SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

 ( X )  Quarterly Report pursuant to Section 13 or 15(d) of the
        Securities Exchange Act of 1934

For the quarterly period ended         September 30, 1998

 (  )   Transition Report under Section 13 or 15(d) of the
        Securities Exchange Act of 1934

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 No.)
of incorporation or
organization)

     2817 Forest Lane, Dallas, Texas                    75234
----------------------------------------------       ------------
(Address of principal executive offices)               (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

           Class                                 Outstanding at October 26, 1998
----------------------------                     -------------------------------
Common Stock, $.01 per value                              4,159,914




<PAGE>


PART I.   FINANCIAL INFORMATION

<TABLE>

<CAPTION>

             DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                                  September 30,  December 31,
                            ASSETS                                    1998           1997
                                                                  ------------   ------------  
<S>                                                               <C>            <C>     

Current assets:
  Cash                                                            $   181,327    $ 1,258,254
  Marketable securities - trading                                   2,703,539      1,826,552
  Trade receivables                                                   139,068        134,089
  Notes receivable - officers                                           4,000         82,625
  Inventory                                                         1,567,153      1,033,803
  Prepaid expenses                                                     59,575         24,064
                                                                  -----------    -----------
   Total current assets                                             4,654,662      4,359,387
Marketable securities - available
  for sale                                                             15,000      1,275,300
Property and equipment                                              1,097,925      1,112,414
Other assets                                                           27,798         27,798
                                                                  -----------    -----------
  Total assets                                                    $ 5,795,385    $ 6,774,899
                                                                  ===========    ===========
                           LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Notes payable                                                   $   282,228    $   560,228
  Deferred income taxes                                               471,227        411,500
  Accounts payable                                                    277,359        290,968
  Accrued expenses                                                    235,466        391,880
  Customer deposits                                                   169,915        113,776
  Current maturities of long-term
    debt and lease obligations                                        186,945        199,144
                                                                  -----------    -----------
    Total current liabilities                                       1,623,140      1,967,496
Long-term debt and capital lease
    obligations, less current
    maturities                                                      1,529,933      1,567,199
Deferred income taxes                                                                229,200

Shareholders'  equity:  Common  stock,  $.01 par  value;
  authorized  10,000,000 shares;
  issued and outstanding 4,159,914
  shares at September 30, 1998 and
  4,172,931 at December 31, 1997                                       41,599         41,729
  Additional paid-in capital                                        3,364,812      3,455,633
  Unrealized gain on available for
    sale securities, net of income
     taxes                                                             (8,909)       444,923
  Accumulated deficit                                                (755,190)      (931,281)
                                                                  -----------    -----------
        Total shareholders' equity                                  2,642,312      3,011,004
                                                                  -----------    -----------
   Total liabilities and shareholders'                            
    equity                                                        $ 5,795,385    $ 6,774,899
                                                                  ===========    ===========

</TABLE>


                                        2

<PAGE>




             DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                Three Months Ended
                                                   September 30,
                                                1998          1997
                                                ------------------
Revenues:
  Sales                                    $ 4,025,296   $  2,916,869
  Pawn service fees                              8,855          7,455
  Consulting service income                                    28,500
  Gain (loss) on sale of marketable
   securities - trading                         49,142        103,101
  Unrealized gain on marketable
   securities - trading                       (815,153)       171,474
  Other income                                   1,675         32,583
                                           -----------   ------------
                                             3,269,815      3,259,982
                                           -----------   ------------
Costs and expenses:
  Cost of sales (exclusive of
   items shown separately below)             3,443,536      2,455,079
  Consulting service costs                      54,534         42,867
  Selling, general and administrative
   expenses                                    446,067        381,155
  Depreciation and amortization                 23,885         23,478
  Interest expense                              55,440         57,000
                                           -----------   ------------
    Total costs and expenses                 4,023,462      2,959,579
                                           -----------   ------------

Income (loss) from continuing operations
   before income taxes                        (753,647)       300,403
Deferred income taxes (credits)               (263,925)       102,137
                                           -----------   ------------
Income (loss) from continuing operations      (489,722)       198,266

Discontinued operations,
     net of tax benefit                           --           (1,089)
                                           -----------   ------------

