-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HNVS+cKT1TAqQpd08wMwN+jCVby5h+zsyb+TRyO9lNnbsnDFDbPo39/m5exL7Qgi +Guy5yHOSDqLx2k//GAtXQ== 0001010549-01-000118.txt : 20010330 0001010549-01-000118.hdr.sgml : 20010330 ACCESSION NUMBER: 0001010549-01-000118 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DALLAS GOLD & SILVER EXCHANGE INC /NV/ CENTRAL INDEX KEY: 0000701719 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-JEWELRY STORES [5944] IRS NUMBER: 880097334 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 001-11048 FILM NUMBER: 1584263 BUSINESS ADDRESS: STREET 1: 2817 FOREST L STREET 2: STE 202 CITY: DALLAS STATE: TX ZIP: 75234 BUSINESS PHONE: 9724843662 MAIL ADDRESS: STREET 1: 2817 FOREST LN CITY: DALLAS STATE: TX ZIP: 75234 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN PACIFIC MINT INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CANYON STATE CORP DATE OF NAME CHANGE: 19860819 10KSB 1 0001.txt U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-KSB (Mark One) ( x ) Annual Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Fiscal year ended December 31, 2000 or -------------------------------- ( ) Transition Report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from to ---------------- ---------------- Commission file number 1-11048 ----------- Dallas Gold and Silver Exchange, Inc. ------------------------------------- (Name of small business issuer) NEVADA 88-0097334 - ------------------------------- ------------------------------ (State or other jurisdiction (I.R.S.Employer Identification incorporation or organization) Number) 2817 Forest Lane, Dallas, Texas 75234 - ---------------------------------------- ------------- (Address of Principal Executive Offices) (Zip Code) Issuer's telephone number, including area code (972) 484-3662 -------------- Securities registered under Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- None None Securities registered pursuant to Section 12 (g) of the Exchange Act: Title of each class Name of each exchange on which registered - ------------------- ----------------------------------------- Common Stock None $ .01 par value Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No --- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] --- During fiscal year ended December 31, 2000, total revenues were $ 25,799,918. As of March 14, 2001, the aggregate market value of the voting stock held by non-affiliates of the registrant was $ 24,496,115. As of March 14, 2001, 4,907,990 shares of Common Stock were outstanding. Documents incorporated by reference: Portions of the proxy statement for the annual shareholders' meeting to be held June 25, 2001, are incorporated by reference into Part III. PART I ITEM 1. DESCRIPTION OF BUSINESS Dallas Gold and Silver Exchange, Inc. (the "Company") sells jewelry and bullion products to both retail and wholesale customers throughout the United States and makes collateralized loans to individuals. During the last three years the Company has focused its efforts toward expanding its retail jewelry operations and internet related businesses. Management expects this trend to continue until such time that interest in precious metals results in significantly higher gross profit margins on bullion related products. The Company's products are marketed through its facilities in Dallas and Carrollton, Texas and Mt. Pleasant South Carolina and through its internet web sites dgse.com; FirstJewelryAuctions.com; USBullionExchange.com; FirstCoinAuction.com; FairchildWatches.com; SilvermanLiquidations.com; and ejewelryportal.com. The Company also provides consulting services involving the reorganization of other business enterprises (primarily enterprises that are or have been involved in proceedings under Chapter 11 of the United States Bankruptcy Code). These services are provided through the Company's subsidiary DLS Financial Services, Inc. ("DLS"). The Company operates seven internet sites on the World Wide Web. Through dgse.com the Company operates a virtual store and a real-time auction of its jewelry products. Customers and the Company buy and sell items of jewelry and are free to set their own prices in an interactive market. FirstJewelryAuctions.com provides a forum for business to business and business to consumer auctions for the jewelry industry. For its services the Company receives a fee from the seller. The Company also offers customers current quotations for precious metals prices on its internet site USBullionExchange.com. During 2000 the Company launched three new sites. FirstCoinAuctions.com provides auctions of the Company's rare coin products. FairchildWatches.com provides wholesale customers a virtual catalog of the Company's fine watch inventory and SilvermanLiquidations.com provides a real-time auction of closeout jewelry products. By December 31, 2000, over 7,500 items were available for sale on the Company's internet sites including $ 10,000,000 in diamonds. In addition, the Company recently launched a consolidating portal through which all of its web sites can be accessed, ejewelryportal.com. During 1998, the Company continued the development of its internet software and in February 1999, announced the release of Virtual Auctioneer v2.0, an electronic commerce product that allows users to easily build online auction sites. The Company began marketing its internet software product in late 1999 through its subsidiary eye media, inc. ("eye media"). In December 1998, the Company acquired the assets including inventory, pawn loans, equipment and pawn license of Belt Line Pawn Shop located in Carrollton, Texas. The Company formed a new wholly-owned subsidiary in February 1999, National Jewelry Exchange, Inc. ("NJE") and transferred these assets to this new subsidiary. The operations of Belt Line Pawn Shop are being continued under NJE. The Company has focused the operations of NJE on sales and pawn loans of jewelry products. In August 1999 the Company purchased substantially all assets of The Silverman Group ("Silverman") located in Mt. Pleasant, South Carolina. Silverman's primary business is conducting liquidation, consolidation, promotional or other large-scale retail sales for jewelry stores and other types of retailers. The purchase price of $ 3,115,000 consisted of the issuance of 200,000 shares of the Company's newly issued restricted common stock and the assumption by the Company of a $ 2,500,000 obligation to a bank. The purchase price has been allocated as follows: inventory ($ 2,500,000); property and equipment ($ 131,000); and goodwill ($ 484,000). The results of Silverman have been included in the consolidated financial statements since the date of acquisition. On March 2, 2000, the Company acquired certain assets of Fairchild International, Inc. ("Fairchild") located in Dallas, Texas. Fairchild's primary business is the wholesaling of fine watches. The purchase price consisted of $350,000 in cash, a promissory note for $450,000 and 62,745 newly issued restricted shares of the Company's common stock. The acquisition has been accounted for as a purchase. Accordingly, a portion of the purchase price has been allocated to net tangible and intangible assets acquired based on their estimated fair values. The results of Fairchild have been included in the consolidated financial statements since the date of acquisition. Products and Services - --------------------- JEWELRY - ------- The Company's jewelry operations include sales to both wholesale and retail customers. The Company sells finished jewelry, gem stones, and findings (gold jewelry components) and makes custom jewelry to order. Jewelry inventory is readily available from wholesalers throughout the United States. In addition, the Company purchases inventory from pawn shops and individuals. During the last three years management has focused its efforts toward expanding its retail jewelry business. Additional resources have been invested in advertising and additional staff has been added in jewelry sales and jewelry and watch repair. The Company's bullion trading operations buy and sell all forms of precious metals products including United States and other government coins, medallions, art bars and trade unit bars. Bullion products are purchased and sold based on current market price. The availability of precious metal products is a function of price as virtually all bullion items are actively traded. Precious metals sales amounted to 15.9% of total sales for 2000 and 41.3% in 1999 (For further details, see Item 6 below). The Company did not have any customer or supplier that accounted for more than 10% of total sales or purchases during 2000 or 1999. PAWN - ---- Pawn loans ("loans") are made on the pledge of tangible personal property, primarily jewelry, for one month with an automatic sixty-day extension period ("loan term"). Pawn service charges are recorded on a constant yield basis over the loan term. If the loan is not repaid, the principal amount loaned plus accrued pawn service charges become the carrying value of the forfeited collateral and is transferred to inventory which is recovered through sale. Although revenues from the Company's pawn loans have not been significant, management believes this activity to be a good source of jewelry inventory and provides an excellent return on investment. CONSULTING SERVICES - ------------------- DLS provides insolvency advisory services primarily to business enterprises that are or have been involved in proceedings under Chapter Products and Services (continued...) - --------------------- 11 of the United States Bankruptcy Code. Services provided by DLS include assistance in developing plans of reorganization, negotiations with creditors and general management advice. DLS earns a cash fee and or equity participation in the organizations to which it provides services. DLS expects to accept only a limited number of assignments each year which meet the criteria of having significant fee and or substantial growth potential. Where equity participation is involved, as the client enterprises mature, DLS plans to sell its equity interest subject to compliance with state and federal securities law in order to provide non-dilutive resources for the expansion of the Company's other business activities. During 2000 and 1999, the DLS sold a portion of these equity securities and realized gains in the amount of $ 266,714 and $ 83,116, respectively. In addition, during 1999 the Company had unrealized gains on trading securities in the amount of $ 109,771. As of December 31, 2000 the Company's investment in these enterprises totaled $ 856,081. In addition, during 2000 DLS completed a consulting engagement for which DLS received fee in the form of common stock in the client company. This common stock had a value of $ 456,000 and has been recorded as consulting service revenue during 2000. INTERNET - -------- During 1995 the Company developed a World Wide Web Site on the Internet located at dgse.com. This web site is a fully integrated live trading market in jewelry items on the internet. Customers can buy and sell items of jewelry and are free to set their own prices in an interactive market. For its services, the Company collects a listing fee and a sales commission from the seller. In addition, the Company may offer for sale its own inventory. This site also includes a virtual store of the Company's jewelry products. In April 1996 the Company began operating an additional web site. This site allows customers unlimited access to current quotations for prices on approximately 200 precious metals, coins and other bullion related products. This site is located at USBullionExchange.com. During 1997 management made a decision to significantly expand the Company's internet activities. With over 1 million page views during its first two years of operations, it became apparent that the Internet was a viable mechanism to sell products and introduce customers from around the world to the business of the Company. dgse.com was one of the first to utilize the auction format to sell jewelry and related products. In addition, introduction of a live real time trading floor in jewelry, diamonds and fine watches allowed this commercial site to attract wide participation. Our internet store functions as a CyberCashTM authorized site which allows customers to purchase products automatically, securely and on line. Auctions close at least five times per week and trading floor transactions can occur twenty-four hours per day. In September 1999, the Company launched its third internet site FirstJewelryAuctions.com. This new site significantly expanded the Company's offerings on the internet and provides a forum for business to business auctions for the jewelry industry. By December 31, 2000, over 7,500 items were available for sale including over $ 10 million in diamonds. Products and Services (continued...) - --------------------- During 2000 the launched three new sites. FirstCoinAuctions.com provides auctions of the Company's rare coin products. FairchildWatches.com provides wholesale customers a virtual catalog of the Company's fine watch inventory and SilvermanLiquidations.com