assignment of this Warrant, the new warrants issued to the assignee and the Holder shall in the aggregate be exercisable for the
same number of Common Shares as the number of Common Shares purchasable under this Warrant at the time of the partial assignment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>4. RIGHTS OF THE HOLDER</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Holder shall not, by virtue hereof, be entitled to any voting or other rights of a stockholder of the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>5. ADJUSTMENT OF EXERCISE PRICE</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <B>Common Stock Dividends; Common Stock Splits; Reclassification</B>. If the Company, at any time while this Warrant is outstanding, shall (a) pay a stock dividend on its Common Stock, (b) split or subdivide outstanding shares of Common Stock into a larger number of shares (or reverse split or combine the outstanding shares of Common Stock into a smaller number of shares) or (c) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, then (i) the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event and (ii) the number of shares of the Warrant Shares shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately
after such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such event. Any adjustment made pursuant to this Section 5(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution or, in the case of a subdivision or re-classification, shall become effective immediately after the effective date thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <B>Rights; Options; Warrants or Other Securities</B>. If the Company, at any time while this Warrant is outstanding, shall fix a record date for the issuance of rights, options, warrants or other securities to all the holders of its Common Stock entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire shares of Common Stock for no consideration or at a price per share less than the Exercise Price, the Exercise Price shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issuance or sale plus the number of shares of Common Stock which the aggregate consideration received by the Company (including the exercise price paid for Convertible Securities) would purchase at the Exercise Price, and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such
issuance date plus the number of additional shares of Common Stock offered for subscription, purchase, conversion, exchange or acquisition, as the case may be. Such adjustment shall be made whenever such rights, options, warrants or other securities are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options, warrants or other securities.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) <B>Subscription Rights</B>. If the Company, at any time while this Warrant is outstanding, shall fix a record date for the distribution to holders of its Common Stock, evidence of its indebtedness or assets or rights, options, warrants or other security (excluding those referred to in Sections 5(a) or 5(b) above and excluding Excluded Securities) entitling them to subscribe for or purchase, convert to, exchange for or otherwise acquire any security, then in each such case the Exercise Price at which this Warrant shall thereafter be exercisable shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the per-share Market Price on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as
determined by the Board of Directors in good faith, and the denominator of which shall be the per-share Market Price as of such record date.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) <B>Rounding</B>. All calculations under this Section 5 shall be made to the nearest 1/10th of a cent or the nearest l/100th of a share, as the case may be.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) <B>Notice of Adjustment</B>. Whenever the Exercise Price is adjusted pursuant to this Section 5, the Company shall promptly deliver to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such notice shall be signed by the chairman, chief executive officer, chief operating officer or chief financial officer of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) <B>Treasury Shares</B>. For purposes of this Section 5, the number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock by the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) <B>Change of Control; Compulsory Share Exchange</B>. In case of (A) any Change of Control Transaction (as defined below) or (B) any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property (each, an &#147;<B>Event</B>&#148;), lawful provision shall be made (which may be conditioned upon the surrender and exchange of this Warrant for a warrant of like tenor, subject to such adjustments as may be reasonably necessary to account for the applicable transaction, including proportionate adjustments to the Exercise Price) so that the Holder shall have the right thereafter to exercise this Warrant for shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such Event, and the Holder shall be entitled upon such Event to receive upon exercise hereof such amount of shares of stock and other
securities, cash or property as the shares of the Common Stock of the Company into which this Warrant could have been exercised immediately prior to such Event (without taking into account any limitations or restrictions on the exercisability of this Warrant) would have been entitled. The terms of any such Event shall include such terms so as to continue to give to the Holder the right to receive the securities, cash or property set forth in this Section 5(g) upon any exercise or redemption following such Event, and, in the case of an Event specified in clause (A) above, the successor corporation or other entity (if other than the Company) resulting from such reorganization, merger or consolidation, or the person acquiring the properties and assets, or such other controlling corporation or entity as may be appropriate, shall expressly assume the obligation to deliver the securities or other assets which the Holder is entitled to receive hereunder. The provisions of this Section 5(g) shall similarly
apply to successive Events. &#147;<B>Change of Control</B> <B>Transaction</B>&#148; means the occurrence of any (i) merger or consolidation of the Company with or into another entity, unless the holders of the Company&#146;s securities immediately prior to such transaction or series of transactions continue to hold at least 50% of such securities following such transaction or series of transactions, or (ii) a sale, conveyance, lease, transfer or disposition of all or substantially all of the assets of the Company in one or a series of related transactions. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) <B>Issuances Below Exercise Price</B>. Subject to the last paragraph of this Section 5(h), if the Company, at any time while this Warrant is outstanding:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(i) issues or sells, or is deemed to have issued or sold, any Common Stock (other than any Excluded Securities (as defined below));</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(ii) in any manner grants, issues or sells any rights, options, warrants, options to subscribe for or to purchase Common Stock or any stock or other securities convertible into or exchangeable for Common Stock (other than any Excluded Securities) (such rights, options or warrants being herein called &#147;<B>Options</B>&#148; and such convertible or exchangeable stock or securities being herein called &#147;<B>Convertible Securities</B>&#148;) or reprices of any of the Company&#146;s issued and outstanding Options or Convertible Securities (other than reprices triggered by the issuance of this Warrant or any other warrants being issued on the date hereof); or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iii) in any manner issues or sells any Convertible Securities (other than any Excluded Securities);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">for (a) with respect to paragraph (i) above, a price per share, or (b) with respect to paragraphs (ii) or (iii) above, a price per share for which Common Stock is issuable upon the exercise of such Options (together with the price per optioned share, if any, paid for the issuance of such Options) or upon conversion or exchange of such Convertible Securities; in either case, which is less than the Exercise Price in effect immediately prior to such issuance or sale, then, immediately after such issuance, sale or grant, the Exercise Price shall be adjusted by multiplying the Exercise Price then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for such Common Stock or Convertible Securities, together with any consideration receivable upon
the exercise or conversion of such Convertible Securities, then issued would purchase at the Exercise Price then in effect; and (y) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale plus the number of shares of Common Stock then issued or issuable upon the exercise of any Convertible Securities then issued. No modification of the issuance terms shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Options or Convertible Securities.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">&#147;<B>Excluded Securities</B>&#148; means (i) options to be granted pursuant to a stock option plan approved by the stockholders of the Company or by Stanford International Bank Ltd. (&#147;<B>Stanford</B>&#148;), (ii) shares of Common Stock issued upon conversion or exercise of warrants, options or other securities convertible into Common Stock which are or become outstanding on the date hereof or which are described in clause (i) next above, (iii) shares of Common Stock or securities convertible into or exercisable for shares of Common Stock issued or deemed to be issued by the Company in connection with a strategic acquisition by the Company of the assets or business, or division thereof, of another entity which acquisition has been approved by Stanford in writing or by the stockholders of the Company, (iv) issuances of rights in connection with the adoption of a stockholder rights plan, or (v) any other issuance of securities
referred to in Sections 5(a), 5(b) or 5(c) above. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Notwithstanding anything herein to the contrary, no adjustment shall be made to the Exercise Price hereunder as a result of the first 100,000 shares of Common Stock issued or issuable upon the exercise of Options or the conversion or exchange of Convertible Securities issued during any fiscal year of the Company while this Warrant is outstanding. If this amount is exceeded in any such fiscal year, the Exercise Price shall be adjusted in accordance with the provisions hereof based solely on the shares of Common Stock sold or the exercise price or conversion price of the Options and Convertible Securities issued, as applicable, thereafter, without any adjustment in respect of the initial 100,000 shares of Common Stock, Options or Convertible Securities issued in such fiscal year.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(i) <B>Effect on Exercise Price of Certain Events</B>. For purposes of determining the adjusted Exercise Price under Section 5(h), the following shall be applicable:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(i) <I>Calculation of Consideration Received</I>. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the gross amount received by the Company therefor, without deducting any expenses paid or incurred by the Company or any commissions or compensations paid or concessions or discounts allowed to underwriters, dealers or others performing similar services in connection with such issue or sale. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities listed or quoted on a national securities exchange or national quotation system, in which case the amount of
consideration received by the Company will be the arithmetic average of the closing sale price of such security for the five (5) consecutive trading days immediately preceding the date of receipt thereof. In case any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or such listed or quoted securities will be determined in good faith by the Board of Directors of the Company.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(ii) <I>Integrated Transactions</I>. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for an aggregate consideration of $.002.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iii) <I>Record Date</I>. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (b) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iv) <I>Other Events</I>. If any event occurs that would adversely affect the rights of the Holder of this Warrant but is not expressly provided for by this Section 5 (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company&#146;s Board of Directors will make an appropriate adjustment in the Exercise Price so as to protect the rights of the Holder; provided, however, that no such adjustment will increase the Exercise Price.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(j) <B>Notice of Certain Events</B>. If:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(i) the Company shall declare a dividend (or any other distribution) on its Common Stock; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(ii) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iii) the Company shall authorize the granting to the holders of all of its Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights (other than issuances of rights in connection with the adoption of a stockholder rights plan); </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iv) the approval of any stockholders of the Company shall be required in connection with any capital reorganization, reclassification of the Company&#146;s capital stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(v) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">then the Company shall cause to be filed at each office or agency maintained for the purpose of exercise of this Warrant, and shall cause to be delivered to the Holder, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice (provided the Company may exclude any information which it deems to be material non-public information) stating (a) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined, or (b) the date on which such reorganization, reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, transfer or share exchange; provided, however, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Nothing herein shall prohibit the Holder from exercising this Warrant during the 10-day period commencing on the date of such notice.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(k) <B>Increase in Exercise Price</B>. In no event shall any provision in this Section 5 cause the Exercise Price to be greater than the Exercise Price on the date of issuance of this Warrant, except for a reverse split or other combination of the outstanding shares of Common Stock into a smaller number of shares as referenced in Section 5(a) above. Notwithstanding anything to the contrary in this Section 5, in the event of any adjustment of the Exercise Price or in the securities into which this Warrant may be exercised, the Exercise Price shall be increased as necessary such that the Exercise Price shall be not less than the par value of the shares of capital stock for which this Warrant may be exercised.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>6. INVESTMENT INTENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Unless, prior to the exercise of the Warrant, the issuance of the Warrant Shares has been registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the &#147;Securities Act&#148;), the Warrant Exercise Form shall be accompanied by a representation of the Holder to the Company to the effect that such shares are being acquired for investment and not with a view to the distribution thereof, and such other representations and documentation as may be required by the Company, unless in the opinion of counsel to the Company such representations or other documentation are not necessary to comply with the Securities Act. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>7. RESTRICTIONS ON TRANSFER</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) <B>Transfer to Comply with the Securities Act</B>. Holder understands that, unless a registration statement relating to the resale of this Warrant and the Warrant Shares shall then be effective under the Securities Act, this Warrant and the Warrant Shares shall be &#147;restricted securities&#148; (as that term is defined in Rule 144 promulgated under the Securities Act). Neither this Warrant nor any Warrant Shares or other securities issuable upon exercise hereof may be sold, assigned, pledged, transferred or otherwise disposed of except in compliance with applicable state securities or &#147;blue sky&#148; laws and as follows: (1) to a person who, in the opinion of counsel satisfactory to the Company, is a person to whom this Warrant or the Warrant Shares may legally be transferred without registration and without the delivery of a current prospectus under the Securities Act with respect thereto and then only
against receipt of an agreement of such person to comply with the provisions of this Section 7 with respect to any resale, assignment, pledge, transfer or other disposition of such securities; or (2) to any person upon delivery of a prospectus then meeting the requirements of the Securities Act relating to such securities and the offering thereof for such sale, assignment, pledge, transfer or other disposition.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) <B>Legend</B>. Subject to the terms hereof, upon exercise of this Warrant and the issuance of the Warrant Shares, all certificates representing such Warrant Shares (or other securities issuable hereunder) shall bear on the face or reverse thereof substantially the following legend (or another legend substantially in such form as the transfer agent for the Company may from time to time use generally on certificates evidencing restricted securities of the Company): </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:39.6pt">THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>8. REPRESENTATIONS AND WARRANTIES OF HOLDER</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In connection with the issuance of this Warrant, Holder specifically represents and warrants to the Company by acceptance of this Warrant as follows: </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) If an entity, Holder is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, and has the requisite entity power and authority to exercise the Warrant and purchase the Warrant Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Holder is an &#147;accredited investor&#148; as defined in Rule 501(a) promulgated under the Securities Act, and is not a registered broker-dealer under Section 15 of the Exchange Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Holder, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in this Warrant and, upon exercise hereof, the Warrant Shares, and has so evaluated the merits and risks of such investment. The undersigned is able to bear the economic risk of an investment in this Warrant and the Warrant Shares and, at the present time, is able to afford a complete loss of such investment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Holder is aware of the Company&#146;s business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any &#147;distribution&#148; thereof in violation of the Securities Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Holder is not acquiring this Warrant or purchasing any Warrant Shares as a result of any advertisement, article, notice or other communication regarding this Warrant or the Warrant Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Holder understands that neither this Warrant nor the Warrant Shares has been registered under the Securities Act and neither may be offered, resold, pledged or otherwise transferred except (i) pursuant to an exemption from registration under the Securities Act or pursuant to an effective registration statement in compliance with Section 5 under the Securities Act, or (ii) in accordance with all applicable securities and &#147;blue sky&#148; laws of the states of the United States and other jurisdictions. Holder is aware of the provisions of Rule 144 promulgated under the Securities Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) To the extent a registration statement under the Securities Act is not in effect, Holder understands and acknowledges that (i) this Warrant is, and the Warrant Shares (if any) will be, issued and sold to it without registration under the Securities in a private placement that is exempt from the registration provisions of the Securities , and (ii) the availability of such exemption depends in part on, and that the Company and its counsel is relying upon, the accuracy and truthfulness of the foregoing representations and Holder hereby consents to such reliance.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>9. LOST, STOLEN OR DESTROYED WARRANTS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In the event that the Holder certifies to the Company that this Warrant has been lost, stolen or destroyed and provides (a) a letter, in form reasonably satisfactory to the Company, to the effect that it will indemnify the Company from any loss incurred by it in connection therewith, and/or (b) an indemnity bond in such amount as is reasonably required by the Company, the Company having the option of electing either (a) or (b) or both, the Company may, in its sole discretion, accept such letter and/or indemnity bond in lieu of the surrender of this Warrant as required by Section 1 hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>10. SUBSEQUENT HOLDERS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Every Holder hereof, by accepting the same, agrees with any subsequent Holder hereof and with the Company that this Warrant and all rights hereunder are issued and shall be held subject to all of the terms, conditions, limitations and provisions set forth in this Warrant, and further agrees that the Company and its transfer agent, if any, may deem and treat the registered holder of this Warrant as the absolute owner hereof for all purposes and shall not be affected by any notice to the contrary.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>11. NOTICES</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be effective upon personal delivery, via facsimile or email (upon receipt of confirmation of error-free transmission and mailing a copy of such confirmation, postage prepaid by certified mail, return receipt requested) or two business days following deposit of such notice with an internationally recognized courier service, with postage prepaid and addressed the other party at the following address, or at such other addresses as a party may designate by five days advance written notice to the other party hereto.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=18.75></TD><TD width=89.4></TD><TD width=52.3></TD><TD width=307.55></TD></TR>
<TR><TD valign=top width=25>&nbsp;</TD><TD valign=top width=119.2><P style="margin:0pt"><B>Company:</B></P>
</TD><TD valign=top width=69.733>&nbsp;</TD><TD valign=top width=410.067><P style="margin:0pt">DGSE Companies, Inc.</P>
<P style="margin:0pt">2817 Forest Lane</P>
<P style="margin:0pt">Dallas, Texas 75234</P>
<P style="margin:0pt">Attn: Dr. L.S. Smith</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=25><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=119.2>&nbsp;</TD><TD valign=top width=69.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=410.067>&nbsp;</TD></TR>
<TR><TD valign=top width=25>&nbsp;</TD><TD valign=top width=119.2><P style="margin:0pt"><B>with a copy to:</B></P>
</TD><TD valign=top width=69.733>&nbsp;</TD><TD valign=top width=410.067><P style="margin:0pt">Sheppard, Mullin, Richter &amp; Hampton LLP</P>
<P style="margin:0pt">12275 El Camino Real, Suite 200</P>
<P style="margin:0pt">San Diego, California 92130-2006</P>
<P style="margin:0pt">Attn: John J. Hentrich, Esq.</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=25>&nbsp;</TD><TD valign=top width=119.2>&nbsp;</TD><TD valign=top width=69.733>&nbsp;</TD><TD valign=top width=410.067>&nbsp;</TD></TR>
<TR><TD valign=top width=25>&nbsp;</TD><TD valign=top width=119.2><P style="margin:0pt"><B>Holder:</B></P>
</TD><TD valign=top width=69.733>&nbsp;</TD><TD valign=top width=410.067><P style="margin:0pt">Stanford International Bank Ltd.</P>
<P style="margin:0pt">c/o Stanford Financial Group</P>
<P style="margin:0pt">6075 Poplar Avenue</P>
<P style="margin:0pt">Memphis, Tennessee 38119</P>
<P style="margin:0pt">Attention: James M. Davis, Chief Financial Officer</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
<TR><TD valign=top width=25>&nbsp;</TD><TD valign=top width=119.2>&nbsp;</TD><TD valign=top width=69.733>&nbsp;</TD><TD valign=top width=410.067>&nbsp;</TD></TR>
<TR><TD valign=top width=25>&nbsp;</TD><TD valign=top width=119.2><P style="margin:0pt"><B>with a copy to:</B></P>
</TD><TD valign=top width=69.733>&nbsp;</TD><TD valign=top width=410.067><P style="margin:0pt">Adorno &amp; Yoss LLP</P>
<P style="margin:0pt">2525 Ponce de Leon Boulevard, 4th Floor</P>
<P style="margin:0pt">Coral Gables, Florida 33134</P>
<P style="margin:0pt">Attention: Seth P. Joseph</P>
<P style="margin:0pt">Facsimile: [omitted]</P>
<P style="margin:0pt">Email: [omitted]</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>12. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">This Warrant shall be governed by and interpreted in accordance with the laws of the State of Texas, without regard to its principles of conflict of laws. Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Warrant may be brought against any party in the federal courts of Texas or the state courts of the State of Texas, and each of the parties consents to the jurisdiction of such courts and hereby waives, to the maximum extent permitted by law, any objection, including any objections based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt">EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS WARRANT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (2) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (3) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (4) IT HAS BEEN INDUCED TO ENTER INTO THIS WARRANT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><B>13. WAIVER</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=center><I>[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>H-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its behalf, in its corporate name, by its duly authorized officer, all as of the day and year first above written. </P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=219.75></TD><TD width=14.45></TD><TD width=233.8></TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=331 colspan=2><P style="margin:0pt"><B>DGSE COMPANIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=311.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293>&nbsp;</TD><TD valign=bottom width=19.267>&nbsp;</TD><TD valign=bottom width=311.733><P style="margin:0pt">Dr. L.S. Smith <BR>
Chairman and Chief Executive Officer</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>H-2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>WARRANT EXERCISE FORM</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The undersigned hereby irrevocably elects to exercise the attached Warrant dated __________ _____, 200___ (the &#147;<B>Warrant</B>&#148;), pursuant to the provisions of (SELECT ONE) [ Section 1(a) of the Warrant, to the extent of purchasing _____________ shares (the &#147;<B>Shares</B>&#148;) of the common stock, par value $0.01 per share (the &#147;<B>Common</B> <B>Stock</B>&#148;), of DGSE Companies, Inc., a Nevada corporation (the &#147;<B>Company</B>&#148;), and encloses herewith in cash or by certified or official bank check or by wire transfer, payable to the order of the Company, a payment of $_________ in payment therefor, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the Shares ] (OR) [ Section 1(b) of the Warrant to the extent of _________ shares of the common stock, par value $0.01 per share (the &#147;Common Stock&#148;), of DGSE Companies, Inc., a Nevada corporation (the
&#147;<B>Company</B>&#148;), which based on an estimated Market Price of $_____ per share would result in the issuance to the Holder of _______ shares (the &#147;<B>Shares</B>&#148;) of Common Stock ] .</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As of the date hereof, the undersigned represents and warrants to the Company as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) If an entity, the undersigned is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, and has the requisite entity power and authority to exercise the Warrant and purchase the Shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) The undersigned is an &#147;accredited investor&#148; as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended (the &#147;<B>Act</B>&#148;), and is not a registered broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) The undersigned, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. The undersigned is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) The undersigned is aware of the Company&#146;s business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) The undersigned is acquiring the Shares for its own account for investment purposes only and not with a view to, or for the resale in connection with, any &#147;distribution&#148; thereof in violation of the Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) The undersigned is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Common Stock published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) The undersigned understands that the Shares have not been registered under the Act and may not be offered, resold, pledged or otherwise transferred except (i) pursuant to an exemption from registration under the Act or pursuant to an effective registration statement in compliance with Section 5 under the Act, or (ii) in accordance with all applicable securities and &#147;blue sky&#148; laws of the states of the United States and other jurisdictions. The undersigned is aware of the provisions of Rule 144 promulgated under the Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) To the extent a registration statement under the Act is not in effect, the undersigned understands and acknowledges that (i) the Shares are being issued and sold to it without registration under the Act in a private placement that is exempt from the registration provisions of the Act, and (ii) the availability of such exemption depends in part on, and that the Company and its counsel is relying upon, the accuracy and truthfulness of the foregoing representations and the undersigned hereby consents to such reliance.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Please issue a certificate or certificates representing the Shares in the name of the undersigned or in the name of the undersigned&#146;s nominee as is specified below. [ Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned or the undersigned&#146;s nominee as is specified below. ]</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=234></TD><TD width=234></TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312><P style="margin:0pt">Name of Holder</P>
</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312><P style="margin:0pt">Signature of Holder or Authorized Representative</P>
</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312><P style="margin:0pt">Social Security Number or Tax Identification Number</P>
</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312><P style="margin:0pt">Signature, if jointly held</P>
</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312><P style="margin:0pt">Name and Title of Authorized Representative</P>
</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312><P style="margin:0pt">Address of Holder</P>
</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312><P style="margin:0pt">Nominee of Holder (if applicable)</P>
</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312>&nbsp;</TD></TR>
<TR><TD valign=bottom width=312>&nbsp;</TD><TD valign=bottom width=312><P style="margin:0pt">Date</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>H-3</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>DGSE COMPANIES, INC.</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>WARRANT ASSIGNMENT FORM</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ (&#147;<B>Assignee</B>&#148;) the rights represented by the within Warrant to purchase ____________ shares of common stock, par value $0.01 per share (the &#147;<B>Common Stock</B>&#148;), of DGSE Companies, Inc., a Nevada corporation (the &#147;<B>Company</B>&#148;), to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of the Company with full power of substitution in the premises. The undersigned has informed Assignee that Assignee must make the representations and warranties contained in this form in connection with said transfer, and the undersigned has no reason to belief that Assignee cannot make such representations.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As of the date hereof, the Assignee represents and warrants to the Company as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(a) If an entity, Assignee is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, and has the requisite entity power and authority to exercise the Warrant and purchase the shares of Common Stock deliverable upon such exercise (the &#147;<B>Warrant Shares</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(b) Assignee is an &#147;accredited investor&#148; as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended (the &#147;Act&#148;), and is not a registered broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(c) Assignee, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in this Warrant and, upon exercise hereof, the Warrant Shares, and has so evaluated the merits and risks of such investment. The undersigned is able to bear the economic risk of an investment in this Warrant and the Warrant Shares and, at the present time, is able to afford a complete loss of such investment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(d) Assignee is aware of the Company&#146;s business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(e) Assignee is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any &#147;distribution&#148; thereof in violation of the Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(f) Assignee is not acquiring this Warrant or purchasing any Warrant Shares as a result of any advertisement, article, notice or other communication regarding this Warrant or the Warrant Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(g) Assignee understands that neither the Warrant nor the Warrant Shares has been registered under the Act and neither may be offered, resold, pledged or otherwise transferred except (i) pursuant to an exemption from registration under the Act or pursuant to an effective registration statement in compliance with Section 5 under the Act, or (ii) in accordance with all applicable securities and &#147;blue sky&#148; laws of the states of the United States and other jurisdictions. The Assignee is aware of the provisions of Rule 144 promulgated under the Act.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(h) To the extent a registration statement under the Act is not in effect, Assignee understands and acknowledges that (i) the Warrant is, and the Warrant Shares (if any) will be, issued and sold to it without registration under the Act in a private placement that is exempt from the registration provisions of the Act, and (ii) the availability of such exemption depends in part on, and that the Company and its counsel is relying upon, the accuracy and truthfulness of the foregoing representations and the Assignee hereby consents to such reliance.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">Please issue a new Warrant of like tenor for the assigned portion of the attached Warrant in the name of the Assignee or the Assignee&#146;s nominee as is specified below. [ Please issue a new Warrant of like tenor for the unassigned portion of the attached Warrant in the name of the undersigned or the undersigned&#146;s nominee as is specified below. ]</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=231.7></TD><TD width=236.3></TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Name of Holder</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Signature of Holder or Authorized Representative</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Social Security Number or Tax Identification Number of Holder</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Signature, if jointly held</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Name and Title of Authorized Representative</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Address of Holder</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Nominee of Holder (if applicable)</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Date</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Name of Assignee</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Signature of Assignee or Authorized Representative</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Social Security Number or Tax Identification Number of Assignee</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Signature, if to be jointly held</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Name and Title of Authorized Representative</P>
</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=315.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=308.933>&nbsp;</TD><TD valign=bottom width=315.067><P style="margin:0pt">Address of Assignee</P>
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<P style="margin:0pt" align=center>H-4</P>
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<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX I</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>MANAGEMENT AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">THIS MANAGEMENT AGREEMENT is made and entered into as of January 6, 2007 (this &#147;<B>Agreement</B>&#148;), by and between DGSE Merger Corp., a Delaware corporation (&#147;<B>DGSE</B>&#148;), and Superior Galleries, Inc., a Delaware corporation (f/k/a Tangible Asset Galleries, Inc., a Nevada corporation) (&#147;<B>Superior</B>&#148;). Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in that certain Amended and Restated Agreement and Plan of Merger and Reorganization, made and entered into as of the date hereof (the &#147;<B>Merger</B> <B>Agreement</B>&#148;), by and among DGSE Companies Inc., a Nevada corporation (&#147;<B>Parent</B>&#148;), DGSE, Superior and Stanford International Bank, Ltd., a company organized under the laws of Antigua and Barbuda (together with its successors, &#147;<B>Stanford</B>&#148;).</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>RECITALS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, the respective Boards of Directors of Parent, Merger Sub and Superior have approved and declared advisable the Merger Agreement and the merger of DGSE with and into Superior (the &#147;<B>Merger</B>&#148;), with Superior being the surviving corporation;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, Superior is engaged in the business, inter alia, of the sale of rare coins on a retail, wholesale, and auction basis; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">WHEREAS, key personnel of DGSE have substantial expertise that is useful to Superior, and Superior and DGSE desire that, during the Term hereof, DGSE shall supply the services of certain of its corporate officers to serve as senior management of Superior.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>AGREEMENT</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto (collectively, the &#147;<B>Parties</B>&#148;), intending to be legally bound, hereby agree as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">1. <I>Appointment</I>. Superior hereby appoints DGSE to render the Services described in Section 2 for the term of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">2. <I>Services</I>. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.1 DGSE shall provide two or three senior executives (the &#147;<B>Interim Executives</B>&#148;), on a part-time basis, for the term of this Agreement (the &#147;<B>Term</B>&#148;), to serve as the senior management of Superior. These individuals are initially anticipated to be William H. Oyster as interim Chief Executive Officer, Scott Williamson as interim Chief Operating Officer, and John Benson as interim Chief Financial Officer and interim Vice President, Finance. The interim Chief Executive Officer shall report to the Company Board, and the other Interim Executives shall report to the interim Chief Executive Officer.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2.2 During the term of this Agreement, DGSE shall render to Superior, by and through the Interim Executives and such of DGSE&#146;s Representatives and Affiliates and Representatives of such Affiliates as DGSE, in its sole discretion, shall from time to time designate, management, advisory, consulting and other services in relation to operations, inventory management, litigation, strategic planning, sales, restructuring, marketing and financial oversight, including the selection, retention and supervision of independent auditors and outside legal counsel and the authority to approve hiring, discipline, and termination of all Superior employees, consultants and contractors (the &#147;<B>Services</B>&#148;), in consultation with the Company Board.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">3. <I>Limitations</I>. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.1 The Interim Executives shall not effectuate any material business transaction between DGSE (or any of its Affiliates) and Superior (or any of its Affiliates), except (i) as expressly contemplated by the Merger Agreement, (ii) in the Ordinary Course of Business of each of DGSE and Superior, (iii) for permitted intercompany transactions on the terms described in Schedule 3.1 hereto, or (iv) after consulting with and obtaining the approval of the Special Interim Committee of the Company Board, comprised of the Superior directors who are not affiliated with DGSE, initially to consist of Mitchell Stolz and David Rector (the &#147;<B>Independent Committee</B>&#148;).</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3.2 The Interim Executives shall not materially change the strategic direction of Superior&#146;s business, except (i) for changes to Superior&#146;s strategic direction described in <I>Schedule 3.2</I> hereto, or (ii) after consulting with and obtaining the approval of the Independent Committee. The Parties acknowledge and agree that Superior has been operating with heavy losses for an extended period of time and that DGSE shall have broad authority to implement a turnaround, including changing the focus, strategy and direction of Superior as DGSE in its business judgment and discretion deems appropriate, and Superior authorizes and directs the Independent Committee to cooperate with DGSE in implementing DGSE&#146;s turnaround strategy.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">4. <I>Payment</I>. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.1 In consideration for DGSE providing the Services, Superior shall pay DGSE fees in the amount of (i) $50,000 per month for the services of the Interim Executives, and (ii) the hourly compensation rate, without mark-up, for the services of all other DGSE Representatives. Fees shall accrue and be payable on a daily basis. Fee payments shall be non-refundable. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.2 Superior shall reimburse DGSE, as accrued, for all of its reasonable out-of-pocket expenses, including travel, lodging and related costs for the Interim Executives and other DGSE Representatives for travel to the offices of Superior or otherwise incurred to perform the Services.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4.3 Superior shall pay to DGSE $60,000 concurrently with the execution of this Agreement as an advance payment and retainer for all amounts becoming due under the Agreement, and DGSE may charge its fees and out-of-pocket expenses directly against the retainer as the same accrue. On the first business day of each succeeding calendar month during the term hereof, Superior shall restore the balance of such retainer to $60,000. If at any time the balance of the retainer shall fall below $5,000, Superior shall advance additional funds reasonably requested by DGSE as a retainer. DGSE shall have no obligation to provide any of its Services to Superior, or to incur any out-of-pocket expenses on behalf of Superior, if it shall not be reasonably assured of obtaining indefeasible payment for its Services. DGSE shall be obligated to return any unearned retainer upon the termination of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">5. <I>Term of Agreement</I>. The Term shall commence on the date hereof, and shall continue until the first to occur of the following (or such later time as DGSE and Superior may agree in writing): (i) the consummation of the Merger; (ii) the termination of the Merger Agreement; and (iii) the Outside Date. The Parties acknowledge that nothing contained in this Agreement shall obligate either DGSE or Superior to consummate the Merger, and that all commitments related to the consummation of the Merger are set forth in the Merger Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">6. <I>Other Business</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.1 DGSE and its Affiliates may engage in or possess an interest in any other business venture of any kind, nature or description, independently or with others, whether or not such ventures are competitive with Superior, notwithstanding that representatives of DGSE or any of its Affiliates are serving on the Company Board or as senior management of the Company. None of DGSE nor any of its Affiliates, as a stockholder, officer or director of Superior, shall have any obligation to offer first to Superior any business opportunity or venture of any kind, nature or description that DGSE or any such Affiliate may wish to pursue from time to time, independently or with others. Nothing in this Agreement shall be deemed to prohibit DGSE or any of its Affiliates from dealing, or otherwise engaging in business, with Persons transacting business with Superior. Superior shall not have any rights or obligations by virtue of this
Agreement or the transactions contemplated hereby, in or to any independent venture of DGSE or its Affiliates, or the income or profits or losses or distributions derived therefrom, and such ventures shall not be deemed wrongful or improper even if competitive with the business of Superior.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6.2 During the Term the Interim Executives are expected to continue their current services to DGSE on a part-time basis. Nothing herein shall in any way preclude DGSE or its officers, employees, agents, representatives, members or affiliates, including the Interim Executives, from engaging in any business activities or from performing services for its or their own account or for the account of others, including for companies that may be in competition with the business conducted by Superior.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">7. <I>Confidentiality</I>. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">7.1 The Parties acknowledge that DGSE, Superior and Stanford have previously executed that certain Mutual Confidentiality Agreement, effective April 1, 2006 (as amended from time to time, the &#147;<B>Confidentiality</B> <B>Agreement</B>&#148;), which shall continue in full force and effect in accordance with its terms.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">7.2 Notwithstanding anything to the contrary in the Confidentiality Agreement, the Parties acknowledge that each may use Residuals for any purpose. &#147;<B>Residuals</B>&#148; means any &#147;Confidential Information&#148; (as defined in the Confidentiality Agreement) and any ideas, concepts, know-how and techniques contained therein retained in the unaided memories of any employee or agent of a Party who has had access to Confidential Information. Memory is deemed unaided if an individual has not intentionally memorized the relevant information for the purpose of retaining and subsequently using or disclosing it for purposes unrelated to the purpose of disclosure.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">7.3 Notwithstanding anything to the contrary in the Confidentiality Agreement, the Parties acknowledge that the Interim Executives may use the Confidential Information in connection with providing the Services, including (i) delivering Confidential Information to counterparties to Superior Contracts, (ii) complying with investigations by Governmental Entities, (iii) providing financial and other information to Superior&#146;s independent public auditing firm, and (iv) publicly disclosing the Confidential Information as the Interim Executives in good faith deem necessary to comply with Superior&#146;s reporting obligations under the Securities Act, the Exchange Act, SOX or the SEC Rules. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">7.4 DGSE and Superior acknowledge and agree that they are competitors operating in the same line of business and that certain customers, suppliers, vendors and employees in this business are known to both DGSE and Superior and that each Party has access to information regarding such customers, suppliers, vendors and employees that is not Confidential Information. The Party disclosing Confidential Information (&#147;<B>Discloser</B>&#148;) acknowledges that use of such information will not be restricted by, or, in and of itself, be deemed to violate, any provision of this Agreement. If a customer or employee of one Party becomes a customer or employee, respectively, of the other Party, each Party acknowledges and agrees that such other Party will have no liability with respect thereto unless such Party can affirmatively prove that the Party receiving Confidential Information (&#147;<B>Recipient</B>&#148;) used
Confidential Information to solicit a customer or employee of Discloser to become a customer or employee, respectively, of Recipient. Furthermore, each Party understands that the other Party may currently or in the future be developing information internally, or receiving information from other Party that may be similar to Discloser&#146;s information. Accordingly, nothing in this Agreement or the Confidentiality Agreement will be construed as a representation or inference that Recipient will not enter into a line of business, that, without violation of this Agreement, would compete with the business of the other Party, assuming there is no misuse of Confidential Information.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">8. <I>D&amp;O Insurance</I>. Upon the execution of this Agreement, Superior shall use its commercially reasonably efforts to add the Interim Executives and new members of the Company Board as named beneficiaries under its insurance policy for directors and officers.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">9. <I>Exculpation; Limitation of Liability</I>. Each Party agrees, on behalf of itself and its Affiliates, that in performing any duties hereunder, to the maximum extent permitted by applicable law, DGSE and its Representatives, including the Interim Executives, shall not be directly or indirectly liable to any Party, or any Affiliates of any Party, for damages, losses, expenses or other Liabilities, whether sounding in tort, contract or otherwise, arising from their acts or omissions, including for their active negligence, violations of federal or state securities laws, breaches of fiduciary duties, or other wrongful act of DGSE or any such Representative, <I>except</I> for the acts of gross negligence or willful misconduct of such Person. DGSE or its Representatives may consult with legal counsel (whether such counsel will be regularly retained or specifically employed and whether such counsel is engaged by DGSE or Superior) in
connection with providing the Services and shall be fully protected in any act taken, suffered, or permitted by it in good faith in accordance with the advice of counsel. IN NO EVENT SHALL DGSE OR ANY INTERIM EXECUTIVE BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i) DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER (OTHER THAN FOR DAMAGES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY DGSE OR THE INTERIM EXECUTIVE), (ii) SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR (iii) DAMAGES WHICH IN THE AGGREGATE WOULD EXCEED THE AMOUNT OF FEES PAID TO DGSE UNDER THIS AGREEMENT (OTHER THAN FOR DAMAGES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY DGSE OR THE INTERIM EXECUTIVE). Each Party hereby agrees to defend, indemnify and hold harmless DGSE and its Representatives for any Liabilities to any Affiliate of such Party to the extent the provisions of this Section 9 would limit such Liabilities if such Affiliate were a party and
signatory hereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">10. <I>Indemnification</I>. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">10.1 Superior shall defend, indemnify and hold DGSE, the Interim Executives and their respective Representatives and Affiliates (collectively, the &#147;<B>Indemnified Parties</B>&#148;) harmless from and against all damages, losses, expenses or other Liabilities incurred by the Indemnified Parties directly or indirectly as a result of providing the Services during the Term, including, to the maximum extent permitted by applicable law, for the active negligence, violations of federal or state securities laws, breaches of fiduciary duties, or other wrongful act of an Indemnified Party; <I>provided, however</I>, that Superior shall not be liable for any loss caused by the gross negligence or willful misconduct of an Indemnified Party.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">10.2 All claims for indemnification under this section shall be asserted and resolved as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(a) <I>Third party claims</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:54pt; text-indent:18pt">(1) If an Indemnified Party becomes aware of a third-party claim that such Indemnified Party believes may result in a loss to such Indemnified Party, such Indemnified Party (or DGSE on such Indemnified Party&#146;s behalf) shall promptly notify Superior of such claim; <I>provided</I> that the failure to so notify Superior shall not relieve Superior of any liability that it may have to any Indemnified Party, except to the extent that Superior demonstrates that the defense of such third-party claim is materially prejudiced by the failure to give such notice. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:54pt; text-indent:18pt">(2) If an Indemnified Party (or DGSE on its behalf) provides notice to Superior of the assertion of a third-party claim, Superior shall be entitled to assume the defense of such third-party claim unless (i) Superior is also a Person against whom the third-party claim is made and the Indemnified Party determines in good faith that joint representation would be inappropriate, or (ii) Superior fails to provide reasonable assurance to the Indemnified Party of both (x) the financial capacity of Superior to defend such third-party claim, and (y) the ability of Superior to provide indemnification or to assume the defense of such third-party claim with counsel satisfactory to the Indemnified Party. After notice from Superior to the Indemnified Party of its election to assume the defense of such third-party claim, Superior shall not, so long as it diligently conducts such defense, be liable to the Indemnified Party for any
fees of other counsel or any other expenses with respect to the defense of such third-party claim, in each case subsequently incurred by the Indemnified Party in connection with the defense of such third-party claim, other than reasonable costs of investigation. If Superior assumes the defense of a third-party claim, (A) such assumption shall establish conclusively for purposes of this Agreement that the claims made in that third-party claim are within the scope of and subject to indemnification, and (B) no compromise or settlement of such third-party claims may be effected by Superior without the Indemnified Party&#146;s prior written consent unless (1) there is no finding or admission of any violation of Law or any violation of the rights of any Person, (2) the sole relief provided is monetary damages that are paid in full by Superior, and (3) the Indemnified Party shall have no liability with respect to any compromise or settlement of such third-party claims effected without its written consent. If
notice is given to Superior of the assertion of any third-party claim and Superior does not, within ten days after the Indemnified Party&#146;s notice is provided, provide notice to the Indemnified Party of the election of Superior to assume the defense of such third-party claim, then the Indemnified Party may assume the defense of such third-party claim at the expense of Superior. Superior shall be bound by any determination made in such third-party claim or any compromise or settlement effected by the Indemnified Party.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:54pt; text-indent:18pt">(3) Notwithstanding the foregoing, if an Indemnified Party determines in good faith that there is a reasonable probability that a third-party claim may adversely affect it or its Related Persons other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Party may, by notice to Superior, assume the exclusive right to defend, compromise or settle such third-party claim, but Superior shall not be bound by any determination of any third-party claim (including the losses incurred in connection therewith) so defended for the purposes of this Agreement or any compromise or settlement effected, without its written consent.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:54pt; text-indent:18pt">(4) Any dispute between any Indemnified Party and Superior under this section shall be resolved pursuant to the dispute resolution procedures described in Section 10.2(b) and Section 12.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:54pt; text-indent:18pt">(5) If Superior has conducted any defense or consented to any settlement under this section, Superior shall not have the right, power or authority to object to the amount of any claim by any Indemnified Party with respect to and in accordance with such settlement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(b) <I>Non-third party claims</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:54pt; text-indent:18pt">(1) If an Indemnified Party has a claim hereunder that does not involve a claim being asserted against or sought to be collected by a third party, such Indemnified Party shall with reasonable promptness deliver a notice with respect to such claim to Superior. Such notice shall set forth (i) a brief description of the circumstances supporting such Indemnified Party&#146;s claim against Superior; and (ii) a non-binding, preliminary estimate of the aggregate dollar amount of the actual and potential losses that have arisen and may arise related to such claim. If Superior does not notify such Indemnified Party within 30 calendar days from the date of receipt of such notice that Superior disputes such claim, the amount of such claim shall be conclusively deemed a liability of Superior hereunder. In case Superior shall object in writing to any claim made in accordance with this section, the Indemnified Party shall have 15