Net income (loss)                          $  (489,722)  $    197,177
                                           ===========   ============
Basic earnings(loss) per common share
   Continuing operations                   $      (.12)  $        .04
   Discontinued operations                        --             --
                                           -----------   ------------
    Earnings per common share              $      (.12)  $        .04
                                           ===========   ============
Diluted earnings(loss) per common share
   Continuing operations                   $      (.11)  $        .04
   Discontinued operations                        --
                                           -----------   ------------
    Earnings per common share              $      (.11)  $        .04
                                           ===========   ============
Weighted average number of common shares
   Basic                                     4,160,128      4,366,544
   Diluted                                   4,572,378      4,768,345



                                        3

<PAGE>




             DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                Nine Months Ended
                                                   September 30,
                                                1998         1997
                                               -------------------
Revenues:
  Sales                                    $10,451,193   $ 8,016,369
  Pawn service fees                             28,472        21,795
  Consulting service income                                  199,066
  Gain (loss) on sale of marketable
   securities - trading                        123,557       535,567
  Unrealized gain on marketable
   securities - trading                        194,330       490,419
  Other income                                  37,597        96,742
                                           -----------   -----------
                                            10,835,149     9,359,958
                                           -----------   -----------
Costs and expenses:
  Cost of sales (exclusive of
   items shown separately below)             8,770,046     6,756,740
  Consulting service costs                     153,381       162,483
  Selling, general and administrative
   expenses                                  1,419,011     1,149,218
  Depreciation and amortization                 71,786        70,622
  Interest expense                             165,660       170,850
                                           -----------   -----------
    Total costs and expenses                10,579,884     8,309,913
                                           -----------   -----------

Income from continuing operations
   before income taxes                         255,265     1,050,045
Deferred income taxes                           79,175       249,396
                                           -----------   -----------
Income from continuing                         176,090       800,649

Discontinued operations
   Loss from operations, net of tax               --         (95,153)
                                           -----------   -----------

Net income                                 $   176,090   $   705,496
                                           ===========   ===========
Basic earnings(loss) per common share
   Continuing operations                   $       .04   $       .18
   Discontinued operations                        --            (.02)
                                           -----------   -----------
    Earnings per common share              $       .04   $       .16
                                           ===========   ===========
Diluted earnings(loss) per common share
   Continuing operations                   $       .04   $       .17
   Discontinued operations                        --            (.02)
                                           -----------   -----------
    Earnings per common share              $       .04   $       .15
                                           ===========   ===========
Weighted average number of common shares
   Basic                                     4,160,128     4,366,544
   Diluted                                   4,572,378     4,768,345



                                        4

<PAGE>



             DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                               Nine Months Ended
                                                  September 30,
                                                1998       1997


Cash used for operating activities       $  (678,759)   $  (765,783)

Cash flows from investing activities:
   Purchase of property, plant and
    equipment                                (57,297)       (55,991)
   Sale of marketable securities             332,453        888,606
   Purchase of marketable securities        (267,407)      (203,401)
                                         -----------    -----------
   Net cash provided by (used
     for investing activities                  7,749        629,214
                                         -----------    -----------

Cash flows from financing activities:
   Purchase of common stock                 (103,452)      (263,635)
   Issuance of common stock for debt          12,500
   Principal payments on notes payable      (277,699)       (54,124)
   Principal payments on long-term
    debt and capital lease obligations       (37,266)       (33,298)
                                         -----------    -----------
   Net cash used for financing
    activities                              (405,917)      (351,057)
                                         -----------    -----------

Decrease in cash and cash equivalents    $(1,076,927)   $  (487,626)
                                         ===========    ===========















                                        5

<PAGE>




             DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
          NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT



September 30, 1998



(1)  Basis of Presentation:

     The accompanying  unaudited condensed  consolidated financial statements of
     Dallas  Gold  and  Silver  Exchange,  Inc.  and  Subsidiaries  include  the
     financial  statements  of Dallas  Gold and Silver  Exchange,  Inc.  and its
     wholly-owned  subsidiaries,  DGSE  Corporation and DLS Financial  Services,
     Inc. In the opinion of management,  all  adjustments  (consisting of normal
     recurring accruals)  considered necessary for a fair presentation have been
     included.

     The Company's  operating  results for the periods ended September 30, 1998,
     are not necessarily  indicative of the results that may be expected for the
     year  ended  December  31,  1998.  For  further  information,  refer to the
     consolidated  financial  statements and footnotes  thereto  included in the
     Company's  annual  report on Form  10-KSB for the year ended  December  31,
     1997.


(2)  The Year 2000 (Y2K) Disclosure:

     The Company's  computerized  information system has been tested and has met
     the requirements of a certification  for Year 2000 compliance.  The Company
     does not rely on any third parties who, if are unable to address this issue
     in a timely  manner,  could  result  in a  material  financial  risk to the
     Company.