provides a real-time auction of closeout jewelry products. In addition, the Company recently launched a consolidating portal through which all of its web sites can be accessed, ejewelryportal.com. SOFTWARE - -------- During 1998, management decided to continue the development of its internet software and in February 1999 announced the release of Virtual Auctioneer v2.0, an electronic commerce product that allows users to easily build online auction sites. Virtual Auctioneer is built around an eye media developed bidding engine, which was created utilizing the Allaire ColdFusiontm development environment. Virtual Auctioneer allows clients unparalleled flexibility, customization and power, placing it in its own market space, by offering a complete, integrated online product. LIQUIDATION - ----------- On August 13, 1999 the Company purchased substantially all of the assets of Silverman located in Mt. Pleasant, South Carolina. Silverman's primary business is conducting liquidation, consolidation, promotional or other large-scale retail sales for jewelry stores and other types of retailers. The Company is conducting the business of the through a newly formed wholly owned subsidiary, Silverman Consultants, Inc. ("SCI"). All senior management and key employees of the Silverman have become employees of the SCI. During December 2000 the Company opened a new jewelry super store located in Mt. Pleasant, South Carolina. The store operates through a newly formed wholly owned subsidiary, Charleston Gold And Diamond Exchange, Inc. ("CGDE"). A newly leased facility located in Mt. Pleasant, South Carolina now houses the operations of CGDE and SCI. RECENT DEVELOPMENTS - ------------------- On March 2, 2000 the Company purchased certain assets of Fairchild International, Inc. ("Fairchild") located in Dallas, Texas. Fairchild's primary business is the wholesale of fine watches and other jewelry products. Four former Fairchild key employees have become employees of the Company. The business is being conducted from the Company's facility in Dallas, Texas. Sales and Marketing - ------------------- All Company activities other than consulting services rely heavily on local television, print media, the internet, pamphlets, and brochures to attract retail customers. Solicitations of wholesale customers are made through local print media, direct mailings, and direct contact. Marketing activities emphasize what the Company perceives to be the attractiveness of its pricing and its customer service. The Company relies on professional contacts of the Company's Chairman in order to attract new consulting clients. The Company markets its bullion trading services through a combination of advertising in national coin publications, local print media, coin and bullion wire services and its internet web site. Trades are primarily with coin and bullion dealers on a "cash on confirmation" basis which is prevalent in the industry. Cash on confirmation means that once credit is approved the buyer remits funds by mail or wire concurrently with the mailing of the precious metals. Customer orders for bullion trades are customarily delivered within three days of the order or upon clearance of funds depending on the customer's credit standing. Consequently, there was no significant backlog for bullion orders as of December 31, 2000 or 1999. Company backlogs for fabricated jewelry products were also insignificant as of December 31, 2000 and 1999. Seasonality - ----------- The retail and wholesale jewelry business and the liquidation business is seasonal. The Company realized 32.5% and 38.2% of its annual sales in the fourth quarters of 2000 and 1999, respectively. While the Company's bullion business is not seasonal, management believes it is directly impacted by the perception of inflation trends. Historically, anticipation of increases in the rate of inflation have resulted in higher levels of interest in precious metals as well as higher prices for such metals. Other Company business activities are not seasonal. Competition - ----------- The Company operates in a highly competitive industry where competition is based on a combination of price, service and product quality. The jewelry and consumer loan activities of the Company compete with numerous other retail jewelers and consumer lenders in Dallas, Texas and Mt. Pleasant, South Carolina and the surrounding areas. The bullion industry in which the Company competes is dominated by substantially larger enterprises which wholesale bullion and other precious metal products. Likewise, the consulting and liquidation industry in which the Company competes is dominated by large investment banking, accounting, consulting and liquidation firms. The Company attempts to compete in these industries by offering quality products and services at prices below that of its competitors and by maintaining a staff of highly qualified employees to provide customers services such as watch and jewelry repairs and custom jewelry design. Management is of the opinion that the Company is a factor in the Dallas area jewelry market. However, its consumer lending, bullion trading, consulting and liquidation activities are dominated by larger companies. Employees - --------- As of December 31, 2000, the Company employed 53 individuals, all of which were full time employees. ITEM 2. DESCRIPTION OF PROPERTY The Company owns a 6,000 square foot building in Dallas, Texas which houses retail jewelry, consumer lending and bullion trading operations and its principal executive offices. The land and building are subject to a mortgage maturing in January 2014, with a balance outstanding of approximately $ 591,000 as of December 31, 2000. The Company leases a 5,000 square foot building in Dallas, Texas which housed a retail jewelry store. The lease has a term of ten years beginning July 1, 1994 and requires monthly payments of $ 7,500 for the first five years and $ 9,000 thereafter. In November 1995, the Company closed this store and during 1999, the Company moved its internet activities into this facility. During July 2000 the Company subleased this facility for a term ending on June 30, 2004. The Company leases a 2,400 square foot facility in Carrollton, Texas which houses National Jewelry Exchange. The lease expires on July 31, 2002 and requires monthly lease payments in the amount of $ 1,088. Silverman and CGDE are housed in a leased 11,000 square foot facility in Mt. Pleasant, South Carolina. The lease expires in August 2005 and requires monthly lease payments in the amount of $ 14,421. The Company also maintains a resident agent office in Nevada at the office of its Nevada counsel, McDonald, Carano, Wilson, McClure, Bergin, Frankovitch and Hicks, 241 Ridge Street, Reno, Nevada 89505. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material pending legal proceedings which are expected to have a material adverse effect on the Company and none of its property is the subject of any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS On June 29, 1999 the Company's Common Stock began trading on the NASDAQ Small CAP Market under the symbol "DGSE". Previously, the Company's Common Stock was traded on the American Stock Exchange ("ASE") pursuant to its "Emerging Companies" listing program under the symbol "DLS.EC". The following table sets forth for the period indicated, the per share high and low sale prices as reported by the NASDAQ or the ASE, as the case may be, for the common stock. During the past two years, the Company has not declared any dividends with respect to its common stock. The Company intends to retain all earnings to finance future growth; accordingly, it is not anticipated that cash dividends will be paid to holders of common stock in the foreseeable future. High and low stock prices for the last two years were: 2000 1999 ---- ---- High Low High Low ---- --- ---- --- First Quarter 7 5/8 4 1/2 4 17/32 2 Second Quarter 9 1/8 5 4 1/8 2 3/4 Third Quarter 8 5/8 6 3/4 4 1/8 3 17/32 Fourth Quarter 10 1/8 7 1/8 6 3 1/8 On March 14, 2001, the closing sales price for the Company's common stock was $ 8.25 and there were 675 shareholders of record. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. GENERAL - ------- The Company's bullion trading operation has the ability to significantly increase or decrease sales by adjusting the "spread" or gross profit margin added to bullion products. In addition, economic factors such as inflation and interest rates as well as political uncertainty are major factors affecting both bullion sales volume and gross profit margins. Historically, the Company has earned gross profit margins of from 2.0% to 3.0% on its bullion trading operations compared to 29.0% to 32.0% on the sale of jewelry products. As a result, the Company emphasizes the more profitable jewelry products. Management expects this trend to continue until such time that interest in precious metals results in higher gross margins on bullion products. In 1993 the Company founded DLS in an effort to generate additional revenue and enhance shareholder value by capitalizing on the experience and professional contacts of the Company's Chairman. DLS provides insolvency advisory services to businesses that are or have been involved in proceedings under Chapter 11 of the United States Bankruptcy Code. Marketable equity securities have been categorized as either available-for-sale or trading and carried at fair value. Unrealized gains and losses for available-for-sale securities are included as a component of shareholders' equity net of tax until realized, while unrealized gains and losses for trading securities are included in the statement of income. Realized gains and losses on the sale of securities are based on the specific identification method. Results of Operations - --------------------- Sales increased by $ 3,554,302 (16.6%) in 2000. This increase was the result of a $ 2,124,490 increase in sales from the liquidations segment, a $ 1,412,982 (7.5%) increase in sales from the jewelry segment and a $ 45,368 (28.4%) increase in the sale of internet software products. The increase in sales from the liquidations segment was the result of the acquisition of Silverman in August 1999. The increase in sales from the jewelry segment were the result of sales in the amount of $ 4,389,486 from Fairchild acquired in March 2000. This increase in sales from Fairchild was partially offset by a decrease in the amount of $3,924,931 in sales of bullion products. Consulting services revenue during 2000 was the result of common stock in a client company received for services rendered by DLS during the year. The Company sold marketable trading securities during 2000 and 1999 and realized gains of $ 266,714 and $ 83,116, respectively. The unrealized gains on trading securities during 1999 in the amounts of $ 109,771 was the result of an increase in market value of the Company's investment in trading securities. These realized and unrealized gains on trading securities are reflected in the statement of income. During 2000 the Company transferred all unsold trading securities to held for sale securities. As a result, unrealized gains and losses on these investments are include as a component of shareholders' equity net of tax. Sales increased by $ 5,597,390 in 1999. This increase was the result of $ 2,212,060 in sales from Silverman, $ 1,438,976 increase in the sales Results of Operations (continued...) - --------------------- of jewelry products, $ 1,786,354 increase in the sale of bullion products and $ 160,000 in the sale of internet software products. Management believes that the Company's Internet related activities have had a significant impact on all sectors of its business. In addition, public concerns related to Y2K issues during 1999 resulted in an increase in demand for bullion products. The Company sold marketable trading securities during 1999 realizing a gain in the amount of $ 83,116. The unrealized gains on trading securities in 1999 was the result of an increase in the market value of the Company's investment in trading securities. Cost of goods sold increased by $ $ 1,759,357 (10.3%) during 2000 and $ 3,987,148 (30.5%) during 1999 due to the changes in sales volume. Consulting services cost decreased by $ 132,091 during 1999 due to lower travel and related costs. Selling, general and administrative expenses increased $ 1,862,032 during 2000 and $ 1,403,875 during 1999 due to the acquisitions of Belt Line Pawn in December 1998, the acquisition of Silverman in August 1999 and the acquisition of Fairchild in March 2000. Depreciation and amortization increased by $ 177,858 during 2000 and $ 108,949 during 1999 due to the acquisitions of Beltline Pawn, Silverman and Fairchild. Interest expense increased by $ 283,019 during 2000 and $ 9,627 during 1999 due to notes payable issued for the acquisitions of Silverman and Fairchild. Liquidity and Capital Resources - ------------------------------- During 2000 the Company generated $ 2,730,745 cash flow from operating activities. These funds were used to reduce net indebtness by $ 1,017,773, purchase and retire common stock in the amount of $ 148,863, purchase Fairchild in the amount of $ 369,933, purchase property and equipment in the amount of $ 147,174 and purchase marketable securities in the amount of $ 36,500. As a result, cash and cash equivalents increased by $ 98,502. Management of the Company expects capital expenditures to total approximately $ 100,000 during 2001. It is anticipated that these expenditures will be funded from working capital. From time to time, management has adjusted the Company's inventory levels to meet seasonal demand or in order to meet working capital requirements. Management is of the opinion that if additional working capital is required, additional loans can be obtained from individuals or from commercial banks. If necessary, inventory levels may be adjusted or a portion of the Company's investments in marketable securities may be liquidated in order to meet unforseen working capital requirements. This report contains forward-looking statements which reflect the view of Company's management with respect to future events. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from such expectations are a down turn in the current strong retail climate and the potential for fluctuations in precious metals prices. The forward-looking statements contained herein reflect the current views of the Company's management and the Company assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those contemplated by such forward-looking statements. ITEM 7. FINANCIAL STATEMENTS (a) Financial Statements (see pages 15 - 31 of this report). ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The information contained in Dallas Gold and Silver Exchange, Inc.'s Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-KSB with respect to directors and executive officers of the Company, is incorporated by reference in response to this item. ITEM 10. EXECUTIVE COMPENSATION The information contained in Dallas Gold and Silver Exchange, Inc.'s Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-KSB, with respect to executive compensation and transactions, is incorporated by reference in response to this item. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained in the Dallas Gold and Silver Exchange, Inc.'s Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-KSB with respect to security ownership of certain beneficial owners and management, is incorporated by reference in response to this item. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained in Dallas Gold and Silver Exchange, Inc.'s Proxy Statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-KSB, with respect to certain relationships and related transactions, is incorporated by reference in response to this item. ITEM 13. EXHIBITS REPORTS ON FORM 8-K (a) Exhibits: 21 - List of subsidiaries DGSE Corporation International Jewelry Exchange, Inc. (formerly Dallas Global Travel, Inc.) DLS Financial Services, Inc. eye media, inc. National Jewelry Exchange, Inc. Silverman Consultants, Inc. Charleston Gold And Diamond Exchange, Inc. 10.1 LEASE AGREEMENT dated JUNE 2, 2000 by and between SND PROPERTIES and CHARLESTON GOLD AND DIAMOND EXCHAMGE, INC. The following exhibits are incorporated by reference to the Company's Form 10-QSB dated May 14, 2000: 10.2 EXHIBIT 10.1 - BILL OF SALE AND ASSET PURCHASE AGREEMENT dated March 2, 2000 by and among Dallas Gold AND Silver Exchange, INC., FAIRCHILD INTERNATIONAL, INC. and MACK H. HOSKINS. The following exhibits are incorporated by reference to the Company's Form 8-K dated August 26, 1999: 10.3 EXHIBIT 1.0 AGREEMENT AND PLAN OF MERGER dated AUGUST 13, 1999 by and among Dallas Gold and Silver Exchange Silver Exchange, Inc., SILVERMAN ACQUISITION, INC., JEWEL CASH, INC. (the "COMPANY") and the COMPANY'S SHAREHOLDERS. 10.4 EXHIBIT 2.0 ASSIGNMENT AGREEMENT DATED AUGUST 13, 1999 between SILVERMAN JEWELRY CONSULTANTS, INC., FIRST UNION NATIONAL BANK OF SOUTH CAROLINA, and DALLAS GOLD & SILVER EXCHANGE, INC. (a) Exhibits:, continued 10.5 EXHIBIT 3.0 PROMISSORY NOTE DATED AUGUST 13, 1999 BY DALLAS GOLD & SILVER EXCHANGE, INC. PAYABLE TO FIRST UNION NATIONAL BANK. 10.6 EXHIBIT 4.0 SECURITY AGREEMENT DATED AUGUST 13, 1999 BY DALLAS GOLD & SILVER EXCHANGE, INC. and FIRST UNION NATIONAL BANK. 10.7 EXHIBIT 5.0 BILL OF SALE DATED AUGUST 13, 1999 BY AND BETWEEN FIRST UNION NATIONAL BANK, SILVERMAN RETAIL CONSULTANTS, SILVERMAN JEWELRY CONSULTANTS AND DALLAS GOLD & SILVER EXCHANGE, INC. The following exhibits are incorporated by reference to the Company's Form 10-KSB for the year ended December 31, 1998: 10.8 EXHIBIT 10.1 Renewal of Shopping Center Lease dated as of August 1, 1997 by and between Beltline Pawn Shop and Belt Line - Denton Road Associates. The following exhibits are incorporated by reference to the Company's Form 10-KSB for the year ended December 31, 1996: 10.9 EXHIBIT 10.1 Agreement For Purchase And Sale Of Stock dated December 30, 1996 by and among Dallas Gold And Silver Exchange, Inc. and Henry Hirschman. The following exhibits are incorporated by reference to the Company's Form 10-KSB for the year ended December 31, 1995: 10.10 EXHIBIT 10.1 9% Convertible Promissory Note dated December 5, 1995, by and among Dallas Gold And Silver Exchange, Inc. and A-Mark Precious Metals, Inc. The following exhibits are incorporated by reference to the Company's Form 10-KSB for the year ended December 31, 1994: 10.11 EXHIBIT 10.1 Lease Agreement dated February 11, 1994, by and among Dallas Gold And Silver Exchange, Inc. and Stanley Kline. 10.12 EXHIBIT 10.2 renewal, extension, modification agreement dated January 28, 1994 by and among DGSE Corporation And Michael E. Hall and Marion Hall. (b) Reports on Form 8-K - None SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dallas Gold and Silver Exchange, Inc. By: /s/ L. S. Smith Dated: March 21, 2001 ------------------------- L. S. Smith Chairman of the Board, Chief Executive Officer and Secretary In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. By: /s/ L. S. Smith Dated: March 21, 2001 ------------------------- L.S Smith Chairman of the Board, Chief Executive Officer and Secretary By: /s/ W. H. Oyster Dated: March 21, 2001 ------------------------- W. H. Oyster Director, President and Chief Operating Officer By: /s/ John Benson Dated: March 21, 2001 ------------------------- John Benson Director and Chief Financial Officer (Principal Accounting Officer) BY: /s/ William P. Cordeiro Dated: March 21, 2001 ----------------------- Director By: /s/ James Walsh Dated: March 21, 2001 --------------- Director Report of Independent Certified Public Accountants Board of Directors and Shareholders Dallas Gold and Silver Exchange, Inc. We have audited the accompanying consolidated balance sheet of Dallas Gold and Silver Exchange, Inc. and Subsidiaries as of December 31, 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the two years ended December 31, 2000 and 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Dallas Gold and Silver Exchange, Inc. and Subsidiaries as of December 31, 2000, and the consolidated results of their operations and their cash flows for the years ended December 31, 2000 and 1999 in conformity with accounting principles generally accepted in the United States of America. GRANT THORNTON LLP Dallas, Texas February 7, 2001 Dallas Gold and Silver Exchange, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEET December 31, 2000 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,362,219 Trade receivables 935,002 Inventories 7,087,265 Prepaid expenses 142,291 ------------ Total current assets 9,526,777 MARKETABLE SECURITIES - AVAILABLE FOR SALE 856,081 PROPERTY AND EQUIPMENT - AT COST, NET 1,391,618 DEFERRED TAX ASSETS 171,432 GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $209,702 1,343,804 OTHER ASSETS 123,531 ------------ $ 13,413,243 ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 2,899,918 Current maturities of long-term debt 830,561 Accounts payable - trade 2,176,834 Accrued expenses 458,191 Accrued compensation 322,539 Customer deposits 127,144 Federal income taxes payable 656,604 ------------ Total current liabilities 7,471,791 LONG-TERM DEBT, less current maturities 949,838 SHAREHOLDERS' EQUITY Common stock, $.01 par value; authorized 10,000,000 shares; issued and outstanding 4,907,990 shares 49,080 Additional paid-in capital 5,609,445 Accumulated other comprehensive loss (690,749) Retained earnings 23,838 ------------ Total shareholders' equity 4,991,614 ------------ $ 13,413,243 ============ The accompanying notes are an integral part of this statement. Dallas Gold and Silver Exchange, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, 2000 1999 ----------- ----------- Revenue Sales $24,969,467 $21,415,165 Pawn service fees 95,718 62,809 Consulting services 456,000 -- Gain on sale of marketable securities 266,714 83,116 Unrealized gains on marketable securities -- 109,771 Other income 12,019 1,744 ----------- ----------- 25,799,918 21,672,605 Costs and expenses Cost of goods sold 18,834,689 17,075,332 Consulting service costs 115,053 114,670 Selling, general and administrative expenses 5,467,265 3,605,233 Depreciation and amortization 387,963 210,105 Interest expense 497,004 213,985 ----------- ----------- 25,301,974 21,219,325 ----------- ----------- Income before income taxes 497,944 453,280 Income tax expense 246,260 167,978 ----------- ----------- Net Income $ 251,684 $ 285,302 =========== =========== Earnings per common share Basic $ .05 $ .07 Diluted $ .05 $ .06 Weighted average number of common shares Basic 4,682,375 4,256,920 Diluted 5,043,103 4,612,245 The accompanying notes are an integral part of these statements.
Dallas Gold and Silver Exchange, Inc. and Subsidiaries CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Years ended December 31, 2000 and 1999 Accumulated Common stock Additional other Total -------------------------- paid-in Retained comprehensive shareholders' Shares Amount capital earnings loss equity ----------- ----------- ----------- ----------- ----------- ----------- Balances at January 1, 1999 4,144,912 $ 41,449 $ 3,341,387 $ (513,148) $ (4,950) $ 2,864,738 Net income -- -- -- 285,302 -- 285,302 Other comprehensive income: Unrealized loss on marketable securities, net of tax -- -- -- -- (1,980) (1,980) ----------- Comprehensive income -- -- -- -- -- 283,322 ----------- Purchase and retirement of common shares (39,500) (395) (128,581) -- -- (128,976) Issuance of warrants in connection with debt -- -- 30,000 -- -- 30,000 Common stock issued on conversion of debt 25,000 250 18,500 -- -- 18,750 Common stock issued for services 37,500 375 93,625 -- -- 94,000 Common stock issued for acquisition 200,000 2,000 613,000 -- -- 615,000 ----------- ----------- ----------- ----------- ----------- ----------- Balances at December 31, 1999 4,367,912 43,679 3,967,931 (227,846) (6,930) 3,776,834 Net income -- -- -- 251,684 -- 251,684 Other comprehensive income: Unrealized loss on marketable securities, net of tax -- -- -- -- (683,819) (683,819) ----------- Comprehensive loss -- -- -- -- -- (432,135) ----------- Purchase and retirement of common shares (24,500) (245) (148,618) -- -- (148,863) Issuance of warrants in connection with debt -- -- 53,584 -- -- 53,584 Common stock issued on conversion of debt 498,333 4,983 1,403,002 -- -- 1,407,985 Common stock issued for services 3,500 35 14,173 -- -- 14,208 Common stock issued for acquisition 62,745 628 319,373 -- -- 320,001 ----------- ----------- ----------- ----------- ----------- ----------- Balances at December 31, 2000 4,907,990 $ 49,080 $ 5,609,445 $ 23,838 $ (690,749) $ 4,991,614 =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
Dallas Gold and Silver Exchange, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2000 1999 ----------- ----------- Reconciliation of net income to net cash provided by (used in) operating activities Net income $ 251,684 $ 285,302 Adjustments to reconcile net income to cash provided by (used in) operating activities Common stock issued for services 14,208 94,000 Marketable securities received for consulting services 456,000 -- Depreciation and amortization 387,963 210,105 Unrealized gain on marketable securities - trading -- (109,771) Realized gain on marketable securities - trading (266,714) -- Accretion of debt discount 56,792 -- Deferred taxes (438,136) 32,962 Change in operating assets and liabilities Net change in marketable securities - trading 1,966,902 30,955 Trade receivables (199,224) (568,849) Inventories (1,174,784) (1,655,411) Prepaid expenses and other assets (142,626) (80,707) Accounts payable and accrued expenses 1,289,806 656,712 Accrued compensation (48,102) 5,914 Customer deposits 36,950 (84,406) Federal income taxes payable 540,026 104,920 ----------- ----------- Total net cash provided by (used in) operating activities 2,730,745 (1,078,274) Cash flows from investing activities Purchase of marketable securities (36,500) -- Decrease in notes receivable - officers -- 4,001 Purchases of property and equipment (147,174) (172,280) Acquisition of Fairchild assets (369,933) -- ----------- ----------- Net cash used in investing activities (553,607) (168,279) ----------- -----------
The accompanying notes are an integral part of these statements.