calendar days to respond in a written statement to the objection of Superior. If after such 15 calendar day period there remains a dispute as to any claim, the Indemnified Party and Superior shall attempt in good faith for 60 calendar days to agree upon the rights of the respective parties with respect to each of such claims. If the Indemnified Party and Superior should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties. If such parties do not so agree, the Indemnified Party and Superior shall resolve such dispute pursuant to Section 12 and Section 15.6.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">10.3 An Indemnified Party&#146;s failure to give reasonably prompt notice to Superior of any actual, threatened or possible claim or demand which may give rise to a right of indemnification hereunder shall not relieve Superior of any liability which Superior may have to such Indemnified Party, unless the failure to give such notice materially and adversely prejudiced Superior.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">10.4 Each Party, on its own behalf, and on behalf of its Affiliates, agrees that DGSE shall not owe any fiduciary duties to such Party or its Affiliates, in any capacity (including as a stockholder or creditor of Superior) in the performance of any of the Services.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">11. <I>Right of Setoff</I>. Superior hereby grants to DGSE a right of setoff upon any and all monies, securities or other property of Superior, and the proceeds therefrom, now or hereafter held or received by or in transit to DGSE from or for the account of Superior (including any amounts held as a retainer hereunder), whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon and against any and all claims or other Actions of Superior against DGSE, or any sums owing from DGSE to Superior, at any time arising or existing. The right of setoff granted pursuant to this Section 11 shall be cumulative of and in addition to DGSE&#146;s common law right of setoff.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">12. <I>Arbitration</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">12.1 If a dispute arises concerning the matters contemplated by this Agreement, the Party defending the claim (the &#147;<B>Defending Party</B>&#148;), may, by written notice to the Party asserting the claim (the &#147;<B>Prosecuting</B> <B>Party</B>&#148;), demand arbitration of the matter, which arbitration shall be conducted by a single arbitrator. The Prosecuting Party and the Defending Party shall use their respective best efforts to agree on the arbitrator, provided that if they cannot so agree within ten business days (or such longer period as they may agree), either the Prosecuting Party or the Defending Party can request that Judicial Arbitration and Mediation Services (&#147;<B>JAMS</B>&#148;) select the arbitrator. The arbitrator shall set a limited time period and establish procedures designed to reduce the cost and time for discovery while allowing the Defending Party and Prosecuting Party an opportunity,
adequate in the sole judgment of the arbitrator, to discover relevant information from the other of them about the subject matter of the dispute. The arbitrator shall rule upon motions to compel or limit discovery and shall have the authority to impose sanctions, including attorneys&#146; fees and costs, to the same extent as a court of competent Law or equity, should the arbitrator determine that discovery was sought without substantial justification or that discovery was refused or objected to without substantial justification. The decision of the arbitrator shall be written, shall be in accordance with applicable Law and with this Agreement, and shall be supported by written findings of fact and conclusions of Law, which shall set forth the basis for the decision of the arbitrator. The decision of the arbitrator as to the validity and amount of any claim shall be binding and conclusive.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">12.2 Judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction. Any such arbitration shall be held in Dallas, Texas under the commercial rules then in effect for JAMS. The non-prevailing party to an arbitration shall pay its own expenses, the fees of the arbitrator, any administrative fee of JAMS, and the expenses, including attorneys&#146; fees and costs, reasonably incurred by the other party to the arbitration.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">13. <I>Notices</I>. All notices, requests, instructions or other documents to be given or delivered under this Agreement shall be in writing and shall be deemed given: (i) five Business Days following the deposit of registered or certified mail in the United States mails, postage prepaid, (ii) when confirmed by telephone confirmation, if sent by facsimile or email, (iii) when delivered, if delivered personally to the intended recipient, and (iv) one Business Day following delivery to a reputable national courier service for overnight delivery, postage prepaid; and in each case, addressed to a Party at the following address for such Party:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If to DGSE, addressed to it at:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">DGSE Merger Corp. <BR>
2817 Forest Lane<BR>
Dallas, Texas 75234<BR>
Attn: Dr. L.S. Smith<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">with a copy (which shall not constitute notice and which shall not be required for delivery to be effective) to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">Sheppard, Mullin, Richter &amp; Hampton LLP<BR>
12275 El Camino Real, Suite 200<BR>
San Diego, California 92130-2006<BR>
Attn: John J. Hentrich, Esq.<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If to Superior, addressed to it at:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">Superior Galleries, Inc.<BR>
9478 W. Olympic Boulevard<BR>
Beverly Hills, California 90212<BR>
Attn: Chair, Special Independent Committee<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">with copies (which shall not constitute notice and which shall not be required for delivery to be effective) to:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">Rutan &amp; Tucker LLP<BR>
611 Anton Boulevard Suite 1400<BR>
Costa Mesa, California 92626-1931<BR>
Attn: Thomas Brockington, Esq.<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">and:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">Stanford International Bank Ltd.<BR>
c/o Stanford Financial Group<BR>
6075 Poplar Avenue<BR>
Memphis, Tennessee 38119<BR>
Attn: James M. Davis, Chief Financial Officer<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">and:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt">Adorno &amp; Yoss LLP<BR>
2525 Ponce de Leon Blvd., Suite 400<BR>
Miami, Florida 33134-6012<BR>
Attn: Seth P. Joseph, Esq.<BR>
Facsimile: [omitted]<BR>
Email: [omitted]</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Any Party may change its address, email address or fax number for purposes hereof to such other address, email address or fax number as such Party may have previously furnished to the other Parties in writing in accordance with this Section 13.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">14. <I>Status</I>. The Parties intend that DGSE shall be an independent contractor pursuant to this Agreement, and that this Agreement shall not be construed to create or give rise to any partnership, agency or joint venture.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">15. <I>Miscellaneous</I>.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.1 <I>Headings</I>. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.2 <I>Severability</I>. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.3 <I>Entire Agreement</I>. This Agreement, together with the Merger Agreement and the Confidentiality Agreement, constitute the entire agreement and understanding of the Parties in respect of the subject matter of this Agreement and supersede all prior agreements and undertakings by or among the Parties, both written and oral, among the Parties, or any of them, with respect to the subject matter of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.4 <I>Assignment</I>. Neither this Agreement nor any of the rights, interests, Liabilities or obligations hereunder shall be assigned by any of the Parties, in whole or in part, by operation of Law or otherwise, without the prior written consent of the other Parties, and any attempt to make any such assignment without such consent shall be null and void and of no force or effect; <I>provided</I> that DGSE may assign its rights and obligations hereunder to any of its Affiliates.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.5 <I>Parties in Interest</I>. This Agreement shall be binding upon and inure solely to the benefit of each Party and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, except as provided in (i) Section 10 with respect to Indemnified Parties and (ii) Section 8 with respect to Interim Executives and new members of the Superior board of directors.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.6 <I>Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury</I>. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(a) This Agreement and the performance of the obligations of the Parties hereunder shall be governed by, and construed in accordance with, the laws of the State of Texas applicable to contracts negotiated, executed and to be performed entirely within such State.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(b) Each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction and venue of any Texas district court and any state appellate court therefrom within the County of Dallas in the State of Texas (or, if the Texas district court declines to accept jurisdiction over a particular matter, any state or federal court within said County) in any action or proceeding arising out of or relating to this Agreement or for recognition or enforcement of any judgment relating hereto, and each of the Parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Texas state court or, to the extent permitted by law, in such federal court, (iii) waives, to the fullest extent it may legally and effectively
do so, any objection that it may now or hereafter have to the laying of venue of any such action or proceeding in any such Texas state or federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Texas state or federal court. Each of the Parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(c) Each Party irrevocably consents to service of process in the manner provided for notices under this Agreement. Nothing in this Agreement shall affect the right of any Party to this Agreement to serve process in any other manner permitted by law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(d) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (2) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (3) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (4) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.7 <I>Counterparts</I>. This Agreement may be executed in two or more original or facsimile counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute but one and the same agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.8 <I>Facsimile Execution</I>. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more Parties, and an executed copy of this Agreement may be delivered by one or more Parties by facsimile, email or similar electronic or digital transmission pursuant to which the signature of or on behalf of such Party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any Party, all Parties agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.9 <I>Remedies Cumulative</I>. Except as otherwise provided in this Agreement, any and all remedies in this Agreement that are expressly conferred upon a Party shall be deemed cumulative with and not exclusive of any other remedy conferred by this Agreement, or by law or equity upon such Party, and the exercise by a Party of any one remedy shall not preclude the exercise of any other remedy and nothing in this Agreement shall be deemed a waiver by any Party of any right to specific performance or injunctive relief.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.10 <I>Time</I>. Time is of the essence in the performance of this Agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">15.11 <I>Interpretation</I>. The terms and provisions of Section 1.3 of the Merger Agreement are hereby incorporated by reference herein and shall apply to this Agreement <I>mutatis mutandis</I>, as if expressly set forth herein.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=center><I>[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]</I></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>I-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=218.5></TD><TD width=16.95></TD><TD width=232.55></TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=332.667 colspan=2><P style="margin:0pt"><B>DGSE MERGER CORP.</B></P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6><P style="margin:0pt">By:&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=310.067><P style="margin:0pt">/s/ William H. Oyster</P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067><P style="margin:0pt">William H. Oyster<BR>
Chief Executive Officer</P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=332.667 colspan=2><P style="margin:0pt"><B>SUPERIOR GALLERIES, INC.</B></P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067>&nbsp;</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6><P style="margin:0pt">By:</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=310.067><P style="margin:0pt">/s/ Silvano DiGenova</P>
</TD></TR>
<TR><TD valign=bottom width=291.333>&nbsp;</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=310.067><P style="margin:0pt">Silvano DiGenova<BR>
Chief Executimve Officer</P>
</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=right><BR>
<BR></P>
<P style="margin:0pt" align=center>I-2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>SCHEDULE 3.1</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>PERMITTED INTERCOMPANY TRANSACTIONS</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The following transactions may be effected between DGSE Merger Corp. and its Affiliates (collectively, &#147;<I>DGSE</I>&#148;) and Superior Galleries, Inc. and its Affiliates (collectively, &#147;<I>Superior</I>&#148;):</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1. DGSE and Superior may each consign jewelry, watches, coins, collectibles, and any other inventory to the other for sale to customers at the standard DGSE dealer rates.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2. DGSE may pay Superior standard dealer rates for scrap gold, silver, and other metals.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3. DGSE may repair jewelry, watches, and other inventory items for Superior or Superior&#146;s customers at standard dealer rates.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4. Each may sell the other inventory as needed based on standard DGSE dealer rates.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">5. DGSE may consign rare coins to Superior for auction at the preferred standard auction consignment rates charged by Superior.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6. DGSE may write appraisals for Superior jewelry inventory or Superior customer jewelry and charge the standard customer rates.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">7. Either company may consign to the other items to be sold on eBay or other Internet sites; such items may be consigned to Superior to establish DGSE&#146;s interest in such items. </P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>Sch-3.1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>SCHEDULE 3.2</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>APPROVED STRATEGIC CHANGES</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">DGSE Merger Corp., acting through the Interim Executives and its other Representatives (collectively, &#147;<I>DGSE</I>&#148;), is authorized to change the strategic direction of Superior Galleries, Inc. and its Affiliates (collectively, &#147;<I>Superior</I>&#148;) in,<I> inter alia</I>, the following manner:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1. DGSE may reassign Superior personnel between operating activities, or substantially increase or decrease staffing levels.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2. DGSE may increase or decrease Superior&#146;s emphasis on any or all of the following operating activities:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">2.1 auction;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">2.2 wholesale;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">2.3 retail;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">2.4 over the counter buying and selling (second-hand transactions);</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">2.5 scrap processing;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">2.6 trading;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">2.7 dealer wholesale; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">2.8 any other activity in which Superior is currently engaged.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3. DGSE may change Superior&#146;s accounting hardware and software.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4. DGSE may modify Superior&#146;s corporate policies regarding compensation and fringe benefits.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">5. DGSE may change Superior&#146;s advertising form and policy.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">6. DGSE may introduce new business related to jewelry, watches, diamonds.</P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>Sch-3.2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX J</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=61.3></TD><TD width=406.7></TD></TR>
<TR><TD valign=top width=81.733><P style="margin:0pt" align=center><img src="v065446s4annexes002.gif" alt="[v065446s4annexes002.gif]" align=middle height=78.4 width=72.8></P>
</TD><TD valign=top width=542.267><P style="margin:0pt"><B>ROSS MILLER</B></P>
<P style="margin:0pt"><B>Secretary of State</B></P>
<P style="margin:0pt"><B>204 North Carson Street, Ste 1</B></P>
<P style="margin:0pt"><B>Carson City, Nevada 89701-4299</B></P>
<P style="margin:0pt"><B>(775) 684 5708</B></P>
<P style="margin:0pt"><B>Website: secretaryofstate.biz</B></P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=305.4></TD></TR>
<TR><TD style="border:6pt solid #000000" valign=top width=407.2><P style="line-height:normal; margin:0pt; font-size:16pt" align=center><B>Certificate of Amendment<BR>
</B><SMALL>(PURSUANT TO NRS 78.385 AND 78.390)</SMALL></P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=277.8></TD><TD width=190.2></TD></TR>
<TR><TD valign=top width=370.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>USE BLACK INK ONLY &#150; DO NOT HIGHLIGHT</B></P>
</TD><TD valign=top width=253.6><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>ABOVE SPACE IS FOR OFFICE USE ONLY</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt" align=center><B><U>Certificate of Amendment to Articles of Incorporation<BR>
For Nevada Profit Corporations<BR>
</U>(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)</B></P>
<P style="margin-top:6.65pt; margin-bottom:3.35pt">1.&nbsp;Name of corporation:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=468.5></TD></TR>
<TR><TD style="border:0.5pt solid #000000" valign=top width=624.667><P style="line-height:14pt; margin-top:4pt; margin-bottom:4pt; font-size:12pt" align=center><B>DGSE Companies, Inc.</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:3.35pt">2.&nbsp;The articles have been amended as follows (provide article numbers, if available):</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=468.5></TD></TR>
<TR><TD style="border:0.5pt solid #000000" valign=top width=624.667><P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; padding-right:18pt"><B>RESOLVED: That Article Fourth of the Articles of Incorporation of the Corporation shall be amended to read in its entirety as follows:</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; padding-right:18pt"><B>&#147;Fourth. The total authorized capital stock of the Corporation shall consist of Thirty Million (30,000,000) shares of Common Stock of the par value of one cent ($0.01) per share.&#148;</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:3.35pt">3.&nbsp;The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the* articles of incorporation have voted in favor of the amendment is: </P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=468.5></TD></TR>
<TR><TD style="border:0.5pt solid #000000" valign=top width=624.667><P style="margin-top:4pt; margin-bottom:4pt; font-size:12pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt">4.&nbsp;Effective date of filing (optional):&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(must not be later than 90 days after the certificate is filed)</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">5.&nbsp;Officer Signature <B>(Required)</B>:&nbsp;&nbsp;&nbsp;&nbsp;<B><U>X</U></B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt">*If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof.</P>
<P style="line-height:14pt; margin-top:8pt; margin-bottom:18pt; font-size:12pt"><B>IMPORTANT:</B>&nbsp;Failure to include any of the above information and submit the proper fees may cause this filing to be rejected.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=235></TD><TD width=233></TD></TR>
<TR><TD valign=top width=313.333><P style="line-height:10pt; margin:0pt; font-size:8pt"><I>This form must be accompanied by appropriate fees.</I></P>
</TD><TD valign=bottom width=310.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=right>Nevada Secretary of State AM 78.385 Amend 2007</P>
<P style="line-height:10pt; margin:0pt; font-size:8pt" align=right>Revised on: 01/01/07</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt" align=center><BR></P>
<P style="margin:0pt" align=center>J-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; page-break-before:always" align=right><B>ANNEX K</B></P>
<P style="margin:0pt" align=center><img src="v065446s4annexes004.gif" alt="[v065446s4annexes004.gif]" align=middle height=131 width=331.2></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">December 21, 2006 </P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Board of Directors<BR>
Superior Galleries, Inc.<BR>
9478 West Olympic Boulevard<BR>
Beverly Hills, CA 90212</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Gentlemen: </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Stenton Leigh Valuation Group, Inc. (&#147;Stenton Leigh&#148; or &#147;SL&#148;) has been advised that, DGSE Companies, Inc. (formerly known as Dallas Gold and Silver Exchange, Inc.) (&#147;DGSE&#148;) and Superior Galleries, Inc. (&#147;SPGR&#148; or the &#147;Company&#148;) have entered into an Agreement and Plan of Merger and Reorganization (the &#147;Merger Agreement&#148;). Under the Merger DGSE will issue an aggregate of 3,700,000 shares of DGSE common stock currently valued at $2.65 per share, or a total value of $9,805,000 to the shareholders of SPGR in exchange for a wholly owned interest in SPGR. This business arrangement is referred to herein as the &#147;Transaction&#148;. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have been retained to render an opinion as to whether, on the date of this opinion, the Transaction is fair, from a financial point of view, to the SPGR minority shareholders.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have not been requested to opine as to, and the opinion does not in any manner address, the relative merits of the Transaction as compared to any alternative business strategy that might exist for SPGR, the decision on whether SPGR should complete the Transaction, or other alternatives to the Transaction that might exist for SPGR. The amount of consideration being paid by DGSE to acquire the existing operating business of SPGR was determined pursuant to negotiations between the relevant parties and not pursuant to recommendations of SL.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In arriving at its opinion, SL took into account an assessment of general economic, market and financial conditions, as well as its experience in connection with similar transactions and securities valuations generally. In so doing, among other things, SL:</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed the Merger/ Agreement;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed publicly available financial information and other data with respect to SPGR, including the Annual Report on Form 10-K for the years ended June 30, 2005, and June 30, 2006;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed publicly available financial information and other data with respect to SPGR, including the Quarterly Reports on Form 10-Q for the quarters ended September 30, 2005, December 31, 2005, March 31, 2006, and September 30, 2006, and discussed performance to December 15, 2006 with SPGR management;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed publicly available financial information and other data with respect to DGSE, including the Annual Report on Form 10-K for the year ended December 31, 2005;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed publicly available financial information and other data with respect to DGSE, including the Quarterly Report on Form 10-Q for the quarters ended March 31, 2006, June 30, 2006, and September 30, 2006, and discussed performance to December 15, 2006 with SPGR management;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed and analyzed the Transaction&#146;s pro-forma impact on SPGR&#146;s capitalization;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed and analyzed the Transaction&#146;s pro-forma impact on SPGR&#146;s securities outstanding and stockholder ownership;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed the planned conversion features of debt to equity by Stanford International Bank Ltd and planned issuance of warrants to Stanford International Bank Ltd at the closing of the Transaction;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Considered the historical financial results and present financial condition of SPGR and DGSE;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed the trading market for the common stock of SPGR and DGSE;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed and analyzed certain financial characteristics of publicly-traded companies that were deemed to have characteristics comparable to SPGR and DGSE;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">Reviewed and analyzed certain financial characteristics of target companies in transactions where such target company was deemed to have characteristics comparable to that of SPGR and DGSE.</FONT></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">SL also performed such other analyses and examinations as it deemed appropriate and held discussions with SPGR and DGSE management in relation to certain financial and operating information furnished to SL, including financial analyses with respect to their respective business and operations.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In arriving at its opinion, SL relied upon and assumed the accuracy and completeness of all of the financial and other information that was used without assuming any responsibility for any independent verification of any such information. Further, SL relied upon the assurances of SPGR and DGSE management that they were not aware of any facts or circumstances that would make any such information inaccurate or misleading. With respect to the financial information and projections utilized, SL assumed that such information has been reasonably prepared on a basis reflecting the best currently available estimates and judgments, and that such information provides a reasonable basis upon which it could make an analysis and form an opinion. SL did not make a physical inspection of the properties and facilities of SPGR and DGSE. In addition, SL did not attempt to confirm whether SPGR and DGSE had good title to their respective assets.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">SL assumed that the Transaction will be consummated in a manner that complies in all respects with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations. SL assumes that the Transaction will be consummated substantially in accordance with the terms set forth in the Merger agreement, without any further amendments thereto, and that any amendments, revisions or waivers thereto will not be detrimental to the stockholders of SPGR. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">SL&#146;s opinion is necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of December 15, 2006. Accordingly, although subsequent developments may affect its opinion, SL has not assumed any obligation to update, review or reaffirm its opinion.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, SL made qualitative judgments as to the relevance of each analysis and factor that it considered. In addition, SL may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described above should not be taken to be SL&#146;s view of the value of SPGR&#146;s assets. The estimates contained in SL&#146;s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of
actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses or assets neither purports to be appraisals nor do they necessarily reflect the prices at which businesses or assets may actually be sold. Accordingly, SL&#146;s analyses and estimates are inherently subject to substantial uncertainty. SL believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors it considered, without considering all analyses and factors collectively, could create an incomplete and misleading view of the process underlying the analyses performed by SL in connection with the preparation of its opinion. The analyses performed were prepared solely as part of SL&#146;s analysis of the fairness, from a financial point of view, of the Transaction to the minority stockholders, and were provided to SPGR&#146;s board of directors in connection with the
delivery of SL&#146;s opinion. The opinion of SL was just one of the many factors taken into account by SPGR&#146;s board of directors in making its determination to approve the Transaction, including those described elsewhere in the SPGR information statement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our opinion is for the use and benefit of the Company&#146;s Board of Directors in connection with its consideration of the Transaction and is not intended to be and does not constitute a recommendation to any stockholder of the Company whether such stockholder should take any action, if required, in connection with the contemplated Transaction. SL does not express any opinion as to the future performance of DGSE, or the price at which DGSE&#146;s common stock would trade at any time in the future. Based upon and subject to the foregoing, it is our opinion that, as of the date of this letter, the Transaction is fair, from a financial point of view, to the Company&#146;s minority stockholders.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In connection with our services, we have previously received a retainer and will receive the balance of our fee upon the rendering of this opinion. Neither SL nor its principals beneficially own any interest in SPGR or DGSE. SL has not provided any other services to SPGR or DGSE and SL&#146;s fee for providing the fairness opinion is not contingent on the completion of the Transaction. In addition, the Company has agreed to indemnify us for certain liabilities that may arise out of the rendering this opinion.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our opinion is for the use and benefit of the Board of Directors and is rendered in connection with its consideration of the Transaction and may not be used by the Company for any other purpose or reproduced, disseminated, quoted or referred to by the Company at any time, in any manner or for any purpose, without the prior written consent of SL, except that this opinion may be reproduced in full in, and references to the opinion and to SL and its relationship with the Company may be included in filings made by the Company with the Securities and Exchange Commission, if required by Securities and Exchange Commission rules, and in any proxy statement or similar disclosure document disseminated to shareholders if required by the Securities and Exchange Commission rules.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Very truly yours,</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">/s/ STENTON LEIGH VALUATION GROUP, INC.<BR>
STENTON LEIGH VALUATION GROUP, INC.</P>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
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<P style="margin:0pt" align=center>K-1</P>
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<P style="margin:0pt; page-break-before:always" align=right><B>ANNEX L</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE<BR>
(APPRAISAL RIGHTS)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>&#167; 262. Appraisal rights.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to &#167; 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder&#146;s shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word &#147;stockholder&#148; means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words &#147;stock&#148; and &#147;share&#148; mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock corporation; and the words &#147;depository receipt&#148; mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to &#167; 251 (other than a merger effected pursuant to &#167; 251(g) of this title), &#167; 252, &#167; 254, &#167; 257, &#167; 258, &#167; 263 or &#167; 264 of this title:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of &#167; 251 of this title.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to &#167;&#167; 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; </P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under &#167; 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(d) Appraisal rights shall be perfected as follows:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder&#146;s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder&#146;s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such stockholder&#146;s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(2) If the merger or consolidation was approved pursuant to &#167; 228 or &#167; 253 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such holder&#146;s shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder&#146;s shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder&#146;s shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder&#146;s demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder&#146;s written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the
final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder&#146;s certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court&#146;s decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney&#146;s fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder&#146;s demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.</P>
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<P style="margin:0pt" align=center>L-1</P>
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<P style="margin:0pt; page-break-before:always" align=center><B>PART II</B></P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 20. Indemnification of Directors and Officers.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Under Nevada law, a director or officer is not individually liable to the corporation or its stockholders for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that such act or failure to act constituted a breach of fiduciary duties as a director or officer; and the breach of those duties involved intentional misconduct, fraud or a knowing violation of law. Such provisions, however, will not eliminate a director or officer&#146;s liability to the corporation in the case of a judgment of ouster rendered against a corporation on account of the misconduct of the director or officer, a violation of Nevada state securities laws, or certain other violations of law.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Under Section 78.7502 of the Nevada Revised Statutes, a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys&#146; fees, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with the action, suit or proceeding, but only if such person (i) did not breach his or her fiduciary duties in a manner involving intentional misconduct, fraud or a knowing violation of
law, or (ii) acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person is not eligible for indemnification. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including amounts paid in settlement and attorneys&#146; fees actually and reasonably incurred in connection with the defense or settlement of the action or suit, but only if such person (i) did not breach his or her fiduciary duties in a manner involving intentional misconduct, fraud or a knowing violation of law, or (ii) acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in this paragraph, or in defense of any claim, issue or matter therein, Section 78.7502(3) provide for mandatory indemnification for him or her against expenses, including attorneys&#146; fees, actually and reasonably incurred by him or her in connection with the defense. The Section further provides that indemnification may not be made for
any claim, issue or matter as to which such a person has been finally adjudged to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court determines the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Registrant&#146;s Articles of Incorporation provides that any person who is or was a director or officer of the corporation shall not be personally liable for any breach of his or her fiduciary duties as a director or officer, except to the extent such liability may not be eliminated by applicable law from time to time in effect.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The foregoing summaries are necessarily subject to the complete text of the statute, Articles of Incorporation, Bylaws and agreements referred to above and are qualified in their entirety by reference thereto.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The Registrant maintains liability insurance for the benefit of its directors and officers.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 21. Exhibits and Financial Statement Schedules.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(a) <I>Exhibits</I>. See Index of Exhibits.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(b) <I>Schedules</I>. Schedules have been omitted since the information required is not applicable.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 22. Undertakings.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(a) The undersigned registrant hereby undertakes:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(ii) To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which is registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the &#147;Calculation of Registration Fee&#148; table in the effective registration statement; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:36pt; text-indent:18pt">(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">(4) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: &nbsp;The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1. Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">3. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">4. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant&#146;s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan&#146;s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(c)</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">1. The undersigned registrant hereby undertakes as follows: That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:18pt">2. The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (h)(1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the undersigned registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the undersigned registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(e) The undersigned registrant undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">(f) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.</P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>II-1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SIGNATURES</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this registration statement on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on February 26, 2007.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=217.25></TD><TD width=19.45></TD><TD width=231.3></TD></TR>
<TR><TD valign=bottom width=289.667>&nbsp;</TD><TD valign=bottom width=334.333 colspan=2><P style="margin:0pt">DGSE Companies, Inc.</P>
</TD></TR>
<TR><TD valign=bottom width=289.667>&nbsp;</TD><TD valign=bottom width=25.933>&nbsp;</TD><TD valign=bottom width=308.4>&nbsp;</TD></TR>
<TR><TD valign=bottom width=289.667>&nbsp;</TD><TD valign=bottom width=25.933><P style="margin:0pt">By:&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=308.4><P style="margin:0pt">/s/ Dr. L.S. Smith</P>
</TD></TR>
<TR><TD valign=bottom width=289.667>&nbsp;</TD><TD valign=bottom width=25.933>&nbsp;</TD><TD valign=bottom width=308.4><P style="margin:0pt">Dr. L.S. Smith<BR>
Chairman and Chief Executive Officer</P>
</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>POWER OF ATTORNEY</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Dr. L.S. Smith and William H. Oyster, jointly and severally, the undersigned&#146;s true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for the undersigned and in his or her name, place and stead, in any and all capacities (including the undersigned&#146;s capacity as a director and/or officer of DGSE Companies, Inc.), to sign any or all amendments (including post-effective amendments) to this Registration Statement and any other registration statement for the same offering, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about
the premises, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agent, or his or her substitute, acting alone, may lawfully do or cause to be done by virtue hereof.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=105.7></TD><TD width=14.15></TD><TD width=234.95></TD><TD width=14.15></TD><TD width=99.05></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=140.933><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Name</B></P>
</TD><TD valign=top width=18.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=313.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Title</B></P>
</TD><TD valign=top width=18.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=132.067><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Date</B></P>
</TD></TR>
<TR><TD valign=bottom width=140.933>&nbsp;</TD><TD valign=top width=18.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=313.267>&nbsp;</TD><TD valign=top width=18.867><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=132.067>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">/s/ Dr. L.S. Smith</P>
</TD><TD valign=top width=18.867 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt; text-indent:-36pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=313.267 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt">Chief Executive Officer (Principal Executive Officer),<BR>
Secretary and Chairman of the Board (Director)</P>
</TD><TD valign=top width=18.867 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt; text-indent:-36pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=132.067 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt" align=center>February 26, 2007</P>
</TD></TR>
<TR><TD valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">Dr. L.S. Smith</P>
</TD></TR>
<TR><TD valign=top width=140.933>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=313.267>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=132.067>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">/s/ William H. Oyster</P>
</TD><TD valign=top width=18.867 rowspan=2>&nbsp;</TD><TD valign=top width=313.267 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt">President, Chief Operating Officer and Director</P>
</TD><TD valign=top width=18.867 rowspan=2>&nbsp;</TD><TD valign=top width=132.067 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt" align=center>February 26, 2007</P>
</TD></TR>
<TR><TD valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">William H. Oyster</P>
</TD></TR>
<TR><TD valign=top width=140.933>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=313.267>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=132.067>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">/s/ John Benson</P>
</TD><TD valign=top width=18.867 rowspan=2>&nbsp;</TD><TD valign=top width=313.267 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt">Chief Financial Officer (Principal Financial Officer)</P>
</TD><TD valign=top width=18.867 rowspan=2>&nbsp;</TD><TD valign=top width=132.067 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt" align=center>February 26, 2007</P>
</TD></TR>
<TR><TD valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">John Benson</P>
</TD></TR>
<TR><TD valign=top width=140.933>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=313.267>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=132.067>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">/s/ William P. Cordeiro</P>
</TD><TD valign=top width=18.867 rowspan=2>&nbsp;</TD><TD valign=top width=313.267 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt">Director</P>
</TD><TD valign=top width=18.867 rowspan=2>&nbsp;</TD><TD valign=top width=132.067 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt" align=center>February 7, 2007</P>
</TD></TR>
<TR><TD valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">William P. Cordeiro</P>
</TD></TR>
<TR><TD valign=top width=140.933>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=313.267>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=132.067>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">/s/ Craig Alan-Lee</P>
</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=313.267><P style="margin-top:2.5pt; margin-bottom:0pt">Director</P>
</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=132.067><P style="margin-top:2.5pt; margin-bottom:0pt" align=center>February 7, 2007</P>
</TD></TR>
<TR><TD valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">Craig Alan-Lee</P>
</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=313.267>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=132.067>&nbsp;</TD></TR>
<TR><TD valign=top width=140.933>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=313.267>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=132.067>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">/s/ Paul Hagen</P>
</TD><TD valign=top width=18.867 rowspan=2>&nbsp;</TD><TD valign=top width=313.267 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt">Director</P>
</TD><TD valign=top width=18.867 rowspan=2>&nbsp;</TD><TD valign=top width=132.067 rowspan=2><P style="margin-top:2.5pt; margin-bottom:0pt" align=center>February 26, 2007</P>
</TD></TR>
<TR><TD valign=top width=140.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt">Paul Hagen</P>
</TD></TR>
<TR><TD valign=top width=140.933>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=313.267>&nbsp;</TD><TD valign=top width=18.867>&nbsp;</TD><TD valign=top width=132.067>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:6.65pt; page-break-before:always" align=center><B>INDEX TO EXHIBITS</B></P>
<P style="margin-top:3.35pt; margin-bottom:3.35pt; text-indent:18pt">The following documents are filed as exhibits to this registration statement:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=31.8></TD><TD width=15.25></TD><TD width=130.85></TD><TD width=15.25></TD><TD width=44.75></TD><TD width=15.25></TD><TD width=55.2></TD><TD width=15.25></TD><TD width=32.1></TD><TD width=15.25></TD><TD width=51.2></TD><TD width=15.25></TD><TD width=30.6></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit<BR>
No.</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Description</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Filed<BR>
Herein</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Incorporated<BR>
by Reference</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Form</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Date Filed<BR>
with SEC</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=40.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit<BR>
No.</B></P>
</TD></TR>
<TR><TD valign=bottom width=42.4><P style="margin-top:0.65pt; margin-bottom:0pt"><BR></P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=174.467>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.8>&nbsp;</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">2.1</P>
</TD><TD valign=top width=20.333><P style="margin:0pt; font-size:8pt">&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Amended and Restated Agreement and Plan of Merger and Reorganization, dated as of January 6, 2007</P>
</TD><TD valign=top width=20.333><P style="margin:0pt; font-size:8pt">&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333><P style="margin:0pt; font-size:8pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333><P style="margin:0pt; font-size:8pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K</P>
</TD><TD valign=top width=20.333><P style="margin:0pt; font-size:8pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">January 9, 2007</P>
</TD><TD valign=top width=20.333><P style="margin:0pt; font-size:8pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">2.1</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">2.2</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Limited Joinder Agreement, dated as of January 6, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">January 9, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">2.9</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">3.1</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Articles of Incorporation dated September 17, 1965</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-A12G</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">June 23, 1999</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">3.1</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">3.2</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Certificate of Amendment to Articles of Incorporation, dated October 14, 1981</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-A12G</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">June 23, 1999</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">3.2</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">3.3</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Certificate of Resolution, dated October 14, 1981</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-A12G</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">June 23, 1999</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">3.3</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">3.4</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Certificate of Amendment to Articles of Incorporation , dated July 15, 1986</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-A12G</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">June 23, 1999</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">3.4</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">3.5</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Certificate of Amendment to Articles of Incorporation, dated August 23, 1998</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-A12G</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">June 23, 1999</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">3.5</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">3.6</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Certificate of Amendment to Articles of Incorporation, dated June 26, 1992</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-A12G</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">June 23, 1999</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">3.6</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">3.7</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Certificate of Amendment to Articles of Incorporation, dated June 26, 2001</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">July 3, 2001</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">1.0</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">3.8</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">By-laws, dated March 2, 1992</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-A12G</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">June 23, 1999</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:10.8pt; font-size:8pt">3.7</P>
</TD></TR>
<TR><TD valign=bottom width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">4.1</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Specimen Common Stock Certificate</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.8><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=bottom width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">5.1</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Opinion of Sheppard, Mullin, Richter &amp; Hampton LLP regarding validity</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.8><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">8.1</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Opinion of Sheppard, Mullin, Richter &amp; Hampton LLP regarding certain tax matters</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.1</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Renewal, Extension And Modification Agreement dated January 28, 1994, by and among DGSE Corporation and Michael E. Hall And Marian E. Hall</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>10-KSB</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">March &nbsp;1995</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">10.2</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.2</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Lease Agreement dated June 2, 2000 by and between SND Properties and Charleston Gold and Diamond &nbsp;Exchange, Inc.</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>10-KSB</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">March 29, 2001</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">10.1</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.3</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Lease &nbsp;agreement dated October &nbsp;5, 2004 by and between Beltline Denton Road Associates and Dallas Gold &amp; Silver Exchange</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>10-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">April 15, 2005</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">10.2</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.4</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Lease agreement dated December 1, 2004 by and between Stone Lewis Properties and Dallas Gold &amp; Silver Exchange</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>10-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">April 15, 2005</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">10.3</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.5</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Lease agreement dated November &nbsp;18, &nbsp;2004 by and between Hinkle Income &nbsp;Properties LLC and American Pay Day Centers, Inc.</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>10-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">April 15, 2005</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">10.4</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.6 </P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Lease Agreement dated January 17, 2005 by and between Belle-Hall Development Phase III Limited Partnership and DGSE Companies, Inc.</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>x</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.7</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Loan Agreement, dated as of December 22, 2005, between DGSE Companies, Inc. and Texas Capital Bank, N.A.</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K/A</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">August 17, 2006</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">10.1</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.8</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">First Amendment to Loan Agreement and Other Loan Documents, dated as of August 14, 2006, between DGSE Companies, Inc. and Texas Capital Bank, N.A.</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K/A</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">August 17, 2006</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">10.2</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.9</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Support Agreement, DGSE stockholders, dated as of January 6, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">January 9, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">99.1</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.10</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Securities Exchange Agreement, dated as of January 6, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">January 9, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">99.2</P>
</TD></TR>
<TR><TD valign=top width=42.4><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.11</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Warrant to DiGenova, issued January 6, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">January 9, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.8><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">99.3</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=31.85></TD><TD width=15.3></TD><TD width=130.85></TD><TD width=15.25></TD><TD width=44.75></TD><TD width=15.25></TD><TD width=55.2></TD><TD width=15.25></TD><TD width=32.1></TD><TD width=15.25></TD><TD width=51.2></TD><TD width=15.25></TD><TD width=30.5></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.467><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit<BR>
No.</B></P>
</TD><TD valign=bottom width=20.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Description</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Filed<BR>
Herein</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Incorporated<BR>
by Reference</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Form</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Date Filed<BR>
with SEC</B></P>
</TD><TD valign=bottom width=20.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=40.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit<BR>
No.</B></P>
</TD></TR>
<TR><TD valign=bottom width=42.467><P style="margin-top:1.65pt; margin-bottom:0pt"><BR></P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=bottom width=174.467>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.667>&nbsp;</TD></TR>
<TR><TD valign=top width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">10.12</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Support Agreement, Superior stockholders, dated as of January 6, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6><P style="line-height:10pt; margin:0pt; font-size:8pt">&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>8-K</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267><P style="line-height:10pt; margin:0pt; font-size:8pt">January 9, 2007</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.667><P style="line-height:10pt; margin:0pt; text-indent:6.8pt; font-size:8pt">99.5</P>
</TD></TR>
<TR><TD valign=bottom width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">23.1</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Consent of BKR Cornwell Jackson</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=bottom width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">23.2</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Consent of CF &amp; Co.</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=top width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">23.3</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Consent of Singer Lewak Greenbaum &amp; Goldstein LLP</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=top width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">23.4</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Consent of Sheppard, Mullin, Richter &amp; Hampton LLP</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>See<BR>
Exhibits<BR>
5.1 and 8.1</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=top width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">24.1</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=top width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Powers of Attorney</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>See page II-4</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=top width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=bottom width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">99.1</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Form of Proxy &#150; DGSE Companies</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=bottom width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">99.2</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Form of Proxy &#150; Superior Galleries</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=bottom width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">99.3</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Consent of David Rector</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=bottom width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">99.4</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Consent of Mitchell T. Stoltz</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
<TR><TD valign=bottom width=42.467><P style="line-height:8.65pt; margin-top:1.35pt; margin-bottom:0pt; padding-left:6pt; font-size:8pt">99.5</P>
</TD><TD valign=top width=20.4>&nbsp;</TD><TD valign=bottom width=174.467><P style="line-height:10pt; margin:0pt; font-size:8pt">Consent of Richard Matthew Gozia</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=59.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>&#215;</P>
</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=73.6>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=68.267>&nbsp;</TD><TD valign=top width=20.333>&nbsp;</TD><TD valign=bottom width=40.667><P style="margin:0pt"><BR></P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR></P>

