<SEC-DOCUMENT>0001144204-12-009462.txt : 20120806
<SEC-HEADER>0001144204-12-009462.hdr.sgml : 20120806
<ACCEPTANCE-DATETIME>20120215181841
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001144204-12-009462
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20120215

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DGSE COMPANIES INC
		CENTRAL INDEX KEY:			0000701719
		STANDARD INDUSTRIAL CLASSIFICATION:	RETAIL-JEWELRY STORES [5944]
		IRS NUMBER:				880097334
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

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

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DALLAS GOLD & SILVER EXCHANGE INC /NV/
		DATE OF NAME CHANGE:	19930114

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CANYON STATE CORP
		DATE OF NAME CHANGE:	19860819
</SEC-HEADER>
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<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>DGSE COMPANIES, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>11311 REEDER ROAD</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>DALLAS, TEXAS 75229</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">February 15, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Mr. William Thompson</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Accounting Branch Chief</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">United States Securities and Exchange Commission</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Washington, DC 20549-0450</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>RE: Commission Review Comments Dated January 3, 2012
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>DGSE Companies, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>Form 10-K for Fiscal Year Ended December 21, 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>Filed April 15, 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>Form 10-Q for Fiscal Quarter Ended June 30, 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>Filed August 11, 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>Form 10-Q for Fiscal Quarter Ended September 30, 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>Filed November 14, 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>File No. 1-11048</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Dear Mr. Thompson:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On behalf of DGSE Companies, Inc. (the &ldquo;Company&rdquo;),
we hereby submit the Company&rsquo;s response to the comments of the staff (the &ldquo;Staff&rdquo;) of the Securities and Exchange
Commission (the &ldquo;Commission&rdquo;) set forth in the Staff&rsquo;s letter, dated January 3, 2012, providing the Staff&rsquo;s
comment with respect to the above-referenced Forms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We appreciate the comments of the Staff to the
filings and the opportunity to respond. For the convenience of the Staff, the Staff&rsquo;s comment is included and followed by
the corresponding response of the Company. Unless the context indicates otherwise, references in the letter to &ldquo;we&rdquo;
and &ldquo;our&rdquo; refer to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Form 10-K for Fiscal Year Ended December 31, 2010</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Consolidated Financial Statements</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Consolidated Statements of Operations, page F-2</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt"><B>1.</B></FONT></TD><TD><B>As indicated in your response to comments one and two in our letter dated November 10, 2011, please revise your financial
statements to classify the loss on legal settlement in operating income (loss) and to correct the disclosures in Note 1 with respect
to pre-tax losses of discontinued operations. In doing so, please provide the disclosures required by ASC 250-10-50-7. In addition,
similarly revise the financial statements included in your quarterly reports on Form 10-Q for the quarters ended June 30, 2011
and September 30, 2011 to classify litigation reserves and losses in operating income (loss).</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The loss on legal settlement will be reclassified to income
from operations in the amended Form 10-K for fiscal year ended December 31, 2010 and the quarterly reports on Form 10-Q for the
quarters ended June 30, 2011 and September 30, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Note 13 &ndash; Settlement of Litigation,
page F-16</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>2.</B></TD><TD><B>We reviewed your response to comment three in our letter dated November 10, 2011. Please tell us your consideration of accounting
for the debt extinguishment as a capital transaction given that SIBL was the beneficial owner of a significant equity interest
in DGSE. Refer to ASC 470-50-40-2. If you concluded that SIBL was not a related entity, please provide us with your analysis on
how you arrived at that conclusion. In addition, we note that you did not file the exhibits to the Closing Agreement filed as Exhibit
10.1 to Form 8-K filed May 26, 2010. Please provide us with a copy of the exhibits to the Closing Agreement with your response.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">Although we considered the extinguishment of debt as a
potential capital transaction we concluded it was a gain resulting from a litigation settlement, whereby, SIBL was removed as a
shareholder and was not entitled to receive any future benefit of the transaction. We considered a number of factors to support
our conclusion as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">a.</TD><TD STYLE="text-align: justify">The basis of the litigation related to a number of alleged breaches by SIBL as a shareholder and
a lender. The goodwill from the acquisition of Superior Galleries was fully impaired and this impairment became a portion of the
litigation due to alleged misrepresentations by SIBL.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">b.</TD><TD STYLE="text-align: justify">Stanford and DGSE were parties to a Corporate Governance Agreement dated May 30, 2007 pursuant
to which Stanford had the right to nominate up to two independent directors so long as Stanford beneficially owned at least 15%
of the outstanding shares of common stock. Upon approval of the Purchase Agreement by the Court and after closing, Stanford no