Dallas Gold and Silver Exchange, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED Years ended December 31, 2000 1999 ----------- ----------- Cash flows from financing activities Proceeds from indebtness $ 1,001,136 $ 3,524,079 Repayment of indebtness (2,018,909) (1,889,670) Purchase and retirement of common stock (148,863) (128,976) ----------- ----------- Net cash provided by (used in) financing activities (1,166,636) 1,505,433 ----------- ----------- Net increase in cash and cash equivalents 98,502 258,880 Cash and cash equivalents at beginning of year 1,263,716 1,004,836 ----------- ----------- Cash and cash equivalents at end of year $ 1,362,218 $ 1,263,716 =========== ===========
Supplemental schedule of noncash, investing and financing activities: Interest paid during 2000 and 1999 amounted to $457,518 and $211,189, respectively. Income taxes paid during 2000 amounted to $165,153. No taxes were paid in 1999. During 2000 and 1999, debt amounting to $1,006,863 and $18,750, respectively, was converted to common stock. As more fully described in Note L, in connection with the Company's acquisition of Silverman Consultants, Inc., 200,000 shares of common stock were issued with a value of $615,000 and a $2,500,000 note payable was assumed for $2,500,000 of inventory and $131,000 of furniture and fixtures. As more fully described in Note L, in connection with the Company's acquisition of Fairchild International, Inc., 62,745 shares of common stock were issued with a value of $320,001 as part of the purchase price which included $350,000 in cash and a promissory note in the amount of $450,000. The accompanying notes are an integral part of these statements. Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 and 1999 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations -------------------- Dallas Gold and Silver Exchange, Inc. and its subsidiaries (the Company), sell jewelry and bullion products to both retail and wholesale customers throughout the United States through its facility in Dallas, Texas and through its internet sites. In addition, the Company provides consulting services related to reorganization of other business enterprises and liquidations of jewelry retailers. Principles of Consolidation --------------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated. Cash and Cash Equivalents ------------------------- For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Investments in Marketable Securities ------------------------------------ Marketable equity securities have been categorized as either available-for-sale or trading and carried at fair value. Unrealized gains and losses for available-for-sale securities are included as a component of shareholders' equity net of tax until realized, while unrealized gains and losses for trading securities are included in the statement of income. Realized gains and losses on the sale of securities are based on the specific identification method. Inventory --------- Jewelry and other inventory is valued at lower-of-cost-or-market (specific identification). Bullion inventory is valued at lower-of-cost-or-market (average cost). Property and Equipment ---------------------- Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are being provided on the straight-line method over periods of five to thirty years. Machinery and equipment under capital lease are amortized on the straight-line method over their useful lives. Goodwill -------- Goodwill is being amortized over periods expected to be benefited using the straight-line method with periods ranging from five to ten years. Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Financial Instruments --------------------- The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts receivable, marketable securities, short-term debt, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount reported for long-term debt approximates fair value because substantially all of the underlying instruments have variable interest rates which reprice frequently or the interest rates approximate current market rates. Advertising Costs ----------------- Advertising costs are expensed as incurred and amounted to $439,300 and $398,400 for 2000 and 1999. Income Taxes ------------ Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities. Earnings Per Share ------------------ Basic earnings per common share is based upon the weighted average number of shares of common stock outstanding. Diluted earnings per share is based upon the weighted average number of common stock outstanding and, when dilutive, common shares issuable for stock options, warrants and convertible securities. Stock-based Compensation ------------------------ The Company accounts for stock-based compensation to employees using the intrinsic value method. Accordingly, compensation cost for stock options to employees is measured as the excess, if any, of the quoted market price of the Company's common stock at the date of the grant over the amount an employee must pay to acquire the stock. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications ----------------- Certain reclassifications were made to the prior year's consolidated financial statements to conform to the current year presentation. Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE B - INVENTORIES A summary of inventories at December 31, 2000 is as follows: Jewelry $6,695,405 Scrap gold 188,045 Bullion 42,632 Other 159,183 ---------- $7,087,265 ========== NOTE C - INVESTMENTS IN MARKETABLE SECURITIES Marketable securities have been classified in the consolidated balance sheet according to management's intent. The carrying amount of available-for-sale securities and their fair values at December 31, 2000 follows: Gross Gross unrealized unrealized Fair Cost gains losses value ---------- ---------- ---------- ---------- Equity securities $1,908,288 $ 115,200 $1,167,407 $ 856,081 ========== ========== ========== ========== NOTE D - PROPERTY AND EQUIPMENT A summary of property and equipment at December 31, 2000 is as follows: Land $ 551,300 Buildings and improvements 682,253 Machinery and equipment 758,320 Furniture and fixtures 202,742 ---------- 2,194,615 Less accumulated depreciation and amortization (802,997) ---------- $1,391,618 ========== Property and equipment under capital lease is $158,000. Accumulated depreciation for these assets was $113,200 as of December 31, 2000.
Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE E - NOTES PAYABLE A summary of notes payable at December 31, 2000 follows: Note payable to bank, due in variable weekly installments based on 90% of sales price of inventory collateral approximating $815,896 The note bears interest at 9.25% and is due June 24, 2001 $1,582,117 Line of credit payable to bank with interest at prime plus 1% collateralized by inventory and accounts receivable and due November 1, 2001. Maximum borrowings under the line of credit are $600,000 500,000 Note payable to limited partnership with interest at 10%, collateralized by marketable securities and due April 1, 2001, net of discount of $26,792 248,208 Various demand notes to individuals with interest rates from 8% to 14% 569,593 ---------- $2,899,918 ========== In connection with note payable to limited partnership, the Company issued warrants for 27,500 shares of common stock expiring December 31, 2001. The warrants have an exercise price of $6.20 and were valued at $66,550 at the date of grant. NOTE F - LONG-TERM DEBT A summary of long-term debt at December 31, 2000 follows: Mortgage payable, due in monthly installments of $6,452, including interest based on 30 year US Treasury note rate plus 2-1/2% (10.96% at December 31, 2000); balance due in January 2014 $ 590,764 Note payable, due March 2, 2005. Interest is payable quarterly at a rate of 8% 415,850 Note payable, due December 31, 2001. Interest is payable quarterly at a rate of 8% 675,000 Capital lease obligations 98,785 ---------- 1,780,399 Less current maturities (830,561) ---------- $ 949,838 ==========
Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE F - LONG-TERM DEBT - Continued Convertible Note ---------------- In December 1996, the Company issued a long-term convertible note in the amount of $875,000. The note bears interest at 8% payable quarterly. During 2000, $100,000 of the note was converted to 100,000 shares of common stock. The remaining principal of $675,000 is due December 2001. Also during 2000, approximately $907,000 of debt was converted into 398,333 shares of common stock. The following table summarizes the aggregate maturities of long-term debt and payments on the capital lease obligations: Obligations under Long-term capital debt leases Totals --------- --------- --------- 2001 $ 802,880 $ 36,688 $ 839,568 2002 114,980 34,242 149,222 2003 124,605 32,504 157,109 2004 135,089 12,346 147,435 2005 66,483 1,248 67,731 Thereafter 437,576 -- 437,576 --------- --------- --------- Total 1,681,614 117,028 1,798,642 Amounts representing interest (interest rates Ranging from 10.8% to 23.3%) -- (18,242) (18,242) --------- --------- --------- 1,681,614 98,785 1,780,399 Less current portion (802,880) (27,681) (830,561) --------- --------- --------- $ 878,734 $ 71,104 $ 949,838 ========= ========= =========
Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE G - EARNINGS PER SHARE A reconciliation of the income and shares of the basic earnings per common share and diluted earnings per common share for the years ended December 31, 2000 and 1999 is as follows: 2000 --------------------------------- Per-share Income Shares amount --------- --------- --------- Basic earnings per common share Income from operations allocable to common stockholders $ 251,684 4,682,375 .05 ========= Effect of dilutive securities Stock options and warrants -- 204,872 Convertible debt 11,360 155,856 --------- --------- Diluted earnings per common share Income from operations available to common stockholders plus assumed conversions $ 263,044 5,043,103 .05 ========= ========= ========= 1999 --------------------------------- Per-share Income Shares amount --------- --------- --------- Basic earnings per common share Income from operations allocable to common stockholders $ 285,302 4,256,920 $ .07 ========= Effect of dilutive securities Stock options and warrants -- 95,006 Convertible debt 11,629 260,319 --------- --------- Diluted earnings per common share Income from operations available to common stockholders plus assumed conversions $ 296,931 4,612,245 $ .06 ========= ========= =========
NOTE H - STOCK OPTIONS The Company has granted stock options to key employees to purchase shares of the Company's common stock. Each option issued vests according to schedules designated by the Board of Directors, not to exceed three years. The exercise price is based upon the estimated fair market value of the Company's common stock at the date of grant, and is payable when the option is exercised.
Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE H - STOCK OPTIONS - Continued The Company has adopted only the disclosure provisions of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS 123). It applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for its plans and does not recognize compensation expense for its stock-based compensation. The following table summarizes the activity in common shares subject to options for the two years ended December 31, 2000: 2000 1999 ----------------------- ----------------------- Weighted Weighted average average Options exercise price Options exercise price ------- -------------- ------- -------------- Outstanding at beginning of year 434,000 2.55 340,000 $2.12 Granted - - 94,000 4.13 ------- ------- ----- Outstanding at end of year 434,000 2.55 434,000 $2.55 ======= ==== ======= ===== Exercisable at end of year 408,000 2.49 395,000 $2.45 ======= ==== ======= ===== Weighted average fair value of options granted during the year - $3.39 ==== =====
Stock options outstanding at December 31, 2000: Options Outstanding Options Exercisable ----------------------- ----------------------- Weighted Weighted Weighted Range of average average average exercise price Options expected life exercise price Options exercise price - -------------- ------- ------------- -------------- ------- -------------- $1.63 to $2.25 340,000 8 years $2.12 340,000 $2.12 $3.63 to $4.19 59,000 8 years $3.69 34,000 $3.83 $4.88 35,000 5 years $4.88 35,000 $4.88 ------- ------- 434,000 408,000 ======= =======
Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE H - STOCK OPTIONS - Continued Had compensation costs for stock-based compensation plans been determined consistent with the fair value method of SFAS 123, the Company's net earnings and net earnings per common and diluted share for 1999 would have been: 2000 1999 -------- -------- Net earnings As reported $251,684 $285,302 Pro forma 227,917 155,106 Basic earnings per common share As reported .05 .07 Pro forma .05 .04 Diluted earnings per common share As reported .05 .06 Pro forma .05 .03 The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future disclosures because they do not take into effect pro forma compensation expense related to grants made before fiscal 1996. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants after 1998, expected volatility of 70% to 86%, risk-free rate of 6.3 to 6.6%, no dividend yield and expected life of 8 years. NOTE I - COMPREHENSIVE INCOME Comprehensive income at December 31, 2000 and 1999 is as follows: Before-Tax Tax Net-of-Tax Amount Benefit Amount ----------- -------- ---------- Comprehensive income (loss) at January 1, 1999 $ (7,500) $ 2,550 $ (4,950) Unrealized holding losses arising during 1999 (3,000) 1,020 (1,980) ----------- -------- ---------- Comprehensive income (loss) at December 31, 1999 (10,500) 3,570 (6,930) Unrealized holding losses arising during 2000 (1,041,707) 357,888 (683,819) ----------- -------- ---------- Comprehensive income (loss) at December 31, 2000 $(1,052,207) $361,458 $ (690,749) =========== ======== ==========
Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE J - INCOME TAXES The income tax provision reconciled to the tax computed at the statutory Federal rate follows: 2000 1999 --------- --------- Tax expense at statutory rate $ 169,301 $ 154,115 Nondeductible goodwill 32,844 11,949 Basis difference in acquired assets 36,687 -- Other 7,428 -- --------- --------- Tax expense $ 246,260 $ 167,978 ========= ========= Current $ 684,396 $ 135,016 Deferred (438,136) 32,962 --------- --------- $ 246,260 $ 167,978 ========= ========= Deferred income taxes are comprised of the following at December 31, 2000: Deferred tax assets: Unrealized loss on available for sale securities $ 151,489 Property and equipment 11,443 Goodwill 8,500 --------- $ 171,432 =========
NOTE K - OPERATING LEASES The Company leases certain of its facilities under operating leases. The minimum rental commitments under noncancellable operating leases are as follows: Year ending Lease Sub-lease December 31, obligations receivables Total ------------ ----------- ----------- ---------- 2001 $ 386,943 $ (90,000) $ 296,943 2002 386,760 (90,000) 296,760 2003 388,764 (90,000) 298,764 2004 259,176 (60,000) 199,176 ----------- ----------- ---------- $ 1,421,643 $ (330,000) $1,091,643 =========== =========== ========== Rent expense for the years ended December 31, 2000 and 1999 was approximately $386,000 and $221,000, respectively, and was decreased by sublease income of approximately $23,000 and $18,000, respectively. Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE L - ACQUISITIONS On March 2, 2000, the Company acquired certain assets of Fairchild International, Inc. The purchase price of $1,120,001 consisted of $350,000 in cash, a promissory note for $450,000, and 62,745 shares of the Company's common stock valued at $320,001. The acquisition has been accounted for as a purchase. Accordingly, a portion of the purchase price has been allocated to net tangible and intangible assets acquired based on their estimated fair values. The purchase price has been allocated to furniture and fixtures in the amount of $120,000 and goodwill in the amount of $1,000,000. Goodwill is being amortized over ten years. On August 13, 1999 the Company purchased substantially all assets of Silverman Consultants, Inc. ("Silverman") located in Mt. Pleasant, South Carolina. Silverman's primary business is conducting liquidation, consolidation, promotional or other large-scale retail sales for jewelry stores and other types of retailers. The purchase price of $3,100,000 consisted of the issuance of 200,000 of the Company's newly issued unregistered common stock and the assumption by the Company of a $2,500,000 obligation to a bank. The purchase price has been allocated as follows: inventory ($2,500,000); property and equipment ($131,000); and goodwill ($469,000). Goodwill is being amortized over five years. The results of Silverman have been included in the consolidated financial statements since August 13, 1999. The following unaudited pro forma information presents a summary of 2000 and 1999 consolidated results of operations as if the acquisitions had occurred on January 1, 1999: 2000 1999 ----------- ----------- Revenue $25,998,000 $26,645,518 Net income (loss) 232,592 (518,566) Earnings per share Basic .05 (.12) Diluted .05 (.12)
Dallas Gold and Silver Exchange, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 NOTE M - SEGMENT INFORMATION Management identifies reportable segments by product or service offered. The Company's operations by segment were as follows: Consulting Corporate Software Liquidations Jewelry Services & other Consolidated -------- ------------ ----------- ---------- --------- ------------ Revenues 2000 $205,368 $ 4,336,550 $20,535,286 $ 722,714 $ -- $ 25,799,918 1999 160,000 2,212,060 19,107,084 193,461 -- 21,672,605 Operating income (loss) 2000 $ 50,291 $ (347,276) $ 278,941 $ 369,080 $ (99,352) $ 251,684 1999 86,715 (48,371) 462,582 (45,150) (170,474) 285,302 Identifiable assets 2000 $134,241 $ 3,765,941 $ 8,620,016 $ 886,045 $ 7,000 $ 13,413,243 1999 132,315 3,682,549 4,699,172 3,951,319 -- 12,465,355 Capital expenditures 2000 $ 52,915 $ 44,702 $ 245,010 $ 2,017 $ -- $ 344,644 1999 19,375 131,426 104,764 8,738 -- 264,303 Depreciation and amortization 2000 $ 12,737 $ 142,207 $ 216,552 $ 16,467 $ -- $ 387,963 1999 4,045 89,318 99,115 17,627 -- 210,105
EX-10.1 2 0002.txt LEASE AGREEMENT STATE OF SOUTH CAROLINA ) EXHIBIT 10.1 ) LEASE AGREEMENT COUNTY OF CHARLESTON ) THIS LEASE AGREEMENT is made and entered into on this __2nd____ day of JUNE, 2000, by and between SMD PROPERTIES, (hereinafter referred to as the "Landlord") and CHARLESTON GOLD AND DIAMOND EXCHANGE, INC. (hereinafter referred to as the "Tenant"). W I T N E S S E T H: 1. Premises. The Landlord hereby Leases to the Tenant, and the Tenant hereby Leases from the Landlord, the premises of approximately 9,750 square feet identified as (the "Premises") of 975 Pinehollow Road, Mount Pleasant, SC 29464, (the "Building") and being more particularly described in and shown on the floor plan as "A-1" attached hereto and made a part hereof. The total rentable area of the Premises is stipulated to be the number above and shall be adjusted only by the Landlord as necessary to reflect actual changes in the Premises or Building. The building shall be built per the following plans and specifications that are incorporated, herein by reference: 1) Earthsource Engineering, SITE, CIVIL, & LANDSCAPE DRAWINGS Job Number: 99-153, Final Approval 12-22-99 2) McKellar & Associates Architects, Architectural Drawings Project Number: 99021.07, Final Approval 11-15-1999, A101 DATED 04-28-00: 3) Devita & Associates, Structural, Electrical, Mechanical & Plumbing Project Number: 99081, Final Approval 11-3-99 TO HAVE AND TO HOLD THE Premises upon the terms and conditions hereinafter set forth. 2. Term. The term ("Term") of this Lease shall begin August 1, 2000 or as soon thereafter as Landlord delivers possession of the Premises to Tenant, or upon final completion and approval by Town of Mt. Pleasant (the "Commencement Date") and end at midnight on August 31, 2005 thereafter unless sooner terminated in accordance with the terms hereof. The Tenant shall be granted two (2) five-year (5) options to renew the lease with rental increases of (3%) three percent yearly. 3. Possession. If for any reason Landlord fails to deliver possession of the Premises on or before the specified Commencement Date, this Lease shall remain in full force and effect and the Landlord shall have no liability for delay, but Base Rent and Additional Rent, ("Rent"), and Lease Term shall not commence until the later of the date Landlord delivers possession of the Premises to the Tenant or date of final completion and approval of the Town of Mt. Pleasant. 4. Base Rent. The Tenant shall pay to the Landlord without deduction, set off, prior notice or demand, Base Rent ("Base Rent") as follows: Year One: $14,421.88 per month; or $173,062.50 per year, with rental increases of (3%) three percent each year calculated from the from the previous year. All Base Rent is payable in advance in equal monthly installments, on the first day of each and every calendar month during the Term hereof. All Base Rent payments shall be made to SMD PROPERTIES, 960 BERRY SHOALS ROAD, DUNCAN, S. C. 29334 or at such other place as the Landlord may designate in writing to Tenant. If the Commencement Date of this Lease is a day other than the first day of the month, Base Rent for the first month shall be prorated and paid with the first regular monthly installment. Any Base Rent hereunder which is not received by the fifth, (5th), day of each month shall be subject to a delinquency charge of the greater of either one and one half (1 1/2%) percent per month on the unpaid balance, accruing from the first day of every month for which Base Rent is due or the sum of One Hundred Dollars, ($100.00), so long as the amount does not exceed the amount allowed by applicable law. Said delinquency charge shall be in addition to the default provisions herein. 5. Security Deposit. Tenant shall deposit the sum of TWENTY EIGHT THOUSAND EIGHT HUNDRED FORTY THREE DOLLARS AND SEVENTY-SIX CENTS ($28,843.76) with Landlord upon execution of this Lease as security for the full performance of all of the provisions of this Lease on its part (the "Security Deposit"). If at any time during the Term of this Lease, Tenant shall be in default, Landlord, without limitation of any other right or remedy which may apply because of such default, may (i) apply all or part of the Security Deposit for the payment of Rent in default; and/or (ii) appropriate all or part of the Security Deposit to cure the default, including, but not limited to, the defraying of any and all reasonable and necessary expenses incurred by Landlord in recovering possession of the Premises upon termination of this Lease. To the extent that all or any portion of the Security Deposit is thus applied or appropriated by the Landlord, and if this Lease is not terminated as a result of the default, Tenant, at Landlord's request and as a condition to the continuance of this Lease, shall pay to the Landlord, within ten (10) days of request by the Landlord, an amount sufficient to place in the Landlord's hands the amount of the original Security Deposit, taking into account the portion, if any, of the adjusted original Security Deposit as may not have been applied or expended by Landlord in accordance herewith. Landlord may retain the Security Deposit in a general account with other funds. Tenant shall not be entitled to interest on the Security Deposit. If Tenant is not in default at the termination of this Lease, Landlord shall return the Security Deposit (or the portion that has not been applied or appropriated in accordance herewith) to the Tenant within thirty days (30) after the termination date of this Lease. 6. Use. The Tenant shall use and occupy the Premises solely as general office and retail space and for no other purpose without the prior written consent of Landlord. Tenant shall comply with all laws, ordinances, orders, or regulations of any lawful authority having jurisdiction over the Premises and the use thereof. Tenant shall not at any time leave the Premises vacant, but shall in good faith continuously throughout the Term of this Lease conduct and carry on in the entire Premises the type of business for which the Premises are Leased. Tenant shall not permit any objectionable or unpleasant odors to emanate from the Premises; nor place or permit any radio, television, loudspeaker or amplifier, on the roof or outside the Premises or where the same can be seen or heard from outside the Premises; nor place any antenna, awning or other projection on the exterior of the Premises; or take any action which would constitute a nuisance or would disturb or endanger other Tenants of the Building or unreasonably interfere with the use of their respective Premises; or do anything which would tend to injure the reputation of the Building. Tenant expressly acknowledges that it is its responsibility to obtain a business license from the Town of Mount Pleasant, SC. Tenant represents, warrants and covenants to Landlord throughout the term of the Lease as follows: (a) Tenant is and agrees to remain in compliance with all applicable federal, state and local laws relating to protection of the public health, welfare, and the environment ("environmental laws") with respect to Tenant's use and occupancy of the Premises. Tenant agrees to cause all of its employees, agents, contractors, sublessees, assignees, and any other persons occupying or present on the Premises ("occupants") to comply with all environmental laws applicable to their activities in and around the Premises. (b) Tenant shall not bring into the Building or the Premises, nor shall it allow any occupant to bring into the Premises, any chemical, waste material or other substance that is defined or otherwise classified in any environmental laws as a "hazardous substance", "hazardous material", "hazardous waste", "toxic substance", or "toxic pollutant", except for small quantities of any such substances that are consistent with ordinary use of the Premises. If any quantity of any such substance is brought into the building or the Premises by Tenant or occupants for ordinary use, Tenant or occupants shall handle, use, and dispose of such substance in a reasonable and prudent manner and in compliance with all applicable environmental laws. (c) Landlord or its representative may inspect the Premises at reasonable times, upon prior notice to Tenant, to insure compliance with the requirements of this paragraph. As part of its inspection, Landlord or its representative may take such samples as Landlord in its sole discretion deems necessary, including without limitation, samples of substances located on the Premises, and neither Landlord nor any representative shall have any liability to Tenant as a result of such sampling activity. In the event Landlord determines that Tenant possesses any substances in violation of this paragraph, Landlord shall notify Tenant and Tenant shall immediately remove those substances in compliance with all applicable laws, rules, ordinances, standards and regulations. In the event that Tenant fails to comply with the requirements of this paragraph, Landlord or its representative may enter the Premises and provide for the removal and disposal of those substances as Tenant's agent. Tenant agrees to remain responsible for the substances and to indemnify, defend, hold harmless, and protect Landlord and any representative of Landlord against all costs, fines, penalties, or damages incurred by Landlord or its agent, representative or property manager due to any activities by Landlord pursuant to this paragraph, except in the event of Landlord's negligence. Tenant agrees that no adequate remedy exist at law to enforce this paragraph and that damages would not make Landlord whole; accordingly, Tenant agrees that Landlord may seek and obtain injunctive relief to enforce this paragraph. Tenant shall not place a load on any floor in the Premises exceeding the floor load such floor was designed to carry. Tenant shall not install, operate or maintain any heavy equipment in the Premises except in a manner that properly distributes weight. Landlord agrees that it is the Landlord's responsibility to ensure that the floor under the safe meets proper load standards and acknowledges that the safe will be installed on the Premises. 