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<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>6
<FILENAME>v065446_ex4-1.htm
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBIT
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    <div>&#160;</div>
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              <tr>
                <td align="left" valign="top" width="20%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">INCORPORATED
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                    NJ</font></div>
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        PAID AND NON-ASSESSABLE COMMON STOCK OF THE PAR VALUE OF ONE CENT($.01) EACH
        OF
</font></div>&#160;</div>
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      on the books of the Corporation by the holder hereof, in person or by duly
      authorized attorney, upon surrender of this Certificate properly endorsed.
      This
      Certificate and the shares represented hereby are issued and shall be subject
      to
      all of the provisions of the Certificate and the shares represented hereby
      are
      issued and shall be subject to all of the provision of the Certificate of
      Incorporation. This Certificate is hot valid unless countersigned by the
      Transfer Agent and registered by the Registrar.</font></div>
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      corporate seal to be hereunto affixed.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      power of substitution in the premises.</font></div>
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      ___________________________________</font></div>
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                  AS
                  WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
                  ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.</font></div>
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                (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
                WITH
                MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
                PURSUANT
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<TYPE>EX-5.1
<SEQUENCE>8
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<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vf-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
<!-- All rights reserved EDGARfilings.com -->
</head>
  <body bgcolor="#ffffff">
    <div>&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBIT
      5.1</font></div>
    <div><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
      26, 2007</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="40%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">DGSE
                Companies, Inc.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2817
                Forest Lane</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dallas,
                Texas 75234</font></div>
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          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Re:</font></div>
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Registration
                Statement on Form&#160;S-4</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ladies
      and Gentlemen: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      acted as special counsel to DGSE Companies, Inc., a Nevada corporation
      (&#8220;Parent&#8221;), and its wholly-owned subsidiary DGSE Merger Corp., a Delaware
      corporation (&#8220;Merger Sub&#8221;), in connection with the filing of a registration
      statement on Form&#160;S-4 (the &#8220;Registration Statement&#8221;) under the Securities
      Act of 1933, as amended, covering the registration of:</font></div>
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          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(A)</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">an
                aggregate of 3,603,049 shares (the &#8220;Merger Shares&#8221;) of Parent&#8217;s common
                stock, par value $0.01 per share (the &#8220;Common Stock&#8221;), to be issued to
                stockholders of Superior Galleries, Inc., a Delaware corporation
                (&#8220;Superior&#8221;), pursuant to the terms and conditions of that certain Amended
                and Restated Agreement and Plan of Merger and Reorganization, made
                and
                entered into as of January 6, 2007 (the &#8220;Merger Agreement&#8221;), by and among
                Parent, Merger Sub, Superior, and Stanford International Bank Ltd.
                (&#8220;Stanford&#8221;), as stockholder agent for the stockholders of Superior,
                pursuant to which it is contemplated that Superior will merge with
                and
                into Merger Sub, with Superior as the surviving corporation (the
                &#8220;Merger&#8221;);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(B)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">warrants
                to purchase up to 1,708,634 shares of Common Stock, substantially
                in the
                form attached as an exhibit to the Merger Agreement (the &#8220;Stanford
                Warrants&#8221;), which are contemplated to be issued to Stanford and its
                designees in connection with the Merger, as provided in the Merger
                Agreement;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(C)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">up
                to 1,708,634 shares (the &#8220;Stanford Warrant Shares&#8221;) of Common Stock to be
                issued upon exercise of the Stanford Warrants;
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(D)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">up
                to 96,971 shares (together with the Stanford Warrant Shares, the
&#8220;Warrant
                Shares&#8221;, and, collectively with the Merger Shares, the &#8220;Shares&#8221;) of Common
                Stock to be issued upon exercise of that certain Warrant issued by
                Parent
                to Silvano DiGenova on January 6, 2007 (together with the Stanford
                Warrants, the &#8220;Warrants&#8221;).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      opinion is being furnished in accordance with the requirements of Item&#160;21
      of Form&#160;S-4 and Item 601(b)(5)(i) of Regulation S-K.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
        26, 2007</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page&#160;2</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with this opinion, we have reviewed the Registration Statement,
      Parent&#8217;s charter documents, the proceedings taken by Parent with respect to the
      authorization and adoption of the Merger and the Merger Agreement, certificates
      of government officials, and such other documents, records, certificates,
      memoranda and other instruments as we deem necessary as a basis for this
      opinion. With respect to the foregoing documents, we have assumed the
      genuineness of all signatures, the authenticity of all documents submitted
      to us
      as originals and the conformity to originals of all documents submitted to
      us as
      certified or reproduced copies. We have also assumed that (i)&#160;if the Shares
      are certificated, the stock certificates to be issued to represent the Shares
      (collectively, the &#8220;Stock Certificates&#8221;) will conform to the specimen common
      stock certificate submitted to us, and the Stock Certificates will be duly
      executed by Parent and countersigned by the transfer agent therefor in
      accordance with Article V, Section 6(a) of Parent&#8217;s bylaws and Section 78.235 of
      the Nevada Revised Statutes, (ii)&#160;the stockholders of Superior will approve
      and adopt the Merger Agreement and approve the Merger, and a Certificate of
      Merger substantially in the form attached to the Merger Agreement will be filed
      with the Secretary of State of the State of Delaware giving effect to the
      Merger, (iii)&#160;the stockholders of Parent will approve and adopt the
      amendment to the Articles of Incorporation of Parent increasing the authorized
      shares of Common Stock by 20,000,000 shares (the &#8220;New Shares&#8221;) and Articles of
      Amendment substantially in the form included as Annex J to the prospectus
      forming part of the Registration Statement will be filed with the Secretary
      of
      State of the State of Nevada giving effect to such amendment, (iv)&#160;shares
      currently reserved, including without limitation from the New Shares upon
      authorization thereof, will remain available for the issuance of the Shares,
      (v)&#160;each of the conditions to Parents&#8217; obligation to consummate the Merger
      specified in the Merger Agreement will be satisfied at the time of the
      consummation of the Merger without having been waived, and (vi)&#160;none of
      Parent&#8217;s charter documents, the Merger Agreement, the Warrants and the corporate
      proceedings relating to the Merger will be rescinded, amended or otherwise
      modified prior to the issuance of the Shares (except for the aforesaid Articles
      of Amendment). We have obtained from the officers of Parent certificates as
      to
      certain factual matters and, insofar as this opinion is based on matters of
      fact, we have relied on such certificates without independent
      investigation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Based
      on
      the foregoing review, and in reliance thereon, and subject to the assumptions
      and limitations set forth herein, including without limitation the approval
      by
      the stockholders of Superior of the Merger and the authorization by the
      stockholders of Parent of the New Shares, we are of the opinion
      that:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Merger Shares, when issued and delivered in accordance with the Merger Agreement
      and the Registration Statement (including the execution and delivery of Stock
      Certificates therefor or, with respect to uncertificated Merger Shares, the
      registration of the purchaser thereof as the registered holder thereof by Parent
      or its transfer agent, against payment in full of the consideration therefor),
      will be duly authorized, validly issued, fully paid and
      nonassessable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
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        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
        26, 2007</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page&#160;3</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Stanford Warrants, when executed and delivered in accordance with the Merger
      Agreement and the Registration Statement (including the receipt by Parent
      through Superior of the full consideration specified in the Merger Agreement
      therefor), will constitute the valid and binding obligations of Parent,
      enforceable against Parent in accordance with their terms.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Warrant Shares, when issued and delivered in accordance with the applicable
      Warrant and the Registration Statement (including the execution and delivery
      of
      a Stock Certificate therefor or, with respect to uncertificated Warrant Shares,
      the registration of the purchaser thereof as the registered holder thereof
      by
      Parent or its transfer agent, against payment in full of the exercise price
      specified in such Warrant) and, with respect to the Warrant Shares to be issued
      pursuant to the Stanford Warrants, assuming Parent has received the full
      consideration for the issuance of the Stanford Warrants specified therefor
      in
      the Merger Agreement, upon exercise of the applicable Warrant, will be duly
      authorized, validly issued, fully paid and nonassessable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      opinion in paragraph (b) is above is subject to the following limitations and
      qualifications:&#160;(i)&#160;limitations imposed by applicable bankruptcy,
      insolvency, reorganization, moratorium and other similar laws relating to or
      affecting the relief of debtors or the rights and remedies of creditors
      generally; (ii)&#160;limitations imposed by general principles of equity upon
      the availability of equitable remedies for the enforcement of provisions of
      the
      Stanford Warrants, whether considered in a proceeding at law or in equity,
      and
      by the effect of judicial decisions holding that certain provisions are
      unenforceable when their enforcement would violate the implied covenant of
      good
      faith and fair dealing, or would be commercially unreasonable, or where their
      breach is not material; (iii)&#160;the effect of any California, Nevada or Texas
      state or United States federal law or equitable principle which provides that
      a
      court may refuse to enforce, or may limit the application of, a contract or
      any
      clause thereof which the court finds to have been unconscionable at the time
      it
      was made or contrary to public policy; (iv)&#160;the enforceability of the
      provisions of Section 12 of the Stanford Warrants purporting to waive rights
      to
      trial by jury or objections to venue or jurisdiction in connection with any
      litigation arising out of or pertaining to any Stanford Warrant; and
      (v)&#160;Section 13 of the Stanford Warrants requiring written amendments or
      waivers insofar as it suggests that (A)&#160;the failure to exercise, or any
      delay in exercising, rights or remedies available under the Stanford Warrants
      will not operate as a waiver of any such right or remedy, or (B)&#160;oral or
      other modifications, amendments or waivers could not be effectively agreed
      upon
      by the parties or that the doctrine of promissory estoppel might not apply
      (we
      note that a requirement that provisions of the Stanford Warrants may only be
      amended or waived in writing may not be binding or enforceable if an oral
      agreement has been created modifying such provision or an implied agreement
      by
      trade practice or course of conduct has given rise to an amendment or
      waiver).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
        26, 2007</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page&#160;4</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      consent to the filing of this opinion letter as Exhibit 5.1 to the Registration
      Statement and the naming of our firm in the &#8220;Legal Matters&#8221; portion of the
      Registration Statement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      express no opinion as to matters governed by any laws other than the laws of
      the
      State of California and the Nevada Private Corporations Code, the applicable
      provisions of the Nevada Constitution and reported decisions of the Nevada
      courts interpreting these respective laws. We express no opinion as to the
      laws
      of any other jurisdiction nor as to the statutes, administrative decisions,
      rules, regulations or requirements of any county, municipality, subdivision
      or
      local authority of any jurisdiction. We express no opinion as to whether the
      laws of any jurisdiction are applicable to the Stanford Warrants or the
      transactions contemplated thereby. We note that the Stanford Warrants have
      designated the laws of the State of Texas as the laws governing the Stanford
      Warrants. Our opinion is premised upon the result that would be obtained if
      a
      California court were to apply the internal laws of the State of California
      to
      the interpretation and enforcement of the Stanford Warrants (notwithstanding
      the
      designation therein of the laws of the State of Texas).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      opinion letter is rendered as of the date first written above, and we disclaim
      any obligation to advise you of facts, circumstances, events or developments
      which hereafter may be brought to our attention and which may alter, affect
      or
      modify the opinion expressed herein. Our opinion is expressly limited to the
      matters set forth above, and we render no opinion, whether by implication or
      otherwise, as to any other matters relating to Parent, Merger Sub, the Shares,
      the Warrants, the Merger, the Merger Agreement, or the Registration Statement.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="50%">&#160;</td>
            <td align="left" valign="top" width="50%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Respectfully
                submitted,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%">&#160;</td>
            <td align="left" valign="top" width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
              Sheppard, Mullin, Richter &amp; Hampton
              LLP</font></td>
          </tr>