longer had any rights under the Corporate Governance Agreement.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">c.</TD><TD STYLE="text-align: justify">DGSE Companies, Inc. assigned its rights as a Buyer to NTR, LLC under the &ldquo;Company-SIBL Purchase
Agreement&rdquo; and simultaneously with the debt forgiveness transaction NTR, LLC purchased directly from SIBL 3,000,000 share
of DGSE&rsquo;s common stock for a purchase price of $3,600,000. As a result, SIBL no longer was a beneficial owner of DSGE and
would not be able to benefit from any future benefit related to the transaction.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">d.</TD><TD STYLE="text-align: justify">Since the debt forgiveness was a court order and the intent of the debt forgiveness was other than
the lack of the ability of DGSE to repay the debt &lsquo;or&rsquo; intended to provide an ongoing capital infusion by SIBL, we
determined the nature of the transaction was settlement consideration received by DGSE from SIBL.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">In contrast, had SIBL retained its ownership in DGSE and
entered into the debt forgiveness transaction a further evaluation of the treatment of debt forgiveness income vs. a capital transaction
would have been required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>3.</B></TD><TD><B>Please tell us who received the remaining shares of your common stock owned by SIBL and not acquired by NTR pursuant to
the terms of the purchase and sale agreement and the closing agreement. Please also tell us why you have not given accounting recognition
to the transfer transaction. </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">The shares remain outstanding on
the stock register at present as the Company intended to have them cancelled and recorded as a treasury stock transaction recorded
at par value of $0.01 per share. This immaterial transaction will be reflected in the 4<SUP>th</SUP> quarter of 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Note 19 &ndash; Restatement of Quarters
Ended June 30 and September 30, page F-31</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>4.</B></TD><TD><FONT STYLE="font-size: 10pt"><B>We reviewed your response to comment six in our letter dated November 10, 2011. </B></FONT><B>Please
note that a triggering event specified in one of the items of Form 8-K occurring within four business days before filing of a periodic
report may be disclosed in that periodic report, except for filings required to be made under Item 4.01 of Form 8-K, Changes in
Registrant&rsquo;s Certifying Accountant and Item 4.02 of Form 8-K, Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review. Refer to Question 101.01 of the Division&rsquo;s Compliance &amp; Disclosure
Interpretations &ndash; Exchange Act Form 8-K dated July 8, 2011 available on our website at www.sec.gov. As such, please file
a current report on Form 8-K to report that your interim financial statements included in Form 10-Q for the quarterly periods ended
June 30, 2010 and September 30, 2010 should no longer be relied upon. Refer to the disclosure requirements of Item 4.02 of Form
8-K.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The Company will file a form 8-K under Item 4.02, Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report of Completed Interim Review. This filing will be completed
by February 16, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Form 10-Q for the Fiscal Quarter Ended June 30, 2011</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Item 4. Controls and Procedures, page 17</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>5.</B></TD><TD><B>We reviewed your response to comment eight in our letter dated November 10, 2011. Please file an amendment containing the
revised disclosure set forth in your response.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The Company will file the amendment of its Form 10-Q for
the Fiscal Quarter Ended June 30, 2011 once the Staff has completed its review of all of our responses to the Staff comments on
the stated Form-Q.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Exhibit 32.2</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>6.</B></TD><TD><B>We reviewed your response to comment nine in our letter dated November 10, 2011. Please file an amendment containing the
revised certification as indicated in your response.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The Company will file the amendment of its Form 10-Q for
the Fiscal Quarter Ended June 30, 2011 once the Staff has completed its review of all of our responses to the Staff comments on
the stated Form-Q.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Form 10-Q for the Fiscal Quarter Ended September 30, 2011</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Consolidated Statements of Cash Flows, page 4</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>7.</B></TD><TD><B>Please tell us why net earnings for the nine months ended September 30, 2010 differ from net earnings reported in the statement
of operations.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">Net earnings on the Consolidated Statement of Cash Flows
for the nine months ended September 30, 2010 differ from net earnings reported in the statement of operations due to a failure
to update the Consolidated Statement of Cash Flows for the effect of restatement disclosures included in our Form 10K for the year
ended December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">We will amend our 10Q filing for the quarter ended September
30, 2011 to incorporate the corrections to the Consolidated Statement of Cash Flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Note (7) Acquisitions, page 9</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>8.</B></TD><TD><B>Please revise to disclose the following information pursuant to the disclosure requirements of ASC 805:</B></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font: 10pt Wingdings"><B>&uml;</B></FONT></TD><TD><B>The percentage of voting equity interest acquired; </B></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font: 10pt Wingdings"><B>&uml;</B></FONT></TD><TD><B>The amount of acquisition-related costs recognized as an expense and the line item in which those expenses are recognized;</B></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font: 10pt Wingdings"><B>&uml;</B></FONT></TD><TD><B>The amounts of revenues and earnings of SBT since the acquisition date included in the consolidated statements of operations