7. Substituted Premises. Intentionally Deleted. 8. Assignment or Sublet. Tenant shall not transfer or assign this Lease or sublet the demised Premises without the prior written consent of Landlord (not to be unreasonably withheld) and any attempt to do so shall be void and confer no rights upon any third person. The consent by Landlord to any transfer, assignment or subletting shall not be deemed a waiver by Landlord of any prohibition against any future transfer, assignment or subletting. Further, in the event that Tenant request the Landlord's consent to an assignment or sublease of fifty percent or more of the Premises, the Landlord shall have the option to release the Tenant of its obligations hereunder and accelerate the expiration of the term hereof, and Landlord may subsequently enter into a new lease agreement directly with any such tenant. Consent to one assignment or sublease shall not constitute a waiver of this provision with respect to subsequent transactions. Each subtenant or assignee shall be liable to Landlord for all obligations of the Tenant hereunder, but the Tenant shall not be thereby relieved of such obligations unless Landlord has exercised its option to release Tenant and accelerate expiration of the Term hereof, so that Landlord can enter into a new lease agreement with a new tenant. In such case, Tenant shall be relieved of any further obligation under the Lease. The Landlord shall have the right in its absolute and sole discretion to withhold consent to any sublease or assignment if Tenant shall be in default or breach of this Lease or if the proposed assignee or sublessee or its business will cause Landlord to incur any cost of whatever kind or nature. Any transfer of this Lease from Tenant by merger, consolidation, liquidation, or otherwise by operation of law shall be deemed to constitute an assignment for the purpose of this Lease. In the event of a purported subletting of all or any part of said Premises or purported assignment of this Lease, it is mutually agreed that Tenant will nevertheless remain fully and primarily liable under the terms, covenants and conditions of this Lease. At Landlord's election, Landlord may consider any purported subletting or assignment a default and elect any remedies provided herein. If this Lease is assigned or if the Premises or any part thereof be subleased or occupied by anybody other than Tenant in contravention of this Lease, Landlord may, nevertheless, collect from the assignee, sublessee or occupant any rent payable by Tenant under this Lease and apply the amount collected to rent herein reserved, but such election will not be deemed an acceptance of the assignee, sublessee or occupant as Tenant nor a release of Tenant from performance under this Lease. If Tenant of this Lease is a corporation, and if at any time during the term of this Lease the person or persons owning a majority of such corporation's voting shares on the date hereof shall cease to own a majority of such shares whether due to sale, assignment, operation of law or other disposition, Tenant will so notify Landlord and Landlord shall have the right, at its option, to terminate this Lease by notice to Tenant given within thirty days following receipt of such notice. This provision shall not be applicable to Tenant if all of the outstanding voting stock of such corporation is listed on a national securities exchange as defined in the Securities Exchange Act of 1934, as amended. 9. Condition of Premises. Landlord agrees that the Premises shall be completed and finished according to the specifications described in Paragraph 1 and incorporated herein by reference. Landlord agrees to paint the interior of Premises in a color to be chosen by the Tenant and approved by the Landlord. Landlord shall install carpeting and light bulbs within the Premises prior to occupancy. Except as provided in the specifications, Landlord hereby disclaims any express or implied warranties as to the Premises including, but not limited to any implied warranty of merchantability or fitness for a particular purpose. 10. Americans With Disabilities Act. Landlord warrants and represents that the Premises shall be built to comply with current standards of the American with Disabilities Act of 1990. The parties hereby agree that the Premises may be subject to the terms and conditions of the Americans With Disabilities Act of 1990 (hereinafter the "ADA"). The parties further agree and acknowledge that it shall be the sole responsibility of the Tenant to comply with any and all provisions of the ADA, as such compliance may be required to operate the Premises. The Tenant further agrees to indemnify and hold the Landlord harmless against any claims which may arise out of Tenant's failure to comply with the ADA, such indemnification shall include, but not necessarily be limited to, reasonable attorneys' fees, court costs and judgments as a result of said claims, except for such claims arising out of the Building as built by Landlord. Within ten days after receipt, Tenant shall advise the Landlord in writing and provide the Landlord with copies of any notices alleged in violation of ADA relating to any portion of the demised Premises, any claims made or threatened in writing regarding non-compliance with the ADA and relating to any portion of the Premises or any governmental or regulatory actions or investigations instituted or threatened regarding non-compliance with the ADA and relating to any portion of the Premises. 11. Improvements. All improvements, alterations, and additions to the Premises desired by Tenant shall be made at Tenant's expense, in good and workmanlike manner and in accordance with plans and specifications which have been previously approved in writing by Landlord. If the improvements, alterations, or additions are to be made by a contractor other than Landlord's, Landlord reserves the right to approve such contractor, which approval shall not be unreasonably withheld, and to require adequate lien waivers, bonds, permits, licenses, and insurance. Tenant shall indemnify and hold Landlord harmless against any loss, liability or damage resulting from such work by the Tenant. All improvements and additions made by the Tenant attached to the Premises, including without limitation all partitions, carpets, lighting fixtures, doors, hardware, shelves, cabinets, safe, and ceilings, shall remain in the Premises and shall be surrendered to Landlord at the expiration or earlier termination of this Lease unless Landlord requests their removal in which event, Tenant shall remove the same and restore the Premises to its original condition at Tenant's expense. Tenant shall specifically have the right to remove modular systems that may be attached to walls or floors so long as Tenant repairs any damage to the walls or floors caused by installation or removal of any such item. If by reason of any alteration, repair, labor performed or materials furnished to the Premises for or on behalf of Tenant, any mechanic's or other lien shall be filed, claimed, perfected or otherwise established against the Premises, Tenant shall discharge or remove the lien by bonding or otherwise within fifteen (15) days after the same is filed. If Tenant fails to cause such lien or notice of lien to be discharged within such period, Landlord may, but shall not be obligated to, discharge the same either by paying the amount claimed to be due or by procuring the discharge of such lien by deposit, bond, or otherwise and Tenant shall reimburse Landlord for such amounts upon demand. 12. Utilities and Services. Landlord shall, during the Term hereof, furnish Tenant, without charge: reasonable quantities of water to lavatories in or appurtenant to the Premises. Landlord shall contract for and pay for installation of heating, cooling and electric systems for the Premises including lighting and small business machine purposes only, such as word processors, personal computers, electric typewriters and calculators, with all applicable federal and state regulations. Janitorial services for cleaning of the Premises shall be provided by the Tenant. Tenant shall furnish, at its own expense and without damage or threat of damage to the Premises or any part of the Building, any utilities or services required for its use of the Premises, including, but not limited to, telephone service and electrical power and connections for electronic data processing equipment and other large business equipment. 13. Repairs by Landlord. Upon reasonable notice from Tenant, Landlord shall make necessary repairs to: (1) roof; (2) foundation; (3) exterior wall; (4) any load bearing interior walls of the Premises; (5) below grade plumbing lines; and (6) replacement of the components of the heating and air conditioning equipment that services the Premises if necessitated by ordinary wear and tear, provided that said repairs shall not be occasioned by fire or other casualties as contemplated in paragraph 20 herein, however, Landlord shall not be required to repair windows, plate glass, doors or any fixtures and appurtenances composed of glass or any damage caused by any act, omission, misuse or negligence of Tenant, Tenant's agents or Tenant's invitees. Tenant shall keep the Premises in good, clean and habitable condition. At the expiration of the Lease, Tenant shall surrender the Premises in good condition, excepting reasonable wear and tear. 14. Rubbish. Tenant shall take good care of the Premises and keep the same free from waste at all times. Tenant shall store all trash and garbage within the Premises, arranging for the regular pick up of such trash and garbage at Landlord's expense. Receiving and delivery of goods and merchandise and removal of garbage and trash shall be made only in the manner and areas prescribed by Landlord. Tenant shall not operate an incinerator or burn trash or garbage within the Premises or any Common Area. 15. Signs; Displays. Tenant shall not, without Landlord's prior written consent, (a) install any exterior lighting, decorations, paintings, awnings, canopies, or the like or (b) erect or install any signs, window or door lettering, placards, decorations and advertising media of any type which can be viewed from the exterior of the Premises. All signs, placards, lettering, decorations, and advertising media shall conform in all respects to the sign criteria established by Landlord for the building from time to time in the exercise of its sole discretion and shall be subject to the prior written approval of Landlord as to construction, method of attachment, size, shape, height, lighting, color, and general appearance. All signs shall be kept in good condition and in proper operating order at all times. Tenant shall remove any such signs, lettering, placards, or decorations at the expiration or earlier termination of this Lease and repair any damage to the Premises and/or building caused by the installation or removal of same. 16. Property of Tenant. Tenant may, and at the expiration or earlier termination hereof shall, remove all furniture, equipment, and other personal property which Tenant shall have placed in the Premises or on the exterior thereof; provided that Tenant shall repair any damage to the Premises caused by the installation or removal of the same. All such property shall, during the Term hereof, be at the risk of the Tenant only, and Landlord shall not be liable for any loss thereof or damage thereto resulting from any cause whatsoever; and each policy of insurance covering such property shall contain a standard waiver of subrogation endorsement. Any such property not removed at the expiration or earlier termination of this Lease shall be deemed abandoned and may be disposed of by the Landlord in any manner whatsoever. Landlord shall have the right to deduct any costs and expenses incurred by Landlord in disposing of Tenant's property from the security deposit. In the event that the costs and expenses incurred by Landlord exceed the balance of the security deposit, Tenant shall reimburse Landlord for the discrepancy between the balance of the security deposit and the actual costs and expenses incurred by the Landlord. 17. Landlord's Liability. Landlord shall not be responsible or liable for and Tenant hereby expressly waives all claims against Landlord for injury to persons or damage to Tenant's property resulting from: (i) Water, snow or ice being upon or coming through the roof, walls, windows or otherwise; (ii) Wind, water or flooding; (iii) Any act, omission or negligence of co-tenants or other persons or occupants of the Building; (iv) The acts of any owners or occupants of adjoining or contiguous property; or (v) Failure of the electrical system, the heating or air conditioning systems, or the plumbing or sewer systems, Landlord shall not be liable for any damage occasioned by its failure to keep the Premises in repair unless Landlord is obligated to make such repairs under the terms hereof, notice of the need for such repairs has been given Landlord, a reasonable time has elapsed and Landlord has failed to make such repairs. Notwithstanding the above, Tenant does not waive all claims against Landlord for injury to persons or damage to Tenants property resulting from (I) - (v) above, when such a damage is due to Landlord's failure to keep Premises under repair or acts, omission or negligence of Landlord's agents or employees. 