      </table>
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<DOCUMENT>
<TYPE>EX-8.1
<SEQUENCE>9
<FILENAME>v065446_ex8-1.htm
<TEXT>
<html>
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    <title>
      Unassociated Document
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBIT
      8.1</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
      26, 2007</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">DGSE
                Companies, Inc.</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2817
                Forest Lane</font></div>
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                Texas 75234</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ladies
      and Gentlemen:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      have
      acted as counsel to DGSE Companies, Inc., a Nevada corporation ("DGSE"), in
      connection with the preparation of the Registration Statement on Form S-4 (the
      &#8220;Registration Statement&#8221;), including the Proxy Statement/Prospectus forming part
      thereof, relating to the proposed Merger, as defined and described in the
      Amended and Restated Agreement and Plan of Merger, dated as of January 6, 2007,
      among DGSE, DGSE Merger Corp., a Delaware corporation and a wholly-owned
      subsidiary of DGSE, Superior Galleries, Inc., a Delaware corporation
      ("Superior"), and Stanford International Bank Ltd., as stockholder agent (the
      "Agreement"). This opinion is being furnished in accordance with the
      requirements of Item 21 of Form S-4 and Item 601(b)(8) of Regulation S-K under
      the Securities Act of 1933, as amended (the "Act").</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Our
      opinion is based upon an examination of the Registration Statement (including
      the joint Proxy Statement/Prospectus forming a part thereof) and such other
      documents as we have deemed necessary or appropriate as a basis therefore.
      In
      our examination, we have assumed the legal capacity of all natural persons,
      the
      genuineness of all signatures, the authenticity of all documents submitted
      to us
      as originals, the conformity to original documents of all documents submitted
      to
      us as certified, conformed, or photostatic copies, and the authenticity of
      the
      originals of such copies. Our opinion is further based on the assumption that
      the Merger will be consummated in compliance with the material terms of the
      Agreement, and that none of the material terms and conditions set forth therein
      have been or will be waived or modified. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      hereby
      confirm that, subject to the assumptions and qualifications set forth herein
      and
      therein, the discussion set forth in the section of the Registration Statement
      entitled "Material United States Federal Income Tax Considerations" constitutes
      our opinion as to the U.S. federal income tax consequences of those matters
      set
      forth therein as to which we are described as rendering an opinion. The
      foregoing opinion is based upon the Internal Revenue Code of 1986, as amended,
      Treasury Regulations (including Temporary and Proposed Regulations) promulgated
      thereunder, rulings, official pronouncements and judicial decisions, all as
      in
      effect today and all of which are subject to change, possibly with retroactive
      effect, or different interpretations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">DGSE
        Companies, Inc.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
        26, 2007</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
        2&#160;</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
      than as expressly stated above, we express no opinion regarding the tax
      treatment of the Merger under the laws of any State or local government within
      the United States or under the laws of any foreign country. Additionally, we
      express no opinion regarding any other tax consequences of the Merger, including
      without limitation the tax consequences of other transactions effectuated prior
      to, concurrently with, or after the Merger (including any conversion of Superior
      preferred stock to Superior common stock or the exchange of Superior debt into
      Superior common stock), or on any issue relating to DGSE or Superior or, in
      each
      case, to any investment therein or under any other law. This opinion is being
      provided to you solely in connection with the filing of the Registration
      Statement with the Securities and Exchange Commission (the "SEC") and this
      opinion is not to be used, circulated, quoted or otherwise referred to for
      any
      other purpose without our written permission. This opinion is expressed as
      of
      the date hereof, and we disclaim any undertaking to advise you of any subsequent
      changes in the matters stated, represented, or assumed herein or any subsequent
      changes in applicable law, regulations or interpretations thereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      hereby
      consent to the filing of this opinion with the SEC as an exhibit to the
      Registration Statement and to the use of our name under the heading entitled
      "Material United States Federal Income Tax Considerations" and "Legal Matters."
      In giving such consent, we do not thereby admit that we are in the category
      of
      persons whose consent is required under Section 7 of the Act or the rules or
      regulations of the SEC promulgated thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" colspan="2" valign="top" width="40%">&#160;</td>
            <td align="left" valign="top" width="40%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Very
                truly yours,</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font size="2">/s/
                Sheppard, Mullin, Richter &amp; Hampton
                LLP</font></div>
            </td>
          </tr>