for the reporting period;</B></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font: 10pt Wingdings"><B>&uml;</B></FONT></TD><TD><B>The revenue and earnings of the combined entity for the current reporting period as though the acquisition had occurred
as of the beginning of the year and for the comparable prior reporting period as though the acquisition had occurred as of the
beginning of the comparable prior year;</B></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font: 10pt Wingdings"><B>&uml;</B></FONT></TD><TD><B>A qualitative description of the factors that make up the goodwill recognized;</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.7in; text-indent: -0.2in"><B>&nbsp;</B></P>

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<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font: 10pt Wingdings"><B>&uml;</B></FONT></TD><TD><B>The method of determining the fair value of the restricted shares of common stock issued as consideration; and</B></TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font: 10pt Wingdings"><B>&uml;</B></FONT></TD><TD><B>The amount of goodwill that is expected to be deductible for tax purposes.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">As indicated in response #11, we concluded the acquisition
was &lsquo;not&rsquo; significant under SEC filing guidelines. As a result we also concluded pro forma data was also not required
by US GAAP [ASC 805] in the notes to the financial statements in a Form 10-K or Form 10-Q assuming the definition of materiality
under GAAP was consistent with the definition of significance under SEC rules. We will amend our 10Q filing for the quarter ended
September 30, 2011 to incorporate the remaining disclosures requested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>9.</B></TD><TD><B>Please tell us whether the initial accounting for the business combination is complete and, if not, disclose the reasons
why the initial accounting is incomplete and the assets and liabilities for which the accounting is incomplete. Refer to ASC 805-10-50
6.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The purchase accounting adjustments are complete for the
initial accounting of the SBT business combination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>10.</B></TD><TD><B>Please tell us why you did not recognize any intangible assets separately from goodwill. Please specifically address marketing-related
intangible assets, customer-related intangible assets and contract-based intangible assets. </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We evaluated the recognition for other intangible
assets as follows:</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">a.</TD><TD STYLE="text-align: justify">Customer base &ndash; due to limited recurring customer base we assigned no value to it.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">b.</TD><TD STYLE="text-align: justify">Trade name &ndash; management determined the primary driver of value recently has been the price
of gold and any royalty stream related to its trade name would be immaterial, if any.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">c.</TD><TD STYLE="text-align: justify">Non-compete &ndash; there were no non-compete agreements as a result of the acquisition.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">d.</TD><TD STYLE="text-align: justify">Technology &ndash; the company has no specialized software operating systems or applications.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>11.</B></TD><TD STYLE="text-align: justify"><B>Please tell us if you intend to file the financial statements required by Rule 8-04 of Regulation
S-X and pro forma financial information required by Rule 8-05 of Regulation S-X. Also, please provide us with your significance
tests pursuant to Rule 8-04(b) of Regulation S-X.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">We do not intend to file the financial statements required
by Rule 8-04 of Regulation S-X and pro forma financial information required by Rule 8-05 of Regulation S-X based on the results
of the significance test performed pursuant to Rule 8-04(b) of Regulation S-X. The results of our significance tests pursuant to
Rule 8-04(b) of Regulation S-X are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="width: 93%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center">DGSE&nbsp;Companies, <BR>Inc.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; text-align: center">Southern&nbsp;Bullion <BR>Trading,&nbsp;LLC</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 51%">Purchase Price Test</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 16%; text-align: right">30,260,134</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">5,442,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">18</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Assets Test</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">30,260,134</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,141,990</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Pretax Income Test</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,883,028</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(570,577</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12</TD><TD STYLE="text-align: left">)%</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The above significance test is based on the Company&rsquo;s
and Acquiree&rsquo;s most recently completed fiscal year (December 31, 2010).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Note (8) Legal proceedings, page 9</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>12.</B></TD><TD><B>Please tell us your consideration of disclosing an estimate of the possible loss or range of loss in excess of amounts accrued
or that such an estimate cannot be made. Refer to ASC 450-20-50-4. In addition, please tell us when the lawsuit was filed and why
the contingency was not disclosed in previous periodic reports.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">We will amend our 10Q filing for the quarter ended September
30, 2011 to incorporate disclosure related to the range of possible loss in excess of the amounts accrued as required by ASC 450-20-50-4.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">The lawsuit was initially filed on December 15, 2010.