18. Additional Rent, Taxes and Insurance. In addition to the Base Rent provided for in Paragraph Four (4) herein, Tenant shall pay to the Landlord, as Additional Rent, its pro-rata share of all increases in insurance (liability, fire and extended coverage insurance carried by Landlord insuring the Building) and real estate taxes assessed on the Building and/or the land upon which the Building is located. Such payment shall be due and payable thirty (30) days after a statement thereof is rendered to Tenant by Landlord. If said Additional Rent is not received by Landlord a delinquency charge of one and one-half (1 1/2%) percent per month shall accrue on the unpaid amount from the due date until paid. The term "real estate taxes" shall include any taxes, assessments, levies or charges assessed or imposed on the land and/or the Building of which the Premises forms a part. Tenant shall pay prior to delinquency all personal property taxes and assessments of every kind or nature imposed or assessed upon or with respect to furnishings, fixtures, equipment, and other property of Tenant placed on the Premises. For purposes hereof, Tenant's pro-rata share of the above items shall be based upon the number of square feet comprising the Building. Landlord shall, during the entire Term hereof, maintain in force, casualty insurance on its interest in the Premises in such amounts and against such hazards and contingencies as Landlord shall deem desirable for its own protection; provided, however, Landlord shall not be obligated to insure any furniture, equipment, or other property placed in the Premises by or at the expense of Tenant. Tenant shall not permit any use of the Premises that would invalidate or conflict with the known terms of any insurance policy covering risks insured by Landlord, and Tenant shall pay the cost of any premium amounts above standard rates for such insurance occasioned by the nature of Tenant's use of the Premises. 19. Public Liability Insurance. Tenant shall obtain and maintain a comprehensive policy of liability insurance with respect to the Premises naming Landlord and any designee of Landlord as additional insured and protecting Landlord, Tenant and any designee of Landlord against any liability which arises from any occurrence on or about the Premises or any appurtenances thereof, or any of the claims against which Tenant is required to indemnify Landlord pursuant to this Lease. Such policy shall be written by a company satisfactory to Landlord. The coverage limits shall be at least One Million Dollars, ($1,000,000.), with respect to combined single limits of bodily injury or death per occurrence, One Million Dollars, ($1,000,000.), with respect to bodily injury or death of more than one person in any one occurrence and at least Five Hundred Thousand Dollars, ($500,000.) for property damage per occurrence. Said policy(ies) must contain a provision that they will not be canceled or changed without first giving Landlord thirty (30) days prior written notice. Tenant shall provide Certificate of Insurance to Landlord prior to taking possession of the Premises. Each policy of insurance Tenant is required to carry under this Lease shall contain a waiver of subrogation against Landlord and Tenant hereby waives all rights of recovery or causes of action against Landlord for any damage or injury covered by Tenant's insurance or by the type of insurance required of Tenant by this Lease. 20. Damage or Destruction by Casualty. If the Premises are wholly or partially destroyed by fire or other casualty, Landlord shall, at its own expense, promptly restore the Premises to substantially the same condition as existed when Tenant took possession of the Premises, unless said damage was caused by Tenant, its agents, licensees, employees, invitees, or visitors, in which case any repair shall be at Tenant's expense; provided, however, Landlord may by notice to Tenant within sixty (60) days after the date of such damage or destruction elect, at its option, not to restore or repair the Premises and Landlord or Tenant may thereafter, at its option, cancel this Lease. If the Premises cannot be restored within ninety (90) days of the date of such damage or destruction, either Landlord or Tenant shall have the option to cancel this Lease with written notice thereof to the other party within said period. If all or any portion of the Premises is damaged by fire or other casualty insurable under a standard fire insurance policy with a standard extended coverage endorsement, not caused by the fault or neglect of Tenant or Tenant's agents, and this Lease is not terminated pursuant to any provision of this Lease, the following shall apply: from the date of the occurrence until the Premises, or the portion thereof which is damaged, is rebuilt or repaired, Base Rent and Additional Rent shall abate in the proportion that the area of the portion of the Premises rendered unusable for the permitted use hereunder bears to the entire area of the Premises. If the fire or other casualty is caused by the fault or neglect of Tenant or Tenant's agents, Base Rent shall not abate. 21. Eminent Domain. If the whole of the Premises, or such portion thereof as will make the Premises unsuitable for the use contemplated hereby, be taken or condemned by any public or quasi-public authority (including any conveyance in lieu thereof), then the Term hereof shall cease as of the date possession thereof is taken by the condemnor, and Base Rent and Additional Rent shall be accounted for as between Landlord and Tenant as of that date. If any lesser portion of the Premises is thus taken or condemned, Base Rent and Additional Rent shall abate in proportion to the loss of the use occasioned thereby. Tenant shall not have any right or claim to any part of any award made to or received by Landlord for such taking or any right or claim against Landlord for the value for the unexpired term of this Lease; provided, however, nothing contained herein shall preclude Tenant from making a claim directly against the condemning authority for loss of business, cost of moving, etc. 22. Indemnity. Tenant shall defend, indemnify and hold harmless Landlord, Landlord's agents and property managers and any mortgagee from and against all claims for injuries to persons or property or administrative or criminal action by a governmental authority, which arises from: (i) Tenant's possession, use, occupation, management, repair, maintenance or control of the Premises or any other portion thereof; (ii) Any act or omission of Tenant or Tenant's agents, employees or invitees; (iii) Any default, breach, violation or non-performance of this Lease by Tenant; or (iv) Any injury to person or property or loss of life sustained in or about the Premises. Tenant shall defend any claims against Landlord, Landlord's agents, property managers, and any mortgagees with respect to the foregoing or in any action in which they may be impleaded. Tenant shall pay, satisfy and discharge any judgments, orders and decrees which may be recovered against the Landlord, property manager and/or any mortgagee in connection with the foregoing. Tenant needs indemnification for losses, etc. caused by Landlord, Landlord's agents or property managers. If Landlord, without fault on its part, is made a party to any litigation commenced by or against Tenant, Tenant agrees to protect and hold Landlord harmless therefrom and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by Landlord in connection with such litigation. Landlord shall defend, indemnify and hold harmless Tenant, Tenant's agents and property managers and any mortgagee from and against all claims for injuries to persons or property or administrative or criminal action by a governmental authority, which arises from: (i) Landlord's possession, use, occupation, management, repair, maintenance or control of the Premises or any other portion thereof; (ii) Any act or omission of Landlord or Landlord's agents, employees or invitees; (iii) Any default, breach, violation or non-performance of this Lease by Landlord; or (iv) Any injury to person or property or loss of life sustained in or about the Premises caused by Landlord, Landlord's agents, employees, or property managers. Landlord shall defend any claims against Tenant, Tenant's agents, property managers, and any mortgagees with respect to the foregoing or in any action in which they may be impleaded. Landlord shall pay, satisfy and discharge any judgments, orders and decrees, which may be recovered against the Tenant, property manager and/or any mortgagee in connection with the foregoing. If Tenant, without fault on its part, is made a party to any litigation commenced by or against Landlord, Landlord agrees to protect and hold Tenant harmless therefrom and to pay all costs, expenses and reasonable attorneys' fees incurred or paid by Tenant in connection with such litigation. 23. Landlord's Entry. Upon twenty-four (24) hours notice to Tenant, Landlord may enter the Premises during business hours, and in a reasonable manner to inspect or exhibit same, to comply with Landlord's obligations hereunder, to exercise Landlord's rights under this Lease agreement, or to make repairs or renovations required in connection with adjoining spaces. Additionally, Tenant expressly authorizes Landlord to enter the Premises, without prior notice, in case of an emergency to take action necessary to preserve the Premises. Tenant will permit Landlord to place and maintain "For Rent" or "For Lease" signs on the Premises during the last ninety (90) days of the Lease Term without compensation to Tenant. 24. Default and Remedies. If Tenant shall fail to pay either Base Rent or Additional Rent when due, or any other sums of money becoming due hereunder within ten (10) days of written notice, or if Tenant shall default in the performance of any of the other terms, conditions, or covenants contained in this Lease within thirty (30) days after written notice thereof or does not, within such thirty (30) days, commence such act or acts as shall be necessary to remedy a default, which is not curable within said thirty (30) days for reasons beyond the control of Tenant, and shall not complete such act or acts within sixty (60) days after written notice, or if Tenant shall become bankrupt or insolvent, or file any debtor proceedings, or file in any court pursuant to any statute, either of the United States or any state a petition in bankruptcy or insolvency or for reorganization, or file or have filed against it a petition for the appointment of a receiver or trustee for substantially all of the assets of Tenant, or if Tenant makes an assignment for the benefit of creditors, or petitions for or enters into an arrangement with its creditors, or if Tenant shall abandon the Premises or suffer the Lease to be taken under any writ of execution and such writ is not vacated or set aside within fifteen (15) days, an event of default shall have occurred. Without terminating the Lease, and with a Court Order, Landlord shall have the right to re-enter and take possession of the Premises or any part thereof and repossess the same and expel the Tenant and those claiming through or under the Tenant and remove the effects of both or either with force, if necessary, without being deemed guilty in trespass or of a forcible entry or detainer and without prejudice to any remedies for arrears of rent or preceding breach of covenants. In such event, the Landlord shall be entitled to recover from the Tenant all damages incurred by the Landlord by reason of the Tenant's default, including but not limited to the cost of recovering possession of the Premises, expenses of reletting including necessary repair of any damages to the Premises, reasonable attorneys' fees, any real estate commission actually paid, the worth at the time of the unpaid Base Rent for the balance of the Term. If Landlord should take possession pursuant to legal proceedings, it may either terminate this Lease or it may from time to time without terminating this Lease, relet the Premises for such Term and at such rentals and upon such other terms and conditions as the Landlord may deem advisable. If such reletting shall yield rentals insufficient for any month to pay the rental due by Tenant hereunder for that month, Tenant shall be liable to Landlord for the deficiency and same shall be paid monthly. No such re-entry or taking possession of the Premises by Landlord shall be construed as an election to terminate this Lease unless written notice of such intention be given by the Landlord to the Tenant at the time of such re-entry; but, not withstanding any such re-entry and reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach. If as a result of Tenant's default hereunder, Landlord shall institute legal proceedings for the enforcement of Tenant's obligations, Tenant shall pay all costs incurred by Landlord, including reasonable attorneys' fees. Landlord may relet all or any part of the Premises for all or any part of the unexpired portion of the Term of this Lease or for any longer period. Landlord may accept any rental then obtainable, grant any concessions of rent, and make any repairs of damage to the Premises for any new Tenant, as Landlord may deem advisable 25. Right to Close Common Areas. Landlord shall have the right to close all or any portions of the common areas to such extent as may, in the opinion of Landlord's counsel, be legally sufficient to prevent a dedication thereof or the accrual of any rights to any person or to the public therein and to close temporarily, if necessary, any part of the common areas in order to discourage non-customer parking, to permit alterations of existing buildings and other improvements or the construction of additional buildings or other improvements. 26. Arbitration. At Landlord's request, any disagreement between the parties hereto with respect to the interpretation or application of this Lease, or the obligations of the parties hereunder, or to any matter of dispute arising between the parties hereto, shall be determined by arbitrators. Such arbitration shall be conducted before three (3) arbitrators (unless the parties hereto agree to one arbitrator). Landlord shall have the right to name one (1) arbitrator and the Tenant shall name one (1) arbitrator. The two (2) arbitrators shall then choose a third arbitrator. The arbitrators shall conduct their proceedings and make their decisions in strict conformity with the South Carolina Uniform Arbitration Act; provided, however, such arbitrators shall apply applicable South Carolina law to any controversy. All such arbitration proceedings hereunder shall be conducted in Charleston County, South Carolina. The decision of the arbitrator or arbitrators, as the case may be, shall be final, conclusive and binding upon the parties hereto. 