      </table>
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<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>10
<FILENAME>v065446_ex10-6.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vintage-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
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  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBIT
      10.6</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><br>&#160;</div>
    <div align="center">
      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td width="33%"><strong><font size="2">State of South
              Carolina</font></strong>&#160;</td>
            <td width="33%">&#160;</td>
            <td width="33%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="33%">&#160;</td>
            <td width="33%">&#160;</td>
            <td width="33%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="33%"><strong><font size="2">County of
              Charleston</font></strong>&#160;</td>
            <td width="33%">&#160;</td>
            <td width="33%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">Lease
                Agreement</font></strong></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>THIS
      LEASE, </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">made
      and
      entered into this the 17</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      day of
      January, 2005 by and between </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>BELLE-HALL
      DEVELOPMENT PHASE III LIMITED PARTNERSHIP, </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
      South
      Carolina Limited Partnership (hereinafter called &#8220;Landlord&#8221;) and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DGSE
      COMPANIES, INC.,</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      a Nevada
      corporation (hereinafter called &#8220;Tennant&#8221;); </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>WITNESSETH</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>:</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">That
      for
      and in consideration of the mutual agreement of the parties, including the
      rental agreed to be paid by Tenant to Landlord, Landlord leases and demises
      to
      Tenant, and Tenant leases, demises and rents from Landlord the following
      described Premises on the terms and conditions set out in this Lease and in
      the
      schedule annexed hereto and entitled Fundamental Lease Provisions,
      to-wit:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>1.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Description
          of Leasehold Premises.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Premises this day leased, demised and rented (hereinafter called the &#8220;Premises&#8221;)
      are identified in the schedule annexed hereto entitled Fundamental Lease
      Provisions and are cross-hatched and labeled on the sketch of the Shopping
      Center (the &#8220;Shopping Center&#8221;) which is attached hereto and incorporated herein
      as Exhibit &#8220;A&#8221;. The square feet of Gross Leasable Area within the Premises is
      set forth on the schedule annexed hereto entitled Fundamental Lease
      Provisions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Use.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      shall use the Premises solely for the purposes described as &#8220;Permitted Uses&#8221; in
      the schedule annexed hereto entitled Fundamental Lease Provisions, and for
      no
      other use or purpose.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>3.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Common
      Areas.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      and its employees, agents, invitees and licensees are also granted the right,
      in
      common with others, to the non-exclusive use of such of the areas as are from
      time to time designated by Landlord as &#8220;Common Areas&#8221; within the Shopping
      Center, subject to the exclusive control and management thereof at all times
      by
      Landlord and the exclusive rights of certain tenants and/or other occupants
      of
      the Shopping Center in and to portions of such areas. The Common Areas shall
      include the facilities in the Shopping Center which are designated for the
      general use, in common, of the occupants of the Shopping Center, and to the
      extent the same are provided, the parking areas, sidewalks, roadways, loading
      platforms, restrooms, ramps, maintenance and mechanical areas, management
      offices, promotion offices, and landscaped areas. Landlord will operate and
      maintain or will cause to be operated and maintained the Common Areas in a
      manner deemed by Landlord to be reasonable and appropriate and in the best
      interests of the Shipping Center. Landlord will have the right (i) establish,
      modify and enforce reasonable rules and regulations with respect to the Common
      Areas; (ii) enter into, modify and terminate easements and other agreements
      pertaining to the use and maintenance of the Common Areas and any portions
      thereof; (iii) close any or all portions of the Common Areas to such extent
      as
      may, in the opinion of Landlord, be necessary to prevent a dedication thereof
      or
      the accrual of any rights by an person or by the public therein; (iv) close
      temporarily and or all portions of the Common Areas; (v) change the number
      and
      location of buildings, building dimensions, number of floors in any of the
      buildings, store dimensions, driveways, Common Areas, the identity and type
      of
      other stores and tenants, provided only that the size of the Premises (as herein
      defined), reasonable access to the Premises and the parking facilities to be
      provided shall not be materially impaired, and (vi) do and perform such other
      acts in and to the Common Areas and improvements therein as, in the exercise
      of
      good business judgment, Landlord shall determine to be advisable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>4.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Tenant&#8217;s
      Acceptance of Property.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Neither
      the Landlord nor its agents have made any representations with respect to the
      Premises, the building or the land upon which it is erected, except as expressly
      set forth herein or as may be agreed to, in writing, by both parties, and no
      rights, easements, or licenses are acquired by the Tenant by implication or
      otherwise except as expressly set forth in the provisions of this Lease. The
      taking of possession of the Premises by Tenant shall be conclusive evidence
      that
      the Tenant accepts the same &#8220;as is&#8221;, that all obligations imposed upon Landlord
      under this Lease have been fully performed and that the Premises were in good
      condition at the time possession was taken, except such items as may be agreed
      upon in writing, by both parties prior to entry.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>5.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Landlord&#8217;s
          Work and Tenant&#8217;s Work.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord,
      at its cost, shall construct upon and provide to the Premises for use and
      occupancy by Tenant such items of work, material and fixtures as may be
      specifically identified as Landlord&#8217;s Work on Exhibit &#8220;B&#8221; which is attached
      hereto and incorporated herein by reference and Tenant, at its cost, shall
      provide such items of work, material and fixtures as may be identified as
      Tenant&#8217;s Work on said &#8220;Exhibit B&#8221;. All Tenant&#8217;s work will be done in a
      workmanlike manner in accordance with the Tenant Construction Criteria Handbook
      provided by Landlord. Tenant acknowledges that it has been received from
      Landlord a copy of the Tenant Construction Criteria Handbook. Tenant&#8217;s
      contractor must be approved by the Landlord prior to the commencement of any
      construction.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>6.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Lease
      Term and Lease Year.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      term
      of this Lease shall be the period specified on the schedule annexed hereto
      entitled Fundamental Lease Provisions and shall begin on the Beginning Date.
      The
      Beginning Date shall be the date shown on the schedule annexed hereto entitled
      Fundamental Lease Provisions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      term,
&#8220;Lease Year,&#8221; as used herein shall be a calendar year and each Lease Year shall
      begin on January 1. The first full Lease Year of the term of this Lease shall
      begin on the first day of January next following the Beginning Date (unless
      the
      Beginning Date should occur on January 1) and each succeeding Lease Year shall
      begin on the first day of each succeeding January during the term of this Lease.
      Any portion of the term of this Lease which is prior to January 1 of the first
      Lease Year or after December 31 of the final full Lease Year shall be deemed
      a
&#8220;partial Lease Year&#8221;.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      the
      Premises are vacant prior to the Beginning Date, Tenant shall have the right
      with the prior written consent of Landlord, at its own risk, to enter upon
      the
      Premises for the purpose of taking measurements therein and for any other
      reasonable purpose permitted by Landlord; provided, however, that such entry
      shall not interfere with any work being done by or on behalf of Landlord, and
      Tenant shall indemnify Landlord against any loss or liability arising
      therefrom.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      agrees to occupy the Premises and commence the operation of business therein
      promptly upon commencement of the Lease Term.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>7.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Rental;
          When Paid.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Throughout
      the term of this Lease, Tenant shall pay to Landlord in equal monthly
      installments the Fixed Minimum Rent which is shown on the schedule annexed
      hereto entitled Fundamental Lease Provisions, without notice, demand, set-off
      or
      deduction.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Fixed
      Minimum Rent and the sums designated as additional rental shall be paid in
      equal
      monthly installments as shown on the schedule attached and entitled Fundamental
      Lease Provisions or as adjusted as herein provided in advance on or before
      the
      first day of the month for which said amounts are due (or in any lump sum if
      so
      provided under this Lease); however, if the term of this Lease shall commence
      and/or end on a day other than the first day of the calendar month, the rental
      for the portions of a month at the beginning and end of the Lease Term shall
      be
      prorated and paid in advance. All amounts due but unpaid after the fifth
      (5</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>th)
      </sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">day
      of
      each month shall be subject to a late fee of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>ONE
      HUNDRED</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      DOLLARS
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>100.00</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      per
      month.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Failure
      of Landlord to furnish to Tenant a statement for amounts owed by Tenant within
      time as herein set forth shall not affect Tenant&#8217;s obligation to pay when such
      amounts are billed.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition to the fixed minimum rent, throughout the term of this Lease, Tenant
      shall pay to Landlord in equal monthly installments as additional rent the
      following sums without notice, demand, set-off or deduction:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Percentage
                Rent.</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                -
                Not Applicable</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Common
                Area Maintenance Charge.</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">An
      amount
      equal to Tenant&#8217;s proportionate share of the Common Area Expenses as hereinafter
      defined. The Common Area Maintenance Charge for the first Lease Year or for
      any
      partial Lease Year which precedes the first Lease Year shall be an estimated
      amount which is specified as Common Area Maintenance Charge on the schedule
      annexed hereto entitled Fundamental Lease Provisions. The Common Area
      Maintenance Charge for each succeeding Lease Year or partial Lease Year shall
      be
      reasonably estimated by Landlord at the beginning of each such year and the
      amount payable in such Lease Year or partial Lease Year shall be determined
      by
      multiplying such estimated Common Area Expenses by a fraction, the numerator
      of
      which shall be the number of square feet of Gross Leasable Area of the Premises
      and the denominator of which shall be the total leasable space in the Shopping
      Center. This Article 7b is further subject to the provisions set forth in
      Addendum A attached hereto and incorporated herein by reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      the
      actual Common Area Expenses in any Lease Year or partial Lease Year exceed
      the
      estimates for the applicable year, Tenant shall within thirty (30) days after
      receipt of a statement from Landlord certifying the actual Common Area Expenses
      for the certified year and Tenant&#8217;s proportionate share thereof pay to Landlord
      a lump sum in an amount which will effect the necessary adjustment. Landlord
      shall determine such amount within a reasonable period of time after the end
      of
      any Lease Year or partial Lease Year.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      the
      Common Area Maintenance Charge paid by Tenant in any Lease Year or partial
      Lease
      Year exceeds Tenant&#8217;s share of the Common Area Expenses for that period,
      Landlord shall credit any excess payments made by Tenant against future
      installments of Common Area Maintenance Charges payable by Tenant hereunder
      or,
      during the last Lease Year, Landlord will refund such excess to Tenant within
      a
      reasonable period of time following the expiration of the Lease Term, provided
      Tenant is not then in default of any of its obligations under this
      Lease.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      term
&#8220;Common Area Expenses&#8221; shall mean and include the total cost and expense paid or
      incurred in operating, managing and maintaining the Common Areas (including
      appropriate reserves), including, but not limited to, landscaping, parking
      lot
      repair, security, painting, lighting, insurance, removal of snow, trash, pest
      control, refuse, lights, payment for utilities, water, electricity and gas,
      Common Area maintenance and security personnel payroll, operation of maintenance
      equipment and supplies; services, if any, furnished by Landlord for the
      nonexclusive use of all tenants; as well as administrative costs equal to
      fifteen percent (15%) of the total cost of operating and maintaining the Common
      Area.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Taxes.</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">An
      amount
      equal to Tenant&#8217;s proportionate share of the Taxes. The Taxes for the first
      Lease Year or for any partial Lease Year which precedes the first Lease Year
      shall be an estimated amount which is specified as Taxes on the schedule annexed
      hereto entitled Fundamental Lease Provisions. The Taxes for each succeeding
      Lease Year or partial Lease Year shall be reasonably estimated by Landlord
      at
      the beginning of each such year and the amount payable in such Lease Year or
      partial Lease Year shall be determined by multiplying such estimated Taxes
      by a
      fraction, the numerator of which shall be the number of square feet of Gross
      Leasable Area in the Premises and the denominator of which shall be the total
      leasable area in the Shopping Center. This Article 7c is further subject to
      those provisions set forth in Addendum A attached hereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      the
      actual Taxes in any Lease Year or partial Lease Year exceed the estimates for
      the applicable year, Tenant shall within thirty (30) days after receipt of
      a
      statement from Landlord certifying the actual Taxes for the certified year
      and
      Tenant&#8217;s proportionate share thereof pay to Landlord a lump sum in an amount
      which will effect the necessary adjustment. Landlord shall determine such amount
      within a reasonable period of time of receipt of all the bills for Taxes for
      each Lease Year or partial Lease Year. If the Taxes paid by Tenant in any Lease
      Year or partial Lease Year exceed Tenant&#8217;s share of Taxes for that period,
      Landlord shall credit any excess payments made by Tenant against future
      installments of Taxes payable by Tenant hereunder or, during the last Lease
      Year, Landlord will refund such excess to Tenant within a reasonable period
      of
      time following the expiration of the term of this Lease, provided Tenant is
      not
      then in default of any of its obligations under this Lease.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      term
&#8220;Taxes&#8221; shall mean all governmental imposes, levies, fees, taxes, assessments or
      charges of every kind and nature whatsoever which are levied, assessed or
      imposed against the Shopping Center or any portion thereof or by reason of
      its
      ownership and operation of the Shopping Center and its receipt of rent therefrom
      including, without limitation, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>ad
      valorem</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      taxes,
      real estate taxes, any other tax on rents or real estate, water or sewer and
      all
      other governmental exactions from time to time directly or indirectly assessed
      or imposed upon the Shopping Center including any interest on the same that
      may
      be incurred and/or the portion of the land upon which it is situated, including
      all costs and fees paid or incurred by Landlord in contesting, or in negotiating
      with the public authorities as to the amount of such assessments, charges or
      taxes or the basis upon which the same shall be assessed.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      the entire term of this Lease, Tenant shall pay promptly when due all taxes
      imposed upon Tenant&#8217;s business and upon all personal property and improvements
      of Tenant used in connection therewith.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Insurance.</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">An
      amount
      equal to Tenant&#8217;s proportionate share of Insurance. The insurance costs for the
      first Lease Year or for any partial Lease Year which precedes the first Lease
      Year shall be an estimated amount which is specified as Insurance on the
      schedule annexed hereto entitled Fundamental Lease Provisions. The insurance
      cost for each succeeding Lease Year or partial Lease Year shall be reasonably
      estimated by Landlord at the beginning of each such year and the amount payable
      in such Lease Year or partial Lease Year shall be determined by multiplying
      such
      estimated costs by a fraction, the numerator of which shall be the number of
      square feet of Gross Leasable Area in the Premises and the denominator of which
      shall be the total leasable area in the Shopping Center. This article 7d is
      further subject to those provisions set forth in Addendum A attached
      hereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      the
      actual insurance costs in any Lease Year or partial Lease Year exceed the
      estimates for the applicable year, Tenant shall within thirty (30) days after
      receipt of a statement from Landlord certifying the actual insurance costs
      for
      the certified year and Tenant&#8217;s proportionate share of such insurance costs pay
      to Landlord a lump sum in an amount which will effect the necessary adjustment.
      Landlord shall determine such amount within a reasonable period of time after
      the end of each Lease Year or partial Lease Year. If the insurance cost paid
      by
      Tenant in any Lease Year or partial Lease Year exceed Tenant&#8217;s share of
      insurance costs for that period, Landlord shall credit any excess payments
      made
      by Tenant against future installments of insurance costs payable by Tenant
      hereunder or during the last Lease Year, Landlord will refund such excess to
      Tenant within a reasonable period of time following the expiration of the term
      of this Lease, provided Tenant is not then in default of any of its obligations
      under this Lease.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      term
&#8220;insurance costs&#8221; shall mean and include the cost to Landlord of insurance
      obtained by Landlord in connection with the Shopping Center, including, without
      limitation, any liability insurance or extended coverage; personal injury;
      death
      and property damage; fire; theft or other casualty insurance; Workmen&#8217;s
      Compensation Insurance; fidelity bonds for personnel and insurance against
      liability for defamation and false arrest occurring in or about the Common
      Area.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      further agrees to pay on demand from Landlord the full amount of any increase
      in
      premiums on insurance carried by Landlord to the extent that such increase
      is
      connected to Tenant&#8217;s use of the Premises and/or the Shopping
      Center.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">e.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Trash.</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      even Landlord provides trash collection service, an amount equal to Tenant&#8217;s
      proportionate share of the cost of trash collection. The trash cost for the
      first Lease Year or for any partial Lease Year which precedes the first Lease
      Year shall be an estimated amount which is specified as Trash on the schedule
      annexed hereto and entitled Fundamental Lease Provisions. Tenant&#8217;s share of
      trash costs for each succeeding Lease Year or partial Lease Year shall be
      estimated by Landlord at the beginning of each such Lease Year and subsequently
      adjusted in the manner provided in subparagraph (b) of this Paragraph 7 with
      respect to Common Area Maintenance Charge.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">f.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Utilities
                and Services.</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">From
      and
      after the delivery of the Premises to Tenant by Landlord, Tenant shall pay
      for
      all electricity, gas, heating, lighting, ventilating, air conditioning, water,
      sewer, garbage disposal, custodial services and other utilities and services
      supplied to the Premises. If any such utilities or charges are not separately
      metered or assessed or are only partially separately metered or assessed and
      are
      used in common with other tenants in the Shopping Center, Tenant will pay to
      Landlord its proportionate share of such utility charges.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord
      may install reregistering meters and collect any and all utility charges as
      aforesaid from Tenant, making returns to the proper public utility company
      or
      governmental unit, provided that Tenant shall not be charged more than the
      rates
      it would be charged for the same services if furnished direct to the Premises
      by
      such companies or governmental units. At the option of Landlord, any utility
      or
      related service which Landlord may at any time elect to provide to the Premises
      my be furnished by Landlord or any agent employed, or independent contractor
      selected, by Landlord, and Tenant shall accept the same therefrom to the
      exclusion of all other suppliers so long as the rates charged by the Landlord
      or
      by the supplier of such utility or related service are competitive.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">4</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">g.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Additional
                Rent.</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event Tenant shall fail to comply with its covenants (which covenants are
      specifically set forth under Paragraph 12 of this Lease); (1) to use and occupy
      the Premises continuously and uninterruptedly throughout the term of this Lease,
      (2) to be open for business during at lease the minimum hours set forth in
      Paragraph 12 hereof, and (3) to refrain from conducting any auction, fire,
      bankruptcy, selling out or going out of business sale on or about the Premises,
      then in any of such events, in addition to any remedy Landlord may otherwise
      have pursuant to this Lease, at law or in equity, Tenant shall pay to Landlord
      as liquidated damages the sum of $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>100.00</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      per day
      as additional rent hereunder for Tenant&#8217;s breach of such covenants for so long
      as Tenant is in breach of such covenants. Landlord and Tenant agree that actual
      damages to Landlord in the event Tenant does not comply with these covenants
      would be difficult, if not impossible, to ascertain. Landlord&#8217;s right to receive
      such additional rent as liquidated damages for Tenant&#8217;s breach shall be in
      addition to its other rights and remedies set forth in this Lease, and the
      receipt of additional rent by Landlord hereunder shall not constitute a waiver
      by Landlord of its other right to exercise the rights and remedies set forth
      in
      this Lease. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      fixed
      minimum rent, together with the sums payable pursuant to subparagraphs 7a
      through 7g above shall constitute the &#8220;contract rent&#8221;, as such term is used in
      N.C.G.S. &#167; 42-34(b).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>8.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Address.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      rentals to be paid under the provisions of Paragraph 7 herein, all other sums
      to
      be paid by Tenant to Landlord and all written communications by Tenant to
      Landlord shall be delivered to Landlord at 3800 Arco Corporate Drive, Suite
      200,
      Charlotte, North Carolina 28273, or to such address as is shown on the schedule
      annexed hereto entitled Fundamental Lease Provisions or to such other person,
      firm or corporation and/or at such other place shall be designated by Landlord
      by written notice to Tenant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      written communications by Landlord to Tenant shall be delivered to the Premises
      unless a different address has been specified in the schedule annexed hereto
      entitled Fundamental Lease Provisions in which case such written communications
      shall be delivered to the address specified.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      notices required under this Lease shall be in writing, signed by the party
      giving such notice and transmitted by certified mail, postage prepaid, and
      shall
      be deemed given when deposited in the United States Mail addressed to the Tenant
      or Landlord as set forth above.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>9.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Repairs.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord
      shall be responsible for repairs upon the roof and exterior walls of the
      Premises. Such repairs to be completed within a reasonable period following
      receipt of written notice from Tenant of the need for any such repairs. Tenant
      shall be responsible for the maintenance, repair and replacement of any glass
      and doorways, and any roofing and exterior walls if the necessity therefore
      should be the result of Tenant&#8217;s negligence or intentional act(s) or the
      negligence or intentional act(s) of any agent, employee, customer, invitee
      or
      licensee of Tenant, as well as for the maintenance, repair and replacement
      of
      any other portions of the Premises not otherwise expressly required to be
      maintained by Landlord pursuant to the terms hereof. Tenant shall keep the
      interior of the Premises in good repair, maintaining and replacing, when
      necessary, all electrical, plumbing, heating, air conditioning and other
      mechanical installations and shall maintain and repair all doors (exterior
      and
      interior) and all plate glass and window glass, effecting all such repairs
      and
      replacements at its own expense and employing materials and labor of a kind
      and
      quality equal to the original installations. If Tenant fails to replace or
      repair equipment or other installations in or about the Premises as above
      provided, then immediately after advising Tenant in writing as to the necessity
      therefore, Landlord may accomplish the required work and add the cost thereof
      to
      the next due rental installment(s) but Tenant shall not be liable to the
      Landlord for any failure to fulfill obligations of this paragraph until such
      time as the Tenant shall be notified in writing of such failure.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      agrees to keep in force during the term of this Lease a standard maintenance
      agreement on all heating and air conditioning equipment and to provide a copy
      of
      such maintenance agreement to Landlord. The agreement shall require a semiannual
      inspection of equipment and Tenant will furnish Landlord with semiannual
      certifications by the inspection company that such equipment is in good repair.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      repairs or replacement required to be made to such equipment shall be done
      or
      made only by such persons or corporations as have been approved in advance
      by
      Landlord.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>10.
      Alterations.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      shall effect no structural or exterior alteration to the Premises without the
      prior written consent of </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord
      and any alteration or improvement made within the Premises which results in
      any
      damage to the floor, ceiling or walls of the Premises shall be immediately
      repaired by Tenant and in any event at the termination of the Lease. Except
      as
      otherwise provided, all alterations, improvements and additions to the Premises
      shall remain thereon at the termination of the Lease and shall become the
      property of Landlord unless Landlord shall notify Tenant to remove same, in
      which latter event Tenant shall comply to the end that the Premises shall be
      restored to the same condition in which they were found prior to the
      commencement of work resulting in the alterations, improvements and
      additions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>11.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Furniture
          and Fixtures</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      may install furniture and fixtures within the Premises at Tenant&#8217;s sole expense
      and, subject to Paragraph 26 hereof, the same shall remain Tenant&#8217;s property if
      Tenant removes such furniture and fixtures prior to the expiration of the Lease.
      If the removal or installation of such furniture and fixtures results in any
      damage to the Premises, Tenant shall repair same to the end that the Premises
      shall be restores to the condition in which they were found immediately prior
      to
      the installation, normal wear and tear expected.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>12.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Covenants.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      covenants with and for the benefit of Landlord:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                comply with all requirements of any State or Federal statute or local
                ordinance or regulation applicable to Tenant or its use of the Premises
                and to save Landlord harmless from penalties, fines, costs, expenses
                or
                damages resulting from failure to do so;
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                give Landlord prompt written notice of any accident, fire or damage
                occurring on or to the Premises and the Common
                Area;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                load and unload goods only at such times, in such areas and through
                such
                entrances as may be designated for such purposes by Landlord and
                to
                prohibit all trucks and trailers which have entered onto the Shopping
                Center property on account of Tenant&#8217;s conduct of business from remaining
                overnight in any portion of the Shopping
                Center;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                make such arrangement as Landlord may reasonably require from time
                to time
                for the storage and disposal of all garbage and
                refuse;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">e.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                keep the Premises sufficiently heated to prevent freezing of water
                in
                pipes and fixtures;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">f.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                keep the outside areas immediately adjoining the Premises clean and
                free
                from ice and snow, and not to burn, place or permit any rubbish,
                obstructions or merchandise in such
                areas;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">g.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                keep the Premises clean, orderly, sanitary and fee form objectionable
                odors and from insects, vermin and other
                pests;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">h.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                park Tenant&#8217;s vehicles and to require Tenant&#8217;s directors, officers,
                employees, agents, contractors, sub-tenants, licensees and concessionaires
                to park their vehicles only in those portions of the parking area
                or at
                such other as are designated for that purpose by Landlord. Tenant
                agrees
                to pay to Landlord a daily rate to be established by Landlord (not
                to
                exceed $10.00 per vehicle per day) for any such vehicle parked in
                any part
                of the Shopping Center other than the designated area and from time
                to
                time upon written notice from Landlord, to promptly furnish Landlord
                with
                the State automobile license numbers assigned to the hereinabove
                designated vehicles;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">i.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                keep its display windows, including window and shadow boxes in the
                Premises, dressed and illuminated and its exterior and interior signs
                and
                lights continuously well lighted every day of the Lease Term from
                10:00a.m. to 10:00p.m. or as Landlord may reasonably
                require;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">j.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                use and occupy the Premises continuously and uninterruptedly from
                and
                after its initial opening for business (which shall occur not later
                than
                the Beginning Date, subject to delays in opening for business caused
                by
                force majeure matters) and throughout the term of this Lease and
                to be
                open for business during such reasonable business hours as Landlord
                may
                prescribe from time to time, but at least from 10:00a.m. to 6:00p.m.
                five
                days per week (Monday through Friday) and 10:00a.m. to 5:00p.m. on
                Saturday, except when prevented from so doing by casualty, strike,
                Act of
                God or other causes beyond Tenant&#8217;s control, subject to the agreement that
                Tenant shall be required to remain open only on such days and during
                such
                hours as the majority of the remaining tenants in the Shopping Center
                are
                open;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">k.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                conduct its business in the Premises under Tenant&#8217;s Trade Name and in all
                respects in a diligent and dignified manner, to refrain from using
                any
                sales promotion device or practice that would tend to mislead or
                deceive
                the public or, directly or indirectly detract from or impair the
                reputation or dignity of the Shopping Center, to refrain from installing
                or permitting the installation of video or other electronic games
                and keep
                the Premises in first class condition in accordance with the highest
                standards of operation of similar businesses, maintaining at all
                times
                during the term of this Lease a full staff of well trained and high
                grade
                personnel and a full and complete stock of seasonable merchandise
                so as to
                attain the highest possible sales
                volume;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
    </div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">l.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                comply with any reasonable rules and regulations of Landlord in connection
                with the Premises, the building of which the Premises are a part
                or the
                Shopping Center, which are in effect at the time of the execution
                of this
                Lease as set forth in this Lease or which may be from time to time
                promulgated by Landlord in its sold discretion (collectively, the
&#8220;Rules
                and Regulations&#8221;);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">m.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                install such fire extinguishers and other safety equipment as Landlord
                may
                require and to comply with the recommendations of Landlord&#8217;s insurance
                carriers and their rate making
                bodies;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">n.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                pay promptly to Landlord all minimum and additional rentals and all
                other
                charges due to Landlord pursuant to the terms of this Lease before
                the
                same shall become delinquent;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">o.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                paint and keep the Premises, including the store front, in good condition
                and repair and to deliver the Premises to Landlord at the end of
                the term
                of this Lease in as good condition as they were when received by
                Tenant,
                excepting only normal wear and tear and repairs required to be made
                by
                Landlord;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">p.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                operate a business in the Premises only for the Permitted Uses shown
                on
                the schedule annexed hereto entitled Fundamental Lease
                Provisions;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">q.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                contract for termite and pest extermination services for the Premises
                which shall be rendered no less frequently than semi-annually and
                to
                deliver to Landlord a certificate evidencing such
                services;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">r.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                participate in any reasonable window cleaning program that may be
                established by Landlord for stores in the Shopping
                Center;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">s.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                spend at lease two percent (2%) of its annual Gross Receipts in
                advertising, either by newspaper, radio, television or other media
                approved by Landlord;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">t.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant&#8217;s
                heating or air conditioning facilities shall be operated during all
                hours
                that Tenant is open for business, including but not limited to the
                minimum
                hours referred to above, and at such times as Tenant is using the
                Premises
                for inventory or other non-business purposes; and
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 54pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">u.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                refrain from doing each and every one of the
                following:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>1.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Using
                the Premises in any manner which, in Landlord&#8217;s opinion, is or may be
                harmful to the buildings or disturbing to other tenants in the Shopping
                Center;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Installing
                or permitting the installation of video or other electronic
                games;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>3.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pasting
                or otherwise affixing and merchandise or any advertising material
                closer
                than twelve inches (12&#8221;) to the interior side of any such display window
                or door;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>4.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Placing
                any machines, equipment or materials of any kind outside of the confines
                of the Premises;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>5.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Permitting,
                allowing or causing to be used in or about the Premises or other
                portions
                of the Shopping Center any phonographs, radios, public address systems,
                sound production or reproduction devices, mechanical or moving display
                devices, motion picture or television devices, excessively bright
                lights,
                changing, flashing, flickering or moving lights or lighting devices
                or any
                similar advertising media or devices, the effect of which shall be
                visible
                or audible from the exterior of the
                Premises;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>6.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Causing
                or permitting any noxious, disturbing or offensive odors, fumes or
                gases,
                or any smoke, dust, steam or vapors, or any loud or disturbing noise
                or
                vibrations to originate in or be emitted from the
                Premises;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>7.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Permitting
                any act to be performed or any practice to be adopted or followed
                in or
                about the Premises which, in Landlord&#8217;s opinion, may detract from or
                impair the reputation of the Shopping
                Center;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>8.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Causing
                or suffering to be done, any act, matter or thing objectionable to
                insurance companies whereby any property insurance or any other insurance
                now in force or hereafter to be placed on the Shopping Center or
                on any
                part thereof may become void or be suspended, or whereby the insurance
                premiums payable by Landlord, or by any tenant of Landlord, may be
                increased;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>9.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Conducting
                any auction, fire, bankruptcy, selling out or going out of business
                sale
                on or about the Premises;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>10.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attaching
                any awning, antenna or other projection to the roof or the outside
                walls
                of the Premises or the building of which the Premises are a
                part;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>11.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Committing
                or suffering to be committed by any person any waste upon the Premises
                or
                any nuisance or other act or thing which may disturb the quiet enjoyment
                of any other tenant in the Shopping Center, or which may disturb
                the quiet
                enjoyment of any person within five hundred feet of the boundaries
                of the
                Shopping Center;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>12.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Soliciting
                business for itself, or permitting its licensees, concessionaires
                or
                subtenants to solicit business in the parking areas or other Common
                Areas
                or distributing handbills or other advertising matter in or on automobiles
                parked in a parking area or in other Common Areas; or
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>13.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vacating
                or abandoning the Premises or allowing the same to appear to be vacated
                or
                abandoned.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>13.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Hazardous
      Waste.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.
      In
      General. Tenant shall not use, generate, manufacture, produce, store, transport,
      treat, dispose of or permit the escape or release on, under, about or from
      the
      Premises, or any part thereof, of any Hazardous Materials. As used herein,
      &#8220;Hazardous Materials&#8221; means any chemical, compound, material, substance or other
      matter that: (a) is defined as a hazardous substance, hazardous material or
      waste, or toxic substance under any Hazardous Materials Law, (b) is regulated,
      controlled or governed by any Hazardous Materials Law or other applicable law,
      (c) is petroleum or a petroleum product, or (d) is asbestos, formaldehyde,
      a
      radioactive material, drug, bacteria, virus, or other injurious or potentially
      injurious material (by itself or in combination with other materials). As used
      herein, &#8220;Hazardous Materials Law&#8221; means any and all federal, state or local
      laws, ordinances, rules, decrees, orders, regulations or court decisions
      relating to hazardous substances, hazardous materials, hazardous waste, toxic
      substances, environmental conditions on, under or about the Premises, or soil
      and ground water conditions, including, but not limited to, the Comprehensive
      Environmental Response, Compensation and Liability Act of 1980, the Resource
      Conservation and Recovery Act, the Hazardous Materials Transportation Act,
      any
      other law or legal requirement concerning hazardous or toxic substances, and
      any
      amendments to the foregoing. If Tenant&#8217;s Permitted Use requires the use and/or
      storage of any Hazardous Materials on, under or about the Premises, Tenant
      shall
      provide written notice to Landlord, prior to final execution of this Lease,
      of
      the identity of such materials and Tenant&#8217;s proposed plan for the use, storage
      and disposal thereof; such use, storage and disposal shall be subject to
      Landlord&#8217;s approval, in Landlord&#8217;s sole and absolute discretion. If Landlord
      approves such proposed use, storage and disposal of specific Hazardous
      Materials, Tenant may use and store upon the Premises only such specifically
      approved materials and shall comply with any conditions to such approval as
      Landlord may impose in its sole and absolute discretion. Tenant shall fully
      and
      promptly comply with all Hazardous Materials Laws at all times during the Lease
      Term, and at the expiration or earlier termination of the Lease Term, Tenant
      shall remove and dispose of all Hazardous Materials affecting the Premises
      resulting from the use or occupancy thereof by Tenant or its agents, employees,
      suppliers, contractors, subtenants, successors and assigns. Notwithstanding
      the
      foregoing, Landlord consents to Tenant&#8217;s above-ground use, storage, transport
      and off-site disposal of products containing small quantities of Hazardous
      Materials (e.g. cleaning solutions and materials), provided Tenant shall handle,
      use, store, transport and dispose of such Hazardous Materials in a safe and
      lawful manner and in accordance with all applicable manufacturer&#8217;s
      recommendations and shall not allow such Hazardous Materials to contaminate
      the
      Premises.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.
      Indemnity. Tenant indemnify, protect, defend and hold Landlord (and its
      partners, joint venturers, shareholders, affiliates and property managers,
      and
      their respective officers, directors, employees and agents) and Landlord&#8217;s
      mortgagee(s) harmless from and against any claim, demand, investigation,
      proceeding, action, suit, judgment, award, fine, lien, loss, damage, expense,
      charge or cost of any kind or character and liability (including reasonable
      attorneys&#8217; fees and court costs arising out of, in connection with, or directly
      or indirectly arising out of the use, generation, manufacture, production,
      storage, treatment, release, disposal or transportation of Hazardous Materials
      by Tenant, or any successor, assignee or sublessee of Tenant, or their
      respective agents, contractors, employees, licensees, or invitees, on, under,
      about or from the Premises, including, but not limited to, all foreseeable
      and
      unforeseeable costs, expenses and liabilities related to any testing, repair,
      cleanup, removal costs, detoxification or decontamination and the preparation
      and implementation of any closure, remedial action, site assessment costs or
      other required plans in connection therewith deemed required, necessary or
      advisable by Landlord or any governmental authority, and any foreseeable or
      unforeseeable consequential damages. Any defense of Landlord pursuant to the
      foregoing indemnity shall be by counsel reasonably acceptable to Landlord.
      Neither the consent by Landlord to the use, generation, storage, release,
      disposal or transportation of Hazardous Materials nor Tenant&#8217;s strict compliance
      with all Hazardous Materials Laws shall excuse Tenant from Tenant&#8217;s
      indemnification obligations hereunder. The foregoing indemnity shall be in
      addition to and not a limitation of the other indemnification provisions of
      this
      Lease. Tenant&#8217;s obligations under this Paragraph 13 shall survive the
      termination or expiration of this Lease.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.
      Reporting. Tenant shall notify Landlord in writing immediately after any of
      the
      following (i) Tenant has knowledge, or has reasonable cause to believe, that
      any
      Hazardous Materials have been released, discharged or located on, under or
      about
      the Premises, whether or not the same is in quantities that would otherwise
      be
      reportable to a public agency, (ii) Tenant receives any warning, notice of
      inspection, notice of violation or alleged violation, or Tenant receives notice
      or knowledge of any proceeding, investigation, order or enforcement action,
      under any Hazardous Materials Law concerning the Premises, (iii) Tenant becomes
      aware of any claims made or threatened by any third party concerning the
      Premises respecting Hazardous Materials.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>14.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Tenant&#8217;s
      Signs and Advertising.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant,
      at its expense, shall furnish and install, prior to the opening of its business,
      and maintain at an appropriate location on the exterior of the Premises, an
      identification sign of such design, content, form and material as it may select
      for the purpose of designating its business. Such sign shall be approved by
      Landlord in writing prior to installation and shall comply with the Sign
      Criteria set out Exhibit &#8220;C&#8221; which is attached hereto and incorporated herein.
      In the event Tenant requests any change to its sign which requires Landlord&#8217;s
      review and approval of sign drawings, Tenant shall pay Landlord&#8217;s actual legal
      fees, if any, and an administrative fee of $500.00, for review and approval
      of
      such document.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      shall not install any temporary sign(s) upon or about the interior or exterior
      of the Premises at anytime prior to or after the opening of its business without
      the prior written consent of Landlord. Violation of this provision shall
      constitute a default under this Lease, and furthermore shall obligate Tenant
      to
      pay daily to Landlord as liquidated damages ONE HUNDRED DOLLARS ($100.00) for
      each day any temporary sign not prior approved in writing by Landlord remains
      installed in, upon or about the interior or exterior of the Premises. Landlord
      and Tenant agree that actual damages to Landlord in the event Tenant does not
      install a sign on the Premises would be difficult, if not impossible, to
      ascertain. Landlord&#8217;s right to receive such additional rent as liquidated
      damages for Tenant&#8217;s breach shall be in addition to its rights and remedies set
      forth in this Lease, and the receipt of additional rent by Landlord hereunder
      shall not constitute a waiver by Landlord of its right to exercise the rights
      and remedies set forth in this Lease.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      further agrees that its failure to have its exterior identification sign (and
      if
      applicable, its under-canopy sign), as required under this Lease and in
      accordance with the Sign Criteria (Exhibit &#8220;C&#8221;) of this Lease, installed prior
      to the opening of its business shall: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;"><font size="2">(i)</font>&#160;</td>
            <td><font size="2">constitute a default under this
              Lease;</font>&#160;</td>
          </tr>