                                       6

<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

Quarter ended September 30, 1998 vs 1997:

Sales for the third quarter of 1998 increased $ 1,108,427 or 38.0% when compared
to the corresponding quarter of 1997. The increase was the result of an increase
in jewelry  sales in the amount of $ 432,386 and an increase in precious  metals
sales in the  amount  of $  676,041.  Management  believes  that  the  Company's
Internet related activities had a significant impact on this sales growth.  Pawn
service fees  increased  by 18.8% due to an increase in pawn loans  outstanding.
During  the  third  quarter  of 1998 the  Company  sold $ 65,385  of  marketable
securities realizing a gain of $ 49,142. Unrealized losses on trading securities
in the amount of $ 815,153 in 1998 and gains of $ 575,726 in 1997 was the result
of  changes  in the  market  value of the  Company's  investment  in  marketable
securities.  Cost of sales  increased by $ 988,457 due to the increase in sales.
Consulting  service cost  increased by $ 11,667 during the third quarter of 1998
due to higher travel and related costs.

General and  administration  expenses increased by $ 64,912 primarily due higher
health insurance, advertising and payroll cost.

Deferred  income tax  expense  and credits are a result of changes in the market
value of the Company's investment in marketable securities.

During 1997 the Company  discontinued  the  operations of Dallas Global  Travel,
Inc. and Eye Media, Inc. The operating results of these discontinued  operations
during the third  quarter of 1997 were a net loss of $ 1,650 which was offset by
a tax benefit in the amount of $ 561.

Nine months ended September 30, 1998 vs 1997:

Sales  increased by $ 2,434,824 or 30.4 % during the nine months ended September
30, 1998  compared to the  corresponding  period of 1997.  This increase was the
result of an $ 1,237,466 increase in jewelry sales and a $ 1,197,358 increase in
precious metals sales.  Management  believes that the Company's Internet related
activities  had a  significant  impact on this sales  growth.  Pawn service fees
increased  by 30.6% due to an  increase  in pawn loans  outstanding.  During the
first nine months of 1998 the Company  sold $ 332,453 of  marketable  securities
realizing a gain of $ 123,557.  Unrealized  gains on trading  securities  in the
amount of $ 194,330 in 1998 and $ 490,419 in 1997 was the result of an  increase
in the market value of the Company's investment in marketable  securities.  Cost
of sales  increased  by $ 2,013,306  due to the  increase  in sales.  Consulting
service cost decreased by $ 9,102 during the period due to lower travel cost and
related.

                                        7


<PAGE>




Results of Operations, continued...
-----------------------------------

General and administration expenses increased by $ 269,793 during the period due
to higher health insurance, advertising and payroll cost.

During 1997 the Company  discontinued  the  operations of Dallas Global  Travel,
Inc. and Eye Media, Inc.. The operating results of these discontinued operations
during the first nine  months of 1997 were a net loss in the amount of $ 95,153,
net of a $ 49,000 tax benefit.




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

Due to the somewhat seasonal nature of the Company's jewelry business, inventory
and trade  receivables  are at their lowest  levels on December 31 of each year.
During the nine months of each year jewelry  inventory is replenished  and trade
receivables  begin to increase.  During the first nine months of 1998,  cash and
cash equivalents  decreased by $ 1,076,927 primarily as a result of decreases in
notes  payable ($  278,000),  a decrease  in accrued  expenses ($  156,414),  an
increase in inventory ($ 533,350),  and  purchases of common  treasury  stock ($
103,452).

Management of the Company  expects capital  expenditures to total  approximately
$85,000 during 1998. It is anticipated  that these  expenditures  will be funded
from the Company's current working capital position.

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 by
the  Company,  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 requirement.




PART II.   OTHER INFORMATION
----------------------------

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           Exhibits - None

           Reports on Form 8-K - None

                                        8


<PAGE>








                                   SIGNATURES


         In  accordance  with  Section  13 and 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: October 30, 1998
         -------------------------
         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: October 30, 1998
         -------------------------
         L. S. Smith
         Chairman of the Board,
         Chief Executive Officer and
         Secretary


By:      /s/ W. H. Oyster                               Dated: October 30, 1998
         -------------------------
         W. H. Oyster
         Director, President and
         Chief Operating Officer


By:      /s/ John Benson                                Dated: October 30, 1998
         -------------------------
         John Benson
         Chief Financial Officer
         (Principal Accounting Officer)











                                        9