27. Remedies Cumulative Non-Waiver. No remedy herein or otherwise conferred upon or reserved to Landlord or Tenant shall be considered exclusive of any other remedy, but the same shall be distinct, separate and cumulative and shall be in addition to every other remedy given hereunder, or now or hereafter existing at law or in equity; and every power and remedy given by this Lease Agreement may be exercised from time to time as often as occasion may arise or as may be deemed expedient. No delay or omission of Landlord to exercise any right or power arising from any default on the part of Tenant shall impair any such right or power, or shall be construed to be a waiver of any such default, or any future default, or an acquiescence therein. The acceptance of Base Rent by Landlord with knowledge of default by Tenant hereunder shall not constitute a waiver of such default. 28. Limited Recourse. The liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to the proceeds of sale on execution of the interest of Landlord in the Premises and Landlord shall not be personally liable for any deficiency, except that Landlord shall remain personally liable to account to Tenant for any Security Deposit hereunder. The clause shall not be deemed to limit or deny any remedies, which Tenant may have in the event of default by Landlord hereunder, which do not involve the personal liability of Landlord. The liability of Tenant to Landlord for any default by Tenant under the terms of this Lease shall be united to the Base Rent due for the remaining Term of Lease and Tenant shall not be personally liable for any deficiency. 29. Quiet Enjoyment. If Tenant shall pay the Base Rent and Additional Rent when due and perform and observe all of the other covenants and conditions to be performed and observed by it hereunder, Tenant shall at all times during the term hereof have the peaceable and quiet enjoyment of the Premises without interference from Landlord or any person lawfully claiming through Landlord, subject, however, to the terms of this Lease Agreement and any mortgages or deeds of trust provided for in Paragraph 31 hereof. 30. Estoppel Agreement. Within ten (10) days after written request thereof by the Landlord or any mortgagee or trustee under a mortgage or deed of trust covering the Premises, Tenant shall deliver in recordable form a statement to any mortgagee, trustee or other transferee, or to Landlord, certifying any facts that are then true with respect to this Lease Agreement, including without limitation (if such may be the case) that this Lease Agreement is in full force and effect, that Tenant is in possession, that Tenant commenced the payment of Rent, and that Tenant claims no defense or set-off to the due and full performance of its obligations under this Lease Agreement. 31. Subordination and Attornment; Transfer. Tenant agrees that this Lease shall be subject to and subordinate to any mortgages, deeds of trust or any ground Lease now or hereafter placed upon the Premises, the Building, or land upon which the Premises is located and to all modifications thereto, and to all present and future advances made with respect to any such mortgage or deed of trust. Tenant agrees to attorn to the mortgagee, trustee, or beneficiary under such mortgage or deed of trust, and to the purchaser at a sale pursuant to the foreclosure thereof, and to the lessor in the event of a termination of any such ground Lease. In the event of the transfer and assignment by Landlord of its interest in this Lease and in the Building containing the Premises to a person expressly assuming Landlord's obligations under this Lease, Landlord shall thereby be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of the Landlord for performance of such obligations. Any Security Deposit given by Tenant to secure performance of Tenant's obligations hereunder may be assigned and transferred by Landlord to such successor in interest, and Landlord shall thereby be discharged of any further obligation relating thereto. 32. Jurisdiction and Venue. Tenant expressly consents that the Courts of the State of South Carolina shall have jurisdiction over any dispute arising out of this Lease or the Premises between Landlord and Tenant (unless Landlord exercises its rights to arbitration), that the County of Charleston shall be the proper place of venue for any such proceeding and Tenant expressly waives any rights to object to same. 33. Notices. All notices provided for in this Lease Agreement shall be in writing and shall be deemed to be given when sent by registered or certified mail, return receipt requested, postage prepaid, and addressed as follows: If to Landlord: SMD PROPERTIES 960 BERRY SHOALS ROAD DUNCAN, South Carolina 29334 If to Tenant: CHARLESTON GOLD AND DIAMOND EXCHANGE, INC. 503 Wando Park Boulevard Mt. Pleasant, South Carolina 29464 Notices shall also be sent to the holder or holders of any mortgage or deed of trust covering the Premises at such address as such holder or holders may have given by notice as herein provided. Either party hereto, or any such holder, may from time to time, by notice as herein provided, designated a different address to which notices to it shall be sent. 34. Governing Law. This Lease Agreement shall be governed by, construed and enforced in accordance with the laws of the State of South Carolina. 35. Nature and Extent of Agreement. This Lease Agreement, including the exhibits attached hereto, contains the complete agreement between the parties regarding the terms and conditions of the Lease of the Premises, and there are no oral or written conditions, terms, warranties, understandings, or other agreements pertaining thereto which have not been incorporated herein. This Lease Agreement may be modified only by written instrument duly executed by either parties or their respective successors in interest. 36. Holding Over. This Lease expires at the end of the Term defined herein, but it is expressly understood that if Tenant holds over for another month at the end of said Term for any purpose, and Landlord accepts Rent for said month, such acceptance shall operate as a renewal of the tenancy for another month and for each additional month for which Landlord accepts Rent. Should Landlord require possession of the Premises, it shall give Tenant thirty (30) days to vacate the said Premises during such hold over period. The monthly Base Rent during the hold over period shall be at fifty percent (50%) increase above the monthly Base Rent paid for the last month of the term as set forth herein. 37. Attorney's Fees. If Tenant defaults in the performance of any of the covenants of this Lease and by reason thereof the Landlord employs the service of an attorney to enforce performance by Tenant, or to evict Tenant, to collect monies due by Tenant, or to perform any service based upon said default, then the Tenant shall pay a reasonable attorney's fee and all reasonable expenses and costs incurred by Landlord pertaining thereto. If Landlord defaults in the performance of any of the covenants of this Lease and by reason thereof the Tenant employs the service of an attorney to enforce performance by Landlord, to collect monies due by Landlord, or to perform any service based upon said default, then the Landlord shall pay a reasonable attorney's fee and all reasonable expenses and costs incurred by Tenant pertaining thereto. 38. Non-Waiver. The failure of Landlord or Tenant to insist upon strict performance of any of the terms, conditions and covenants herein shall not be deemed to be a waiver of any rights or remedies that Landlord and Tenant may have, and shall not be deemed a waiver of any subsequent breach or default in the terms, conditions and covenants herein contained except as may be expressly waived in writing. 39. Non-Easement. It is understood and agreed that this Lease does not grant any rights to light and air over property adjoining the land on which the Premises is situated. 40. No Representations by Landlord. Tenant acknowledges that neither Landlord nor any broker, agent or employee of Landlord has made any representations or promises with respect to the Premises or the Building except as herein expressly set forth in the Lease Agreement, and any attachments hereto or incorporated by reference, and no rights, privileges, easements or licenses are acquired by Tenant except as herein expressly set forth. 41. Time is of the Essence. It is understood and agreed between the parties hereto that time is of the essence in all of the terms and provisions of this Lease. 42. Caption and Titles. The captions and titles appearing within this Lease are for reference only and shall not be considered a part of this Lease or in any way modify, amend, or affect the provisions thereof. 43. Grammatical Changes. The proper grammatical changes shall be understood and apply where necessary to designate the plural rather than the singular and the masculine or feminine gender. 44. Recordation and Documentary Stamp Taxes. This Lease shall not be recorded, but a short form referring to this Lease, describing the Premises setting forth the term thereof may be recorded by either party. The cost of recording shall be paid by the recording party. 45. No Partnership or Joint Venture. Landlord does not, in any way or for any purpose, become a partner of Tenant in the conduct of its business, or otherwise, or a joint venturer or a member of a joint enterprise with Tenant. 46. Binding Agreement. The conditions, covenants and agreements contained in this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective successors, heirs, executors, administrators and assigns except as otherwise provided in this Agreement. No rights, however, shall inure to the benefit of any assignee of Tenant unless the assignment to such assignee has been approved in accordance with the provisions set out in this Lease. 47. Brokerage: Tenant represents and warrants to Landlord that they have not dealt with any broker or finder in connection with the transaction contemplated by this Lease other than ReMax Realty, who represents the Landlord. Landlord agrees to pay to Broker the commission earned by reason of this transaction as agreed upon between Landlord and Broker. Tenant shall defend, indemnify and hold harmless Landlord and Landlord's Agent against any and all expense, cost, damage or liability (including without limitation, court costs and reasonable attorney's fees, at trial and appeal) resulting from the claims of any other brokers, or those claiming to have performed services in the nature of brokerage or finding services. 48. Authority. If Tenant is a corporation, general partnership or limited partnership, each person executing this Lease on behalf of Tenant hereby covenants and warrants that Tenant is a duly organized corporation, general partnership or limited partnership (as the case my be) qualified to do business in the State of South Carolina, that it has full authority to enter into this Lease and that each person executing this Lease on behalf of Tenant is authorized to do so. 49. Interpretation Presumption. The Landlord and Tenant expressly agree that in the event of a dispute concerning the interpretation of this Agreement, each party hereby waives the doctrine that an ambiguity should be interpreted against the party who drafted the document. 50. No Limitation of Rights and Remedies. All rights and remedies of Landlord and Tenant herein enumerated shall be cumulative and shall not be construed to exclude any other remedies allowed at law or in equity. 51. Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lessor amount than the Base Rent herein stipulated will be deemed to be other than on account of the earliest stipulated rent nor shall any endorsement or statement on any check or any letter accompanying any check or payment of rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy provided for in this Lease or available at law or in equity. 52. Force Majeure. In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lockouts, inability to procure labor or materials, failure of power, restrictive governmental laws or regulations, riots, war, fire, or other casualty or other reason of a similar or dissimilar nature beyond the reasonable control of the party delayed in performing work, or doing acts required under the terms of this Lease, then performance of such acts shall be excused for the period of delay and the period for the performance of any such acts shall be extended for a period equivalent to the period of such delay. After the commencement date, the provisions of this paragraph shall not operate to excuse Tenant from the prompt payment of rent as required by this Lease and shall not extend the term of this Lease. Delays or failures to perform resulting from lack of funds shall not be deemed delays beyond the reasonable control of a party. 53. Third Party Rights. The rights and obligations arising under this Lease are personal between Landlord and Tenant and such rights and obligations shall not be enforceable by any third party. Furthermore, Tenant recognizes that it has no third party rights arising out of any agreement between Landlord and any party other than Tenant regardless of any benefits accruing to Tenant by virtue of such agreement. 54. Option/Offer. The Tenant shall have an option to purchase as per the terms and conditions specified in the AGREEMENT TO BUY AND SELL and attached hereto as "A-2" Dated May 3rd, 2000 between SMD Properties and Dallas Gold and Silver Exchange. This option to purchase shall terminate ONE (1) YEAR from the date of delivery of the Premises. If the above said option is exercised all monies received, as security deposit shall apply towards the earnest money deposit on the AGREEMENT TO BUY AND SELL. IN WITNESS WHEREOF, the parties hereto have hereunto set their respective hands and seals on the day and year first above written. WITNESSES: Landlord: ________________________ By: ___________________________ As to Landlord Its: __________________________ Dated: ________________________ Tenant: ________________________ By: ___________________________ As to Tenant Its: __________________________ Dated: ________________________ EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
5 0000701719 Dallas Gold & Silver Exchange, Inc. 1,000 US DOLLARS 12-MOS DEC-31-2000 JAN-01-2000 DEC-30-2000 1 1,362 0 935 0 7,087 9,527 2,195 803 13,413 7,472 950 49 0 0 4,943 13,413 24,998 25,800 18,835 24,805 0 0 497 498 246 252 0 0 0 252 .05 .05
-----END PRIVACY-ENHANCED MESSAGE-----