      </table>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">prohibit
                Tenant from operating its business on the Premises until said sign(s)
                is
                installed, or in the event Tenant has opened its business then Tenant
                shall be required to close its business until said sign(s) is installed,
                which in any event shall not release Tenant from its covenant to
                pay rent
                or otherwise relieve Tenant from any monetary obligation under its
                Lease;
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">require
                Tenant to pay daily to Landlord as liquidated damages ONE HUNDRED
                DOLLARS
                ($100.00) for each day Tenant remains in violation of this provision,
                in
                addition to all other rent and any other monetary sums due and payable
                by
                Tenant to Landlord under this Lease. Landlord and Tenant agree that
                actual
                damages to Landlord in the event Tenant does not comply with these
                covenants would be difficult, if not impossible, to ascertain. Landlord&#8217;s
                right to receive such additional rent as liquidated damages for Tenant&#8217;s
                breach shall be in addition to its rights and remedies set forth
                in this
                Lease and the receipt of additional rent by Landlord hereunder shall
                not
                constitute a waiver by Landlord of its right to exercise the rights
                and
                remedies set forth in this Lease. Only with the prior written consent
                of
                Landlord shall Tenant be permitted to open its business on the Premises
                prior to the date Tenant has installed said identification
                sign.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      will advertise a minimum of six times each year in shopping center cooperative
      advertising newspaper sections, tabloids, or mail pieces in an amount of at
      lease twenty newspaper inched per individual advertising program. Such
      advertising may be applied toward the required two percent (2%) required under
      the provisions of Paragraph 12. Tenant agrees to refer to the name and address
      of the Shopping Center in designating the location of the Premises in all
      newspaper and other advertising, stationery, other printed material and all
      other references to location of the Premises; to include the address and
      identity of its business activity in the Premises in all of its advertising
      in
      which the address and identity of any other business activity of like character
      conducted by Tenant within the area serviced by the Shopping Center shall be
      mentioned and to use the Tenant&#8217;s Trade Name as set forth in this Lease in all
      such advertising.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">9</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>15.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Landlord&#8217;s
          Privileges.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition to the other rights and privileges of Landlord herein or by law
      granted, Landlord shall have the following rights and privileges:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.
      To go
      upon and inspect the Premises at any reasonable time and at Landlord&#8217;s option
      make repairs, alterations and additions thereto or to other portions of the
      Shopping Center, which right, in the event of an emergency, shall include the
      right of Landlord to forcibly enter said Premises without rendering Landlord
      or
      Landlord&#8217;s agents or employees liable therefore;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.
      To
      install, maintain, use and repair pipes, ducts, conduits, vents and wires
      leading in, through, over or under the Premises;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.
      To
      display &#8220;For Rent&#8221; signs within the Premises at prominent locations at any time
      within the last six (6) months of the term of this Lease;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d.
      To
      install, place upon or affix to the roof and exterior walls of the Premises
      such
      signs, displays, antennae and other objects or structures as Landlord shall
      deem
      necessary or appropriate for the promotion, operation, expansion, maintenance
      or
      repair of the Shopping Center; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">e.
      To
      make alterations on or additions to the building in which the Premises are
      located, to build additional stories thereon, and to build adjacent to or
      adjoining the Premises. Landlord reserves the right to construct and improve
      other buildings and add to any existing building or improvement in the Shopping
      Center, and to permit others to do so. Said alterations or additions may
      temporarily restrict or diminish the free flow of traffic in the Shopping Center
      or temporarily create noise or other annoyances which, absent this provision,
      could be construed to interfere with Tenant&#8217;s enjoyment of the Premises and to
      the enjoyment of an access to the Premises by Tenant&#8217;s subtenants, employees and
      invitees. The exercise by Landlord of any of its rights, whether herein
      enumerated or otherwise, shall never be deemed to be an eviction of Tenant
      (or
      of Tenant&#8217;s subtenant) nor a disturbance of the use and possession of said
      Premises by Tenant, Tenant&#8217;s subtenants, employees and customers.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>16.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Damages
      to Premises.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      the
      Premises or the Shopping Center are damaged or destroyed by fire, storm, Act
      of
      God, war, riot, unavoidable accident, public enemy or other casualty to an
      extent greater than twenty percent (20%) of the replacement cost thereof,
      Landlord reserves the right, at Landlord&#8217;s sole discretion, of either
      terminating this Lease or restoring the Premises (if and to the extent damaged)
      to the condition in which they were prior to such damage or destruction (not
      to
      include any replacement or other installation of trade fixtures, equipment
      or
      other property of Tenant ). If Landlord should elect to reconstruct the
      Premises, Tenant is to be advised in writing by Landlord within a period of
      forty five (45) days after said damage or destruction that Landlord will as
      soon
      as practicable repair and restore the Premises to the condition above set forth.
      During the time required for repairing and restoring the Premises as aforesaid,
      to the extent that the same are rendered untenantable the fixed minimum rent
      shall abate on a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>per
      diem</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      basis in
      proportion to that portion of the Premises rendered untenantable and the Base
      Receipts amount used in computing percentage rent shall be reduced in like
      manner. If the Premises, or any part thereof, should be damaged by fire, storm,
      war, riot, Act of Gold, unavoidable accident, public enemy or other casualty
      to
      an extent that is less than twenty percent (20%) of the replacement cost,
      Landlord shall, to the extent that the same is covered by insurance repair
      such
      damage and the rent shall not be abated. If by reason of any such event, the
      Premises shall be rendered untenantable in part, Landlord shall speedily and
      as
      soon as practicable after such destruction repair and restore the Premises
      to
      the condition in which they were prior to such damage or destruction (not to
      include any replacement or other installation of trade fixtures, equipment
      or
      other property of Tenant).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the above, if the Premises are damaged or destroyed by a casualty not covered
      by
      Landlord&#8217;s insurance, or if such damage to the Premises is suffered during the
      last two year of the then current term of this Lease and the damage is
      sufficiently extensive to result in the entire suspension of Tenant&#8217;s business,
      however temporary, or if the proceeds of any insurance are not made available
      to
      Landlord by its lender, then Landlord at its option may elect not to repair
      the
      Premises and upon so notifying Tenant in writing this Lease shall terminate
      as
      of the date on which the damage occurred.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>17.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Eminent
      Domain</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      more
      than twenty percent (20%) of the floor area of the Premises is taken for any
      public or quasi-public use under any governmental law, ordinance or regulation
      or by right of eminent domain or by private purchase in lieu thereof, then
      either party hereto shall have the right to terminate this Lease effective
      on
      the date physical possession is taken by the condemning authority.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      less
      than twenty percent (20%) of the floor area of the Premises is taken for any
      public or quasi-public use in said manner, this Lease shall not terminate.
      However, in the event any portion of the Premises is taken and the Lease not
      terminated, the fixed minimum rent specified herein shall be reduced during
      the
      unexpired term of this Lease in proportion to the area of the Premises so taken
      and the Base Receipts amounts used in computing percentage rent shall also
      be
      reduced in the same proportion. Any such reduction shall be effective on the
      date physical possession is taken by the condemning authority.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      any
      portion of the Common Area of the Shopping Center is taken for any public or
      quasi-public use under any governmental law, ordinance or regulation, or by
      right of eminent domain, or by private purchase in lieu thereof, this Lease
      shall continue in full force and effect, without reduction in rentals or other
      changes in the terms of this Lease unless the area so taken shall exceed
      twenty-five percent (25%) of the total number of square feet in the Common
      Area
      of the Shopping Center, in which event either party may terminate this
      Lease.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      election to terminate this Lease following condemnation shall be evidenced
      by
      written notice of termination delivered to the other party not later than
      fifteen (15) days after the date on which physical possession is taken by the
      condemning authority and shall be deemed effective as of the date of said
      taking. If, however, the lease is not terminated following a partial
      condemnation, Landlord shall promptly make all necessary repairs or alterations
      to the Premises and/or Shopping Center which are necessary to restore the
      Premises and/or Shopping Center to an architectural whole.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      compensation awarded for any taking (or the proceeds of private sale in lieu
      thereof) whether for the whole or a part of the Premises, shall be the property
      of the Landlord, whether such award is compensation for damages to Landlord&#8217;s or
      Tenant&#8217;s interest in the Premises, and Tenant hereby assigns all of its interest
      in any such award to Landlord; provided, Landlord shall have no interest in
      any
      award made to Tenant for loss of business or for the taking of Tenant&#8217;s fixtures
      and other property within the Premises if a separate award for such items is
      made to Tenant and such award does not reduce the award made to
      Landlord.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>18.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Default.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 0pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      If one
      or more of the following events (herein called &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Events
      of Default&#8221;</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      shall
      occur: (i) if Tenant shall fail to pay any rent or any other charge or sum
      to be
      paid by Tenant to Landlord when due in accordance with the terms of this Lease
      and such default shall continue for a period five (5) days; or (ii) if Tenant
      shall fail to keep or perform or abide by any other requirement, term,
      condition, covenant or agreement of this Lease or of the Rules and Regulations
      now in effect or hereafter adopted or of any notice given Tenant by Landlord
      pursuant to the terms of this Lease and such default shall continue for a period
      of ten (10) days after notice to Tenant of such default; or (iii) if Tenant
      (or,
      if Tenant is a partnership, if any partner in Tenant) or any guarantor of this
      Lease shall file a petition in bankruptcy or take or consent to any other action
      seeking any such judicial decree, or shall file any debtor proceedings or a
      petition for an arrangement or for corporate reorganization, or shall make
      any
      assignment for the benefit of its creditors or shall admit in writing its
      inability to pay its debts generally as they become due, or if any court of
      competent jurisdiction shall enter a decree or order adjudicating it bankrupt
      or
      insolvent, or if any trustee or receiver for Tenant or for any substantial
      parrot of its property shall be appointed, of if any person shall file a
      petition for involuntary bankruptcy against Tenant and such appointment or
      petition shall not be stayed or vacated within a reasonable period of time
      or
      entry thereof (not to exceed 90 days) , or if Tenant&#8217;s interest hereunder shall
      pass to another by operation of law in any other manner; or (iv) if Tenant&#8217;s
      interest in this Lease or the Premises shall be subjected to any attachment,
      levy or sale pursuant to any order or decree entered against Tenant in any
      legal
      proceeding and such order or decree shall not be vacated within fifteen (15)
      days of entry thereof; or (v) if any audit conducted by or for Landlord under
      Paragraph 7(a) of this Lease shall disclose Gross Receipts to be understated
      by
      more than two percent (2%) of the amount theretofore reported by Tenant to
      Landlord for any period of three (3) consecutive months or should such
      understatement occur more than once during the term of this Lease; or (vi)
      if
      Tenant shall vacate or abandon the Premises or shall fail to strictly comply
      with its agreement in Paragraph 12 above to maintain minimum business hours;
      then and in any such event Landlord without declaring a termination of this
      Lease (which right is, however, unconditionally and absolutely reserved) may
      at
      its election exercise any one or more or all of the following remedies in
      addition to any other remedies available to Landlord at law, in equity or
      pursuant to the terms of this Lease. To the extent permitted by applicable
      state
      law, the time periods provided in this Paragraph 18 for cure of Tenant&#8217;s
      defaults under this Lease shall be in lieu of, and not in addition to, any
      similar time periods prescribed by applicable state law as a condition precedent
      to the commencement of legal action against Tenant for possession of the
      Premises. Any notice given pursuant to this Paragraph 18 is in lieu of any
      written notice required by statute or law, and Tenant waives (to the fullest
      extent permitted by law) the giving of any notice other than that provided
      for
      in this Paragraph 18.</font></div>
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          <hr style="COLOR: black" noshade size="2">
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.
      Upon
      the occurrence of an Event of Default, the Landlord shall have the right and
      remedies allowed at law, in equity, or by statute. Without limiting the
      generality of the foregoing, Landlord, upon the occurrence of an Event of
      Default, shall have the immediate right, after any applicable grace period
      expressed herein, to terminate and cancel this Lease and/or to reenter and
      remove all persons and properties from the Premises and dispose of such property
      as it deems fit, all without being guilty of trespass or being liable for any
      damages caused thereby. If Landlord reenters the Premises, it may either
      terminate this Lease or, from time to time without terminating this Lease,
      make
      such alterations and repairs as may be necessary or appropriate to relet the
      Premises and relet the Premises upon such terms and conditions as Landlord
      deems
      advisable without any responsibility whatsoever to account to Tenant for any
      surplus rents collected. No retaking of possession of the Premises by Landlord
      shall be deemed as an election to terminate this Lease unless a written notice
      of such intention is given by Landlord to Tenant at the time of reentry; but,
      notwithstanding any such reentry or reletting without termination, Landlord
      may
      at any time thereafter elect to terminate for such previous default. In the
      event of an elected termination by Landlord, whether before or after reentry,
      Landlord may recover from Tenant damages, including the costs of recovering
      the
      Premises, and Tenant shall remain liable to Landlord for the total rental (which
      may at Landlord&#8217;s election be accelerated to be due and payable in full as of
      the Event of Default and recoverable as damages in a lump sum) as would have
      been payable by Tenant hereunder for the remainder of the term less the rentals
      actually received from any reletting or, at Landlord&#8217;s election, less the
      reasonable rental value of the Premises for the remainder of the term. In
      determining the rental which would be payable by Tenant subsequent to default,
      the rental for each year of the unexpired term shall be equal to the rental
      payable by Tenant (including, without limitation, Fixed Minimum Rent, percentage
      rent and all other charges payable hereunder by Tenant) for the last year prior
      to default. If any rent owing under this Lease is collected by or through an
      attorney, Tenant agrees to pay Landlord&#8217;s reasonable attorneys&#8217; fees to the
      extent allowed by applicable law.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>19.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Landlord&#8217;s
      Performance For Account of Tenant.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      Tenant
      shall continue in default in the performance of any of the covenants or
      agreements herein contained after the expiration of the time limit hereinabove
      set forth for the curing of said default(s), then Landlord may cure said
      default(s) on behalf of Tenant. Any amount paid or expense or liability incurred
      by Landlord in the performance of any such matter for the account of Tenant
      shall be deemed to be additional rent and the same together with interest
      thereon at the rate of the lesser of the maximum interest rate allowed by law
      or
      eighteen percent (18%) per annum from the date upon which any such expense
      shall
      have been incurred may be added, at the option of Landlord, to any rent then
      due
      or thereafter falling due hereunder. Nothing contained herein shall be construed
      to prevent Landlord from immediately collecting from Tenant by suit or
      otherwise, any such sums with interest.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>20.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Insurance-Indemnity.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      the term of this Lease, Tenant, its assignees and sublessees shall protect,
      defend, indemnify and save Landlord harmless from any and all claims, penalties,
      or demands, including court costs and attorneys&#8217; fees, whatsoever arising,
      directly or indirectly, out of or from Tenant&#8217;s use or occupancy of the
      Premises.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      shall keep in force, upon delivery of the Premises by Landlord and during the
      full term of this Lease or any renewal or extension thereof, workmen&#8217;s
      compensation insurance, commercial general liability insurance (occurrence
      coverage) and special risk property insurance, all issued by a nationally
      recognized insurance company licensed to do business in South Carolina and
      having a rating of &#8220;A&#8221; or better in the most current available Best&#8217;s Insurance
      Reports, with such limits as may be reasonably requested by Landlord from time
      to time, but with minimum commercial general liability limits not less than
      $1,000,000.00 single limit coverage and $2,000,000.00 combined coverage (with
      broad form contractual liability coverage) and, for property damage, not less
      than the greater of $100,000.00 or the full replacement cost of all property
      of
      Tenant within or about the Premises (and any policy proceeds shall be used
      for
      the repair or replacement of any property of Tenant damaged or destroyed).
      Said
      liability policy shall name Landlord and Landlord&#8217;s mortgagee(s) as additional
      insureds, shall provide that it shall not be canceled, allowed to lapse, reduced
      or changed for any reason unless and until Landlord is given fifteen (15) days
      notice in writing by the insurance company and shall insure Tenant&#8217;s performance
      of the indemnity provisions of this Lease (but the amount of such insurance
      shall not limit Tenant&#8217;s liability nor relieve Tenant of any obligation
      hereunder). Said insurance policies or other evidence of coverage satisfactory
      to Landlord shall be deposited with Landlord upon occupancy of Premises by
      Tenant and from time to time upon the request of Landlord during the term
      hereof. All liability, property damage or other casualty insurance policies
      shall be written as primary policies, not contributory with or secondary to
      coverage that Landlord may carry.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord
      (for itself and its insurer) waives any rights, including rights and
      subrogation, and Tenant (for itself and its insurer) waives any rights,
      including rights of subrogation, each may have against the other for
      compensation of any loss or damage occasioned to Landlord or Tenant arising
      from
      any risk generally coverable by a standard all-risk policy of insurance or
      which
      is actually covered by the property insurance carried by Landlord or Tenant
      as
      applicable. The foregoing waivers of subrogation shall be operative only so
      long
      as available in the State of South Carolina. The foregoing waivers shall be
      effective whether or not the parties maintain the insurance required to be
      carried pursuant to this Lease.</font></div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>21.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Personal
      Property.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      agrees that all personal property in said Premises shall be and remain at
      Tenant&#8217;s sold risk, and Landlord shall not be liable for any damage to, or loss
      of such personal property arising from any acts of negligence of any persons
      other than Landlord&#8217;s employees or from fire, or from the leaking of the roof,
      or from the bursting, leaking, or overflowing of water, sewer, or steam pipes,
      or from malfunctions of the heating, plumbing, or electrical systems, or from
      any other cause whatsoever. Tenant expressly agrees to indemnify and save
      Landlord harmless in all such cases.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>22.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Competing
      Business.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant,
      its principals, affiliates, subsidiaries, officers and owners, agree and
      covenant that it shall not, directly or indirectly, during the term of this
      Lease or any renewals or extensions thereof, own, operate, manage or have any
      interest in the profits of any similar business establishment that Tenant
      operates in the Shopping Center within a radius of three (3) miles from the
      outer perimeter of the Shopping Center.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>23.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Marketing
      Fund.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord
      may establish a Marketing Fund to provide and maintain a professional
      advertising and sales promotions and activities for the benefit of the Shopping
      Center (the &#8220;Marketing Fund&#8221;). In connection with said fund, Landlord agrees to
      provide promotional and sufficient secretarial services and pay the salaries
      and
      expenses for all personnel and to pay for such rental, utilities, supplies,
      telephone and all equipment and space necessary for providing the services
      of
      such Marketing Fund. Tenant agrees to pay to Landlord the greater of the amount
      set forth in the Fundamental Lease Provisions or a minimum annual fee of fifty
      cents ($.50) per square foot of Gross Leasable Area of the Premises. If the
      first Lease Year is less than twelve (12) months, Tenant&#8217;s payment hereunder
      shall be decreased on a per diem basis. Tenant agrees that at the tend of every
      Lease Year during the term hereof, the per square foot Marketing Fund fee set
      forth above or in the Fundamental Lease Provisions shall be increased in
      proportion to the increase in the cost of living between the Beginning Date
      under this Lease and the ending date of such Lease Year. The cost of living
      on
      each such date shall be measured by the Consumer Price Index for All Urban
      Consumers specified for all items, U.S. City Average (1982-84=100) published
      on
      the date nearest to each such date by the Bureau of Labor Statistics of the
      United States Department of Labor; or, if such Index is not then in use, by
      the
      most nearly comparable thereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      such
      time or times as Landlord shall not elect to provide the Marketing Fund service
      hereinabove set forth in Subparagraph (a) hereof, Landlord may cause to be
      established a Merchants Association for the tenants of the Shopping Center,
      and
      Tenant agrees to become and remain a member of such Merchants Association for
      the entire team of this Lease and any renewal or extension thererof. Tenant
      agrees to pay as dues to said Merchants Association the amounts hereinabove
      set
      forth in Subparagraph (a) hereof as if Landlord had established the Marketing
      Fund therein referred to.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition to the foregoing, Tenant agrees to advertise in any and all special
      Marketing Fund newspaper sections or other advertisements and agrees to
      cooperated in the Marketing Fund center wide sales and advertisements, except
      that Tenant shall not be required to participate in or contribute to more than
      six (6) Shopping Center-wide advertisements of more than one-eighth
      (1/8</font><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      of an
      eight (8) column wide by twenty-one inch (21&#8221;) deep page or equivalent each in
      any calendar year.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      payments required to be made pursuant to this Paragraph 23 shall be paid by
      Tenant in monthly installments in advance on the first day of each month and
      shall be treated as additional rent.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">e.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
      for increases referred to in subparagraph (a) above, Landlord may increase
      the
      Marketing Fund fee only upon written notice to and with written approval of
      fifty percent (50%) of all tenants of the Shopping Center.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>24.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Application
      of Payments Received From Tenants.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord,
      acting in its sole discretion, shall have the right to apply any payments made
      by Tenant to the satisfaction of any debt or obligations of Tenant to Landlord
      regardless of the instructions of Tenant as to application of any sum whether
      such instructions be endorsed upon Tenant&#8217;s check or otherwise, unless otherwise
      agreed upon by both parties in writing. The acceptance by Landlord of a check
      or
      checks drawn by others than Tenant shall in no way affect Tenant&#8217;s liability
      hereunder nor shall it be deemed an approval of any assignment of this Lease
      by
      Tenant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">13</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>25.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Assignment
      or Subletting.</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      shall not assign, mortgage, or encumber this Lease nor sublet or permit the
      Premises or any part thereof to be used by others, without the prior written
      consent of Landlord and payment by Tenant to Landlord of its actual legal fees,
      if any, and $500.00 for Landlord&#8217;s documentation fee. If this Lease is assigned
      by Tenant or if the Tenant sublets the Premises for rent in excess of the rent
      payable hereunder, Tenant shall pay any such excess in the event of a sublet
      (or
      any consideration received in the event of assignment) to Landlord as additional
      rental. If this Lease is assigned or if the Premises or any part thereof is
      sublet, or occupied other than by Tenant, Landlord, in the event of default
      by
      Tenant, may collect rent directly from the assignee, subtenant, or occupant
      and
      apply the amount collected to the rent due from Tenant. Such action by Landlord
      shall not constitute a waiver of this provision nor a release of Tenant from
      any
      obligation under this Lease. The consent of Landlord to an assignment or
      subletting shall not be construed to relieve Tenant from obtaining the written
      consent of Landlord to any further assignment or subletting and shall not
      relieve Tenant from liability hereunder. Any assignment or subletting under
      this
      Lease automatically cancels any options to extend the term of this Lease which
      may have been granted hereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>26.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Lien
          on Fixtures.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">During
      the term of this Lease or any renewals or extensions thereof, Landlord shall
      have an express lien (in addition to statutory liens) for the payment of rent
      and to secure full and complete performance of all the terms and conditions
      hereof upon all the trade fixtures, goods, stock in trade, and personal property
      of Tenant which shall have been or thereafter may be placed upon the Premises.
      Tenant agrees upon request of Landlord to execute and deliver from time to
      time
      all documents necessary to perfect said lien.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>27.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Mechanics
          Liens.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General.
      Tenant shall pay or cause to be paid all costs of labor, services and/or
      materials supplied in the prosecution of any work done in the Premises by or
      on
      behalf of Tenant or persons claiming under Tenant, and Tenant shall keep the
      Premises free and clear of all mechanics&#8217; liens and other liens arising out of
      any work done for Tenant or persons claiming under Tenant. Tenant shall promptly
      notify Landlord of any claim or lien filed against the Premises or the
      commencement of any action affecting the title thereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Contest
      of Lien. If Tenant desires to contest the claim of any mechanics&#8217; lien, Tenant
      shall (i) either post a release bond issued by a responsible corporate surety
      as
      prescribed by law or furnish Landlord with adequate security for the amount
      of
      the claim plus estimated costs and interest, and (ii) promptly pay or cause
      to
      be paid any and all sums awarded to the claimant on its suit.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord&#8217;s
      Right to Cure. If Tenant fails to provide security for or satisfaction of any
      mechanics&#8217; lien, then Landlord, in addition to any other rights or remedies it
      may have under this Lease or at law or in equity, may (but shall not be
      obligated to) discharge said lien by (i) paying the claimant an amount
      sufficient to settle and discharge the claim, (ii) posting a release bond,
      or
      (iii) taking such action as Landlord shall deem appropriate, and Tenant shall
      pay to Landlord on demand (and as additional rent hereunder) all costs incurred
      by Landlord in setting and discharging such lien (including reasonable
      attorneys&#8217; fees and bond premiums).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notice
      of
      Non-Responsibility. Landlord or its representatives shall have the right to
      go
      upon and inspect the Premises at all reasonable times and shall have the right
      to post and keep posted thereon notices of non-responsibility or such other
      notices that Landlord may deem to be proper for the protection of Landlord&#8217;s
      interest or the interest of Landlord&#8217;s agents, employees or contractors in the
      Premises. Tenant shall give Landlord at least ten (10) days advance written
      notice of its intention to commence any work that might result in a
      lien.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>28.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Change
          of Control of Tenant.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      at any
      time during the term of this Lease any part or all of the corporate shares
      of
      Tenant (if Tenant is a corporation), or the interest of any proprietor of Tenant
      (if Tenant is a proprietorship), or the interest of any member of Tenant (if
      Tenant is a limited liability company), or the interest of any partner of Tenant
      (if Tenant is a partnership) shall be transferred by sale, assignment, bequest,
      inheritance, operation of law or other disposition so as to result in a change
      in the control of Tenant, Tenant shall promptly notify Landlord, in writing,
      of
      such change.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>29.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Estoppel
          Certificates.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      any
      time and from time to time upon request from Landlord, Tenant agrees to execute,
      acknowledge and deliver to Landlord within fifteen (15) days after notice by
      Landlord, a statement in writing certifying that this Lease is unmodified and
      in
      full force and effect (or if there have been modifications, that the same is
      in
      full force and effect as modified and stating the modifications), the dates
      to
      which the fixed minimum rent, percentage rent, and other charges payable
      hereunder have been paid, and any other factual data relating to this Lease
      or
      the Premises which Landlord&#8217;s lender or lenders may request.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">14</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>30.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Brokerage.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      warrants that it has no dealings with any broker or agent in connection with
      this Lease other than Landlord&#8217;s broker (American Asset Corporation)
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>and
      Tenant&#8217;s Broker (CBRE Carmody, LLC)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      and
      covenants to pay, hold harmless and indemnify Landlord from and against any
      and
      all cost, expense or liability for any compensation, commissions and charges
      claimed by any other broker or agent with respect to this Lease or the
      negotiation thereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>31.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Force
          Majeure.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Not
      withstanding anything in this Lease to the contrary, Landlord shall not be
      deemed in default with respect to the performance of any of the terms,
      covenants, and conditions of this Lease to be performed by it if any failure
      of
      its performance shall be due to any strike, lockout, civil commotion, war,
      warlike operation, invasion, rebellion, hostilities, military or usurped power,
      sabotage, governmental regulations or controls, inability to obtain any material
      or service, Act of God, or any other cause whatever (including failure of Tenant
      to supply necessary data or instructions) beyond the reasonable control of
      Landlord, or inability of Landlord to obtain financing satisfactory to Landlord,
      and the time for performance by Landlord shall be extended by the period of
      delay resulting from or due to any of said causes.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>32.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Release
          From Liability.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      agrees not to hold Landlord responsible or liable in damages by abatement of
      rent or otherwise for any damage sustained by Tenant or any other person due
      to
      the state of repair of the building in which the Premises is located or any
      part
      thereof or appurtenance thereto, the happening of any accident (unless resulting
      from affirmative acts of gross negligence on Landlord&#8217;s part), damage caused by
      water, snow, windstorm, tornado, gas, steam, electric wiring, plumbing, or
      heating apparatus, any acts or omissions of cotenants or other occupants of
      the
      Shopping Center or losses by theft.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      any other provision in this Lease, Tenant hereby releases Landlord from any
      claim with respect to water or other damage sustained by Tenant from the
      sprinkler system, except that, subject to the waiver of subrogation in Paragraph
      20 hereof, Tenant does not hereby waive any claim for such damage resulting
      from
      (a) faulty installation or maintenance of said sprinkler system, or (b) the
      negligence of Landlord or any of Landlord&#8217;s servants, agents or
      employees.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>33.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Security.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord
      may, from time to time and to the extent it deems appropriate, determine whether
      to arrange for security services in the Common Areas or manned traffic control
      for special events at the Shopping Center. Notwithstanding any other provision
      of this Lease, Landlord shall not be liable for any loss or damages suffered
      by
      Tenant or anyone else for failure to supply such services or manned traffic
      control. It is agreed that Landlord&#8217;s supplying such security services shall not
      relieve Tenant of its duty to maintain security within the
      Premises.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>34.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Financial
          Information of Tenant</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      shall at any time and from time to time during the term of this Lease, within
      (15) days of written request by Landlord, deliver to Landlord such financial
      information concerning Tenant and Tenant&#8217;s business operations (and the
      Guarantor of this Lease, if the Lease be guaranteed) as may be reasonably
      requested by any mortgagee or prospective mortgagee or purchaser. If Tenant
      fails to provide such information promptly, then, without limiting any other
      remedy by which Landlord may have for such failure, Landlord may thereupon
      terminate this Lease on not less than ten (10) days written notice.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>35.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Holding
          Over</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>.</strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Tenant
      shall not acquire any right or interest in the Premises by remaining in
      possession after the termination of this Lease. If Tenant continues to occupy
      the Premises after the last day of the term hereof or after the last day of
      any
      renewal or extension of the term hereof, and Landlord elects to accept rent
      thereafter, a monthly tenancy termination at will by either party of not less
      than thirty (30) days written notice shall be created; such monthly tenancy
      which shall be on the same terms and conditions as those herein specified,
      except that Fixed Minimum Rent and other charges payable hereunder will be
      increased to 150% of Fixed Minimum Rent and other charges being paid immediately
      prior to the expiration of the Lease term. The foregoing shall not constitute
      Landlord&#8217;s consent for Tenant to holdover. In the event Tenant remains in
      possession of the Premises after the expiration of this Lease without Landlord&#8217;s
      consent, Tenant shall also pay to Landlord all damages, direct and
      consequential, sustained by Landlord resulting from retention of possession
      by
      Tenant, including without limitation damages from the loss of any proposed
      subsequent tenant for any portion of the Premises. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">15</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>36.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Waiver.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">It
      is
      understood and agreed that waiver by Landlord of any default or breach of any
      covenant, condition or agreement herein shall not be construed to be a waiver
      of
      that covenant, condition or agreement or of any subsequent breach thereof.
      The
      acceptance of rent by Landlord with knowledge of the breach of any covenant
      of
      this Lease shall not be deemed a waiver of such breach. No delay or omission
      of
      Landlord to exercise any right or power arising from any default on part of
      Tenant shall impair any such right or power, or shall be construed to be a
      waiver of any such default or acquiescence thereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>37.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Warranty.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord
      covenants, represents and warrants that it has the full right and authority
      to
      lease the Premises upon the terms and conditions herein set forth and that
      Tenant shall peacefully and quietly hold and enjoy the Premises for the full
      term hereof so long as it does not default in the performance of any of its
      agreements hereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>38.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Transfer
          of Landlord&#8217;s Interest.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      term
&#8220;Landlord&#8221; as used in this Lease means only the owner or the mortgagee in
      possession for the time being of the land and building or the owner of the
      lease
      or of the building or of the land and building of which the Premises are a
      part
      so that in the event of any sale or sales of said land and building or of said
      lease, or in the event of a lease of said building, or of the land and building,
      said Landlord shall be and hereby is entirely freed and relieved of all
      covenants and obligations of Landlord hereunder and it shall be deemed and
      construed without further agreement between the parties or their successors
      in
      interest or between the parties and the purchaser at any such sale or the lessee
      of the building or of the land and building, that the purchaser or the lessee
      of
      the building has assumed and agreed to carry out any and all covenants and
      obligations of Landlord hereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      anything to the contrary contained in this Lease, it is specifically understood
      and agreed that the liability of the Landlord hereunder shall be limited to
      the
      equity of the Landlord in the Shopping Center in the event of a breach or the
      failure of Landlord to perform any of the terms, covenants, conditions and
      agreements of this Lease to be performed by Landlord. In furtherance of the
      foregoing, the Tenant hereby agrees that any judgment it may obtain against
      Landlord as a result of the breach of this Lease as aforesaid shall be
      enforceable solely against the Landlord&#8217;s interest in the Shopping
      Center.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      security given by Tenant to Landlord to secure performance of Tenant&#8217;s
      obligations hereunder may be assigned and transferred by Landlord to the
      successor in interest to Landlord; and, upon acknowledgment by such successor
      of
      receipt of such security and its express assumption of the obligation to account
      to Tenant for such security in accordance with the terms of this Lease, Landlord
      shall thereby be discharged of any further obligation relating
      thereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Landlord&#8217;s
      assignment, sale or transfer of the Lease or of any or all of its rights herein
      shall in no manner affect Tenant&#8217;s obligations hereunder. Tenant shall
      thereafter attorn and look to such assignee, as Landlord, provided Tenant has
      first received written notice of such assignment of Landlord&#8217;s
      interest.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>39.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Security
          Deposit.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Not
      Applicable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>40.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Landlord
          Not Partner.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">It
      is
      expressly understood and agreed that the Landlord is not a partner, joint
      venturer or associate of Tenant in the conduct of Tenant&#8217;s business, that the
      provisions of this Lease with respect to the payment by Tenant of percentage
      rentals are payment of additional rent and not sharing of profit and that the
      relationship between the parties hereby is and shall remain at all times that
      of
      Landlord and Tenant.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
      provision of this shall be construed to impose upon the parties hereto any
      obligation or restriction not expressly set forth herein.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>41.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Additional
          Instruments</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      parties agree to execute and deliver any instruments in writing, including
      a
      Memorandum of Lease suitable for recording (which shall be at Tenant&#8217;s sole
      cost), necessary to carry out any agreement, term, condition, or assurance
      in
      this Lease whenever occasion shall arise and request for such instrument shall
      be made. This lease shall not be recorded.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">16</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If,
      following the execution of this Lease, Tenant requests that Landlord execute
      any
      document or instrument that is other than (i) a document or instrument the
      form
      of which is attached hereto as an exhibit, or (ii) a document that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>solely</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      sets
      forth facts or circumstances that are then existing and reasonably ascertainable
      by the requested party with respect to the lease, then Tenant shall be
      responsible for paying the out-of-pocket costs and expenses, including without
      limitation, the attorneys fees, and an administrative fee of $500.00, incurred
      by Landlord in connection with the review (and, if applicable, the negotiations)
      related to such document(s) or instrument(s), regardless of whether such
      document(s) or instrument(s) is (are) ever executed by Landlord. All such costs
      and expenses incurred by Landlord in connection with its review and negotiation
      of any such document(s) or instrument(s) shall be deemed to be additional rental
      due hereunder and shall be payable by Tenant promptly upon demand.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>42.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Pronouns.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      pronouns and any variations thereof shall be deemed to refer to the masculine,
      feminine, neuter, singular or plural, as the identity of the person(s), firm(s)
      or corporation(s) may require.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>43.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Counterparts.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Lease may be executed in counterparts all of which taken together shall be
      deemed one original when executed by both parties.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>44.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Amendment
          and Modifications.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Lease embodies the full agreement of the parties and supersedes any and all
      prior understandings or commitments concerning the subject matter of this Lease.
      Any modification or amendment must be in writing and signed by both
      parties.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>45.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Binding
          Effect.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Lease shall be binding upon and inure to the benefit of the parties hereto,
      their assigns, administrators, successors, estates, heirs and legatees
      respectively, except as herein provided to the contrary.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>46.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Controlling
          Law.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Lease and the rights of the Landlord and Tenant hereunder shall be construed
      and
      enforced in accordance with the law of the State in which the premises are
      located.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>47.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Partial
          Invalidity.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that any part or provision of this Lease shall be determined to be invalid
      or unenforceable, the remaining parts and provisions of said Lease which can
      be
      separated from the invalid, unenforceable provision shall continue in full
      force
      and effect.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>48.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Captions.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      index, paragraph and marginal titles, numbers and captions contained in this
      Lease are inserted only as a matter of convenience and for reference, and in
      no
      way define, limit, extend, modify, or describe the scope or intent of this
      Lease
      nor any provision herein.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>49.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Subordination.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Lease is subject and subordinate to any mortgage or deed of trust now or
      hereafter placed on the property of which the Premises is a part; provided,
      however, that at the option of the mortgagee the Lease or portions of the Lease
      can be made superior to the mortgage or deed of trust; provided further that
      unless the entire Lease is made superior to such mortgage or deed of trust,
      the
      holder of said mortgage or the trustee of such deed of trust shall agree that
      this Lease shall not be divested or in any way affected by a foreclosure or
      other default proceedings under said mortgage or deed of trust or the
      obligations secured thereby, so long as Tenant shall not be in default under
      the
      terms of this Lease; and Tenant agrees that this Lease shall remain in full
      force and effect notwithstanding any default proceeding under said mortgage
      or
      deed of trust or obligation secured thereby, including foreclosure. Tenant
      further agrees that it will attorn to the mortgagee, trustee or beneficiary
      of
      such mortgage or deed of trust, and their successors or assigns and to the
      purchaser or assignee at any such foreclosure. Tenant will, upon request by
      Landlord, execute and deliver to Landlord, or to any other person designated
      by
      Landlord, any instruments required to give effect to the provisions of this
      paragraph.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>50.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Lease
          Rider.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Addendum
      A (Common Area Maintenance, Insurance and Taxes) and Addendum B (Option to
      Extend) are hereby attached hereto made a part hereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">17</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>51.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Surrender
          of Premises.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subject
      to Paragraph 26 hereof, at the expiration or earlier termination of this Lease,
      Tenant shall remove from the Premises all of its fixtures, furniture,
      furnishings, signs and other personal property not permanently affixed to the
      Premises and surrender possession of the Premises to Landlord in broom clean
      condition and good state of repair, except ordinary wear and tear.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>52.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Attorneys&#8217;
          Fees.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      either
      Landlord or Tenant institutes any action or proceeding against the other
      relating to the provisions of this Lease or any default hereunder, the
      nonprevailing party in such action or proceeding shall reimburse the prevailing
      party for the reasonable expenses of attorneys&#8217; fees and all costs and
      disbursements incurred therein by the prevailing party, including, without
      limitation, any such fees, costs or disbursements incurred on any appeal from
      such action or proceeding. The prevailing party shall recover all such fees,
      costs or disbursements as costs taxable by the court in the action or proceeding
      itself without the necessity for a cross-action by the prevailing
      party.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>53.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Guaranty.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Not
      Applicable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>54.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Declaration.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      any
      time prior to or following the execution of this Lease, Landlord shall have
      the
      right, at Landlord&#8217;s election, to prepare and record a declaration of easements,
      covenants, conditions and restrictions (as amended, the &#8220;Declaration&#8221;) governing
      the operation, maintenance and use of the Shopping Center, including, without
      limitation, the Premises. Notwithstanding any term or provision hereinto the
      contrary, Tenant agrees to subordinate this Lease to and comply with and abide
      by the terms of said Declaration, if and when recorded by Landlord in the
      Charleston County Public Registry, in connection with Tenant&#8217;s use and operation
      of the Premises. In this regard, the Declaration, if and when recorded, shall
      be
      employed in conjunction with this Lease; provided, however, if there is an
      express conflict between the terms of the Declaration and terms of this Lease,
      the terms of the Declaration shall control and prevail. The mere fact that
      the
      terms of the Declaration may be more restrictive than the terms of this Lease,
      or vice versa, shall not be construed as an express conflict, and in such case
      the most restrictive provision shall control and prevail.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>55.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Prohibited
          Uses.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      any term or provision herein to the contrary, in no event shall the Premises
      and/or any improvements located thereon be used for any use or purpose set
      forth
      on Exhibit &#8220;E&#8221; attached hereto and incorporated herein by
      reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>56.
          </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Exclusive
          Use.</u></strong></font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Notwithstanding
      any term or provision herein to the contrary, Landlord shall abide by the
      Exclusive Use granted to Tenant as set forth on Exhibit F, attached hereto
      and
      incorporated herein by reference.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">18</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>IN
      WITNESS WHEREOF, </em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      parties have set their hands and seals on the day and year first above
      mentioned.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 216pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>LANDLORD:</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>BELLE-HALL
      DEVELOPMENT PHASE III LIMITED</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PARTNERSHIP,</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
      South
      Carolina Limited Partnership</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      AAC-Belle-Hall Development Phase III GP, LLC, </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Its
      sole
      general partner</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><u>/s/
      Paul L. Herndon</u></em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
      Paul L. Herndon</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Title:
      Vice President</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>TENANT:</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DGSE
      COMPANIES, INC., </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
      Nevada
      corporation</font></div>
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      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><u>/s/
      W. H. Oyster</u></em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Name:
      William H. Oyster</font></div>
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      President</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">19</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>11
<FILENAME>v065446_ex23-1.htm
<TEXT>
<html>
  <head>
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</title>
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CONSENT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      hereby
      consent to the incorporation by reference in this Registration Statement on
      Form
      S-4, and in any other registration statement for the same offering that is
      effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
      of our report dated March 31, 2006, relating to the consolidated financial
      statements of DGSE Companies, Inc., which appears in the Annual Report of DGSE
      Companies, Inc. on Form 10-K for the fiscal year ended December 31, 2005. We
      also consent to the reference to us under the heading &#8220;Experts&#8221; in this
      Registration Statement or any such other registration statement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">BKR
      CORNWELL JACKSON</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Plano,
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
      16, 2007</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
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  </body>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>12
<FILENAME>v065446_ex23-2.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CONSENT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      hereby
      consent to the incorporation by reference in this Registration Statement on
      Form
      S-4, and in any other registration statement for the same offering that is
      effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
      of our report dated March 22, 2004, relating to the audited consolidated
      financial statements of DGSE Companies, Inc. and Subsidiaries, which appears
      in
      the Annual Report of DGSE Companies, Inc. on Form 10-K for the fiscal year
      ended
      December 31, 2003. We also consent to the reference to us under the heading
      &#8220;Experts&#8221; in this Registration Statement or any such other registration
      statement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CF
&amp;
      CO., L.L.P.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dallas,
      Texas</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
      7, 2007</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.3
<SEQUENCE>13
<FILENAME>v065446_ex23-3.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vintage-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
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  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBIT
      23.3</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CONSENT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      consent to the use in this Registration Statement on Form S-4 of DGSE Companies,
      Inc. of our report dated September 21, 2006 relating to our audit of the
      financial statements of Superior Galleries, Inc., appearing in the Prospectus,
      which is part of this Registration Statement and of our report dated September
      21, 2006, relating to the financial statement schedule appearing elsewhere
      in
      this Registration Statement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      also
      consent to the reference to our firm under the captions &#8220;Experts&#8221; and &#8220;Selected
      Financial Data&#8221; in such Prospectus.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SINGER
      LEWAK GREENBAUM &amp; GOLDSTEIN LLP</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Los
      Angeles, California</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">February
      23, 2007</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>14
<FILENAME>v065446_ex99-1.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff">
    <div align="left"><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBIT
        99.1</font>&#160;<br></div>
      <div align="left">
        <div align="left"><br>
          <div align="left">
            <table cellpadding="0" cellspacing="0" width="100%">