The contingency was not specifically disclosed in previous periodic reports as it was included under the general legal contingency
disclosure. At that time management believed the claims were without merit and a loss related to this lawsuit had only a remote
possibility of materializing and if quantifiable would be immaterial. Management of the Company and its legal counsel began the
discovery process and intended to vigorously defend its position. During the quarter ended September 30, 2011, in conjunction with
the change in management and based on its legal team&rsquo;s advise, it was determined that offering a settlement in order to avoid
protracted legal proceeding to be the best course of action for the Company and its shareholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><U>Note (9) Subsequent Events, page 9 </U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><B>13.</B></TD><TD><B>Please tell us how you intend to account for the settlement of outstanding obligations payable to NTR. In doing so, please
tell us how you determined the fair value of the option contract and whether a gain or loss will be recognized.</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">Paragraph 505-50-30 of the ASC establishes
that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of goods or services received
in a share-based payment transaction with nonemployees is more reliably measurable than the fair value of the equity instruments
issued, the fair value of the goods or services received shall be used to measure the transaction. In contrast, if the fair value
of the equity instruments issued in a share-based payment transaction with nonemployees is more reliably measurable than the fair
value of the consideration received, the transaction shall be measured based on the fair value of the equity instruments issued.
As noted in paragraph 505-50-05-5 of the ASC for transactions involving the receipt of equity instruments in exchange for providing
goods or services, in certain cases, the fair value of the equity instruments to be received may be more reliably measurable than
the fair value of the goods or services to be given as consideration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">In order to evaluate whether the
fair value of consideration received or the fair value of equity instruments issued is more reliable we calculated the fair value
of each.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">We received debt forgiveness of $2,500,000.
The $2,500,000 included accounts payable owed to NTR for bullion purchases. The bullion purchases were related party transactions
with NTR. NTR sold the bullion at a marked up value to us. As such it appears the fair value of the liability forgiven is $2,500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">We issued 5,000,000 common stock
options at $15/share with a term of 5 years. Based on 5-year volatility and a risk free rate of 1.01%, expected life of 5 years,
the Black Scholes calculated value was $4.77/share. The resulting value of the stock option grant is $23,850,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify">As a result we concluded the fair
value of the consideration received of $2,500,000 was a more reliable measure as the short term nature of the working capital transactions
reflects a more accurate measure at the measurement date. Therefore, no gain or loss was recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.25in; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition to our response to the aforementioned
questions, we acknowledge that:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">A.</TD><TD STYLE="text-align: justify">The Company is responsible for the adequacy of the disclosure in the filings;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">B.</TD><TD STYLE="text-align: justify">Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission
from taking any action with respect to the filings; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">C.</TD><TD STYLE="text-align: justify">The Company may not assert staff comments as a defense in any proceeding initiated by the Commission
or any person under federal securities laws of the United States.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">If you have any additional questions, please
feel free to contact Matthew Auger, our Controller and Interim CFO, at 972-739-2926 or at <U>mauger@dgse.com</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 50%">Sincerely,</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>DGSE Companies, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid">/s/William H. Oyster</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>William H. Oyster</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>Chief Executive Officer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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