                <tr>
                  <td align="left" valign="top" width="44%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings"><strong>x</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>
                      PLEASE MARK VOTES AS IN THIS EXAMPLE</strong></font></div>
                  </td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="top" width="24%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>REVOCABLE&#160;PROXY
                      DGSE COMPANIES,&#160;INC.</strong></font></div>
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                  <td align="left" valign="top" width="10%">&#160;</td>
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                <tr>
                  <td align="left" valign="top" width="44%">&#160;</td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="top" width="24%">&#160;</td>
                  <td align="left" valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="10%">&#160;</td>
                  <td align="left" valign="top" width="10%">&#160;</td>
                </tr>
                <tr>
                  <td align="left" valign="top" width="44%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SPECIAL
                      MEETING OF STOCKHOLDERS</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#9679;,
                      2007</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>This
                      Proxy is Solicited on Behalf of the Board of
                      Directors</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                      undersigned, a stockholder of DGSE Companies, Inc., a Nevada
                      corporation,
                      hereby appoints DR. L.S. SMITH and WILLIAM H. OYSTER, or any
                      of them, the
                      proxies of the undersigned, each with the power to appoint
                      his substitute,
                      and hereby authorizes them to represent and to vote for the
                      undersigned
                      all the shares of DGSE Companies, Inc. common stock held of
                      record on
                      February __, 2007, by the undersigned at the Special Meeting
                      of
                      Stockholders to be held on &#9679;, 2007 or any adjournment or postponement
                      thereof as follows on the reverse side of this proxy card.
                      Unless a
                      contrary direction is indicated, this proxy will be voted for
                      Proposal 1,
                      Proposal 2 and Proposal 3 as specifically described in the
                      proxy
                      statement. If specific instructions are indicated, this proxy
                      will be
                      voted in accordance therewith.</font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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                      OF MERGER. To adopt and approve the Amended and Restated Agreement
                      and
                      Plan of Merger and Reorganization, entered into as of January
                      6, 2007, by
                      and among DGSE Companies, Inc., DGSE Merger Corp., a wholly-owned
                      subsidiary of DGSE, Superior Galleries, Inc., and Stanford
                      International
                      Bank Ltd., as stockholder agent, and to approve the merger
                      and
                      reorganization contemplated thereby, including the issuance
                      of shares of
                      DGSE common stock to Superior stockholders, and the issuance
                      of options and warrants to acquire shares of DGSE common stock,
                      pursuant to the merger
                      agreement</font></div>
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                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Against</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                  </td>
                  <td valign="top" width="10%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Abstain</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                  </td>
                </tr>
                <tr>
                  <td align="left" valign="top" width="44%">&#160;</td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="top" width="24%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                      approve an amendment to DGSE&#8217;s articles of incorporation to increase the
                      number of authorized shares of common stock by 20,000,000 shares,
                      to a
                      total of 30,000,000 shares.</font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                  </td>
                  <td valign="top" width="10%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>For</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Against</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Abstain</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                  </td>
                </tr>
                <tr>
                  <td align="left" valign="top" width="44%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>IF
                      NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL
                      1</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>,
                      FOR PROPOSAL 2 AND FOR PROPOSAL 3.</strong></font></div>
                  </td>
                  <td width="2%">&#160;</td>
                  <td align="left" valign="top" width="24%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                      adjourn the special meeting, if necessary, to solicit additional
                      proxies
                      if there are not sufficient votes in favor of the
                      proposals.</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>For</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Against</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                  </td>
                  <td valign="top" width="10%">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Abstain</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                  </td>
                </tr>

            </table>
          </div>
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="41%">&#160;</td>
              <td align="left" valign="top" width="5%" style="border-bottom: #ffffff thin solid;">&#160;</td>
              <td align="left" valign="top" width="44%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PLEASE
                  MARK BOX IF </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>YOU
                  PLAN TO ATTEND THE MEETING </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#232;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
              </td>
              <td align="left" colspan="2" valign="top" width="10%">
                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></div>
              </td>
            </tr>

        </table>
      </div>
      <div>
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="41%" style="border-bottom: #ffffff thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                  be sure to sign and date the Proxy in the box below</font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date</font></div>
              </td>
              <td align="left" colspan="3" valign="top" width="54%">&#160;</td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Stockholder
                  sign above </em></font></div>
              </td>
              <td align="left" valign="top" width="21%"><em><font size="2">Co-holder
                (if any)
                sign above</font></em></td>
              <td align="left" valign="top" width="5%">&#160;</td>
              <td align="left" colspan="3" valign="top" width="54%">&#160;</td>
            </tr>

        </table>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Note:
      Please sign exactly as your name or names appear on this Proxy; when shares
      are
      held jointly, each holder should sign. When signing as executor, administrator,
      attorney, trustee or guardian, please give full title as such if the signer
      is a
      corporation please sign full corporate name by duly authorized officer, giving
      full title as such if signer is a partnership, please sign in partnership name
      by authorized person.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#233;
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Detach
        above card, sign, date and mail in postage paid envelope provided. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#233;</font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DGSE
          COMPANIES,</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>
          INC.</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div align="left">
          <table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" width="100%">

              <tr>
                <td align="left" valign="middle" width="100%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PLEASE
                    ACT PROMPTLY</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><strong><font size="2">SIGN,
                    DATE MAIL YOUR PROXY CARD
                    TODAY</font></strong></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IF
          YOUR
          ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW
          AND
          RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div align="left">
          <table border="0" cellpadding="0" cellspacing="0" width="50%">

              <tr>
                <td align="left" valign="top" width="100%" style="border-bottom: black thin solid;">
                  <div>&#160;</div>
                  <div>&#160;</div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="100%" style="border-bottom: black thin solid;">
                  <div>&#160;</div>
                  <div>&#160;</div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="100%" style="border-bottom: black thin solid;">
                  <div>&#160;</div>
                  <div>&#160;</div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-
              2
              -</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="2">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
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  </body>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>15
<FILENAME>v065446_ex99-2.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vf-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
<!-- All rights reserved EDGARfilings.com -->
</head>
  <body bgcolor="#ffffff">
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXHIBIT
      99.2</font>&#160;<br></div>
    <div align="left">
      <div align="left"><br>
        <div align="left">
          <table cellpadding="0" cellspacing="0" width="100%">

              <tr>
                <td align="left" valign="top" width="44%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings"><strong>x</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>
                    PLEASE MARK VOTES AS IN THIS EXAMPLE</strong></font></div>
                </td>
                <td width="2%">&#160;</td>
                <td align="left" valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>REVOCABLE&#160;PROXY
                    SUPERIOR GALLERIES,&#160;INC.</strong></font></div>
                </td>
                <td align="left" valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="10%">&#160;</td>
              </tr>
              <tr>
                <td align="left" valign="top" width="44%">&#160;</td>
                <td width="2%">&#160;</td>
                <td align="left" valign="top" width="24%">&#160;</td>
                <td align="left" valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="10%">&#160;</td>
                <td align="left" valign="top" width="10%">&#160;</td>
              </tr>
              <tr>
                <td align="left" valign="top" width="44%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SPECIAL
                    MEETING OF STOCKHOLDERS<br></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#9679;,
                    2007</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>This
                      Proxy is Solicited on Behalf of the Board of
                      Directors</strong></font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                      undersigned, a stockholder of Superior Galleries, Inc., a Delaware
                      corporation, hereby appoints WILLIAM H. OYSTER and S. SCOTT
                      WILLIAMSON, or
                      any of them, the proxies of the undersigned, each with the
                      power to
                      appoint his substitute, and hereby authorizes them to represent
                      and to
                      vote for the undersigned all the shares of Superior Galleries,
                      Inc. common
                      stock held of record on February __, 2007, by the undersigned
                      at the
                      Special Meeting of Stockholders to be held on &#9679;, 2007 or any adjournment
                      or postponement thereof as follows on the reverse side of this
                      proxy card.
                      Unless a contrary direction is indicated, this proxy will be
                      voted for
                      Proposal 1, Proposal 2 and Proposal 3 as specifically described
                      in the
                      proxy statement. If specific instructions are indicated, this
                      proxy will
                      be voted in accordance therewith.</font></div>
                  </div>
                </td>
                <td width="2%">&#160;</td>
                <td align="left" valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">APPROVAL
                      OF MERGER. To adopt and approve the Amended and Restated Agreement
                      and
                      Plan of Merger and Reorganization, entered into as of January
                      6, 2007, by
                      and among DGSE Companies, Inc., DGSE Merger Corp., a wholly-owned
                      subsidiary of DGSE, Superior Galleries, Inc., and Stanford
                      International
                      Bank Ltd., as stockholder agent, and to approve the merger
                      and
                      reorganization contemplated thereby.</font></div>
                  </div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>For</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Against</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Abstain</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="44%">&#160;</td>
                <td width="2%">&#160;</td>
                <td align="left" valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                      irrevocably appoint Stanford International Bank Ltd., including
                      its
                      successors as stockholder agent, as the exclusive agent, attorney-in-fact
                      and representative of Superior stockholders under the merger
                      agreement and
                      related escrow agreement.</font></div>
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
                  </div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>For</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Against</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Abstain</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="44%">
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                      NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL
                      1, FOR
                      PROPOSAL 2 AND FOR PROPOSAL 3.</font></div>
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                <td width="2%">&#160;</td>
                <td align="left" valign="top" width="24%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
                    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
                      adjourn the special meeting, if necessary, to solicit additional
                      proxies
                      if there are not sufficient votes in favor of the
                      proposals.</font></div>
                  </div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>For</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Against</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
                </td>
                <td valign="top" width="10%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Abstain</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="FONT-FAMILY: Wingdings">o</font></div>
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        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div>
      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="41%">&#160;</td>
              <td align="left" valign="top" width="5%" style="border-bottom: #ffffff thin solid;">&#160;</td>
              <td align="left" valign="top" width="44%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PLEASE
                  MARK BOX IF </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>YOU
                  PLAN TO ATTEND THE MEETING </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#232;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
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                <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font></div>
              </td>
            </tr>

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      </div>
      <div>
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="41%" style="border-bottom: #ffffff thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Please
                  be sure to sign and date the Proxy in the box below</font></div>
              </td>
              <td align="left" valign="top" width="5%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date</font></div>
              </td>
              <td align="left" colspan="3" valign="top" width="54%">&#160;</td>
            </tr>

        </table>
      </div>
      <div>&#160;</div>
      <div align="left">
        <table border="0" cellpadding="0" cellspacing="0" width="100%">

            <tr>
              <td align="left" valign="top" width="20%">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Stockholder
                  sign above </em></font></div>
              </td>
              <td align="left" valign="top" width="21%"><em><font size="2">Co-holder
                (if any)
                sign above</font></em></td>
              <td align="left" valign="top" width="5%">&#160;</td>
              <td align="left" colspan="3" valign="top" width="54%">&#160;</td>
            </tr>

        </table>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Note:
      Please sign exactly as your name or names appear on this Proxy; when shares
      are
      held jointly, each holder should sign. When signing as executor, administrator,
      attorney, trustee or guardian, please give full title as such if the signer
      is a
      corporation please sign full corporate name by duly authorized officer, giving
      full title as such if signer is a partnership, please sign in partnership name
      by authorized person.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#233;
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Detach
        above card, sign, date and mail in postage paid envelope provided. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Wingdings">&#233;</font></div><br>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
          </div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SUPERIOR
          GALLERIES,</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>
          INC.</strong></font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div align="left">
          <table border="1" bordercolor="#000000" cellpadding="4" cellspacing="0" width="100%">

              <tr>
                <td align="left" valign="middle" width="100%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PLEASE
                    ACT PROMPTLY</strong></font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><strong><font size="2">SIGN,
                    DATE MAIL YOUR PROXY CARD
                    TODAY</font></strong></div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IF
          YOUR
          ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW
          AND
          RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED. </font></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        <div align="left">
          <table border="0" cellpadding="0" cellspacing="0" width="50%">

              <tr>
                <td align="left" valign="top" width="100%" style="border-bottom: black thin solid;">
                  <div>&#160;</div>
                  <div>&#160;</div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="100%" style="border-bottom: black thin solid;">
                  <div>&#160;</div>
                  <div>&#160;</div>
                </td>
              </tr>
              <tr>
                <td align="left" valign="top" width="100%" style="border-bottom: black thin solid;">
                  <div>&#160;</div>
                  <div>&#160;</div>
                </td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
        <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div id="FTR">
            <div id="GLFTR" style="WIDTH: 100%" align="left">
            </div>
          </div>
          <div id="PN">
            <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-
              2
              -</font></div>
            <div style="WIDTH: 100%; TEXT-ALIGN: center">
              <hr style="COLOR: black" noshade size="2">
            </div>
          </div>
          <div id="HDR">
            <div id="GLHDR" style="WIDTH: 100%" align="right">
            </div>
          </div>
        </div><br></div>
    </div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>16
<FILENAME>v065446_ex99-3.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>EXHIBIT
      99.3</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I
      hereby
      consent to the inclusion in the registration statement on Form&#160;S-4 of DGSE
      Companies,&#160;Inc. relating to the proposed acquisition of Superior Galleries,
      Inc., and in the joint proxy statement/prospectus included therein, of
      (1)&#160;a reference naming me as a prospective director of DGSE Companies,
      Inc., and (2)&#160;such other information regarding me as DGSE Companies, Inc.
      in good faith determines is required to be included therein under the Securities
      Act of 1933, as amended, and the rules&#160;and regulations promulgated
      thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td>&#160;</td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">By:&#160;&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;David
              Rector</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="FONT-FAMILY: " size="1">&#160;</font></td>
            <td align="left">
              <hr style="COLOR: black" align="left" noshade size="1" width="70%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">David
                Rector</font></div>
            </td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td>&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-1-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>17
<FILENAME>v065446_ex99-4.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>EXHIBIT
      99.4</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I
      hereby
      consent to the inclusion in the registration statement on Form&#160;S-4 of DGSE
      Companies,&#160;Inc. relating to the proposed acquisition of Superior Galleries,
      Inc., and in the joint proxy statement/prospectus included therein, of
      (1)&#160;a reference naming me as a prospective director of DGSE Companies,
      Inc., and (2)&#160;such other information regarding me as DGSE Companies, Inc.
      in good faith determines is required to be included therein under the Securities
      Act of 1933, as amended, and the rules&#160;and regulations promulgated
      thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;<br>&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td>&#160;</td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">By:&#160;&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;M.
              T.
              Stoltz</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="FONT-FAMILY: " size="1">&#160;</font></td>
            <td align="left">
              <hr style="COLOR: black" align="left" noshade size="1" width="70%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mitchell
                T. Stoltz</font></div>
            </td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td>&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-1-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>18
<FILENAME>v065446_ex99-5.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vf-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
<!-- All rights reserved EDGARfilings.com -->
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>EXHIBIT
      99.5</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I
      hereby
      consent to the inclusion in the registration statement on Form&#160;S-4 of DGSE
      Companies,&#160;Inc. relating to the proposed acquisition of Superior Galleries,
      Inc., and in the joint proxy statement/prospectus included therein, of
      (1)&#160;a reference naming me as a prospective director of DGSE Companies,
      Inc., and (2)&#160;such other information regarding me as DGSE Companies, Inc.
      in good faith determines is required to be included therein under the Securities
      Act of 1933, as amended, and the rules&#160;and regulations promulgated
      thereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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