Note 8 – Stock Options and Restricted Stock Units

On June 21, 2004, our shareholders approved the adoption of the 2004 Stock Option Plan (the “2004 Plan”), which reserved 1,700,000 shares of our Common Stock for issuance upon exercise of options to purchase our Common Stock. We granted options to purchase an aggregate of 1,459,634 shares of our Common Stock under the 2004 Plan to certain of our officers, directors, key employees and certain other individuals who provided us with goods and services. Each option vested on either January 1, 2004 or immediately upon issuance thereafter. The exercise price of each option issued pursuant to the 2004 Plan is equal to the market value of our Common Stock on the date of grant, as determined by the closing bid price for our Common Stock on the Exchange on the date of grant or, if no trading occurred on the date of grant, on the last day prior to the date of grant on which our securities were listed and traded on the Exchange. Of the options issued under the 2004 Plan, as of December 31, 2014, 845,634 have been exercised, 594,000 have expired, and 20,000 remain outstanding. We have determined to not make any further issuances pursuant to the 2004 Plan.

On June 27, 2006 our shareholders approved the adoption of the 2006 Equity Incentive Plan (the “2006 Plan”), which reserved 750,000 shares for issuance upon exercise of options to purchase our Common Stock or other stock awards. We subsequently granted options to purchase 150,000 shares of our Common Stock pursuant to the 2006 Plan, of which 100,000 have been exercised, 40,000 have expired, and 10,000 remain outstanding.

On October 25, 2011, the Company entered into a debt cancellation agreement with NTR, whereby NTR agreed to forgive $2,500,000 of payables owed to NTR by the Company. In consideration for this debt forgiveness, NTR was granted options to purchase 5,000,000 shares of the common stock of DGSE, par value $0.01 per share, at an exercise price of fifteen dollars ($15) per share (the “NTR Options”). These options were not issued pursuant to either of the shareholder-approved employee stock option plans. The NTR Options vested immediately upon grant, and expire on the fifth anniversary of the date of grant.

The following table summarizes the activity in common shares subject to options for the years ended December 31, 2014 and 2013:

	2014					2013

				Weighted average					Weighted average
	Shares			exercise price		Shares			exercise price

Outstanding at beginning of year		5,347,500		$	14.20		5,372,500		$	14.14
Granted		-			-		-			-
Exercised		-			-		-			-
Forfeited		(317,500	)		2.50		(25,000	)		2.20

Outstanding at end of year		5,030,000		$	14.93		5,347,500		$	14.20

Options exercisable at end of year		5,030,000		$	14.93		5,347,500		$	14.20

Information about stock options outstanding at December 31, 2014 is summarized as follows:

	Options Outstanding and Exercisable
			Weighted average		Weighted
			remaining		average
	Number		contractual life		exercise		Aggregate
Exercise price	outstanding		(Years)		price		Intrinsic Value
$2.13		10,000		NA(1)		2.13	$	-
$2.25		10,000		NA(1)		2.25		-
$6.00		10,000		2.9		6.00		-
$15.00		5,000,000		1.8		15.00		-
		5,030,000					$	-

(1)

All Options currently issued pursuant to the Company's 2004 Employee Stock Option Plans have no expiration date.

The aggregate intrinsic values in the above table were based on the closing price of our Common Stock of $1.22 as of December 31, 2014.

In January 2014 we granted 112,000 Restricted Stock Units (“RSUs”) to management and key employees, subject to the 2006 Plan. Under the terms of the RSU Award Agreements from January 2014, 25% of these RSUs vested immediately, with the remaining 75% to vest ratably over the next three years, pending each recipient's continued employment by DGSE. On September 24, 2014, the Board awarded the three independent directors a total of 42,600 RSUs as compensation for their Board service. 100% of these RSUs will vest as of the earlier of the one year anniversary of their award, or on the day prior to DGSE's 2015 Annual Meeting of Stockholders. On December 10, 2014, the Board awarded DGSE's Chief Executive Officer, James D. Clem, 75,000 RSUs as part of his compensation package. 100% of these RSUs vested immediately, and pursuant to this vesting, 75,000 shares of DGSE common stock were issued to Mr. Clem on December 18, 2014.

A summary of the status of our non-vested RSU grants issued under our 2006 Plan, and the changes during the year ended December 31, 2014, is presented below:

	2014
	Number of RSUs			Weighted average grant-date fair value

Nonvested at beginning of year		-		$	-
Granted		229,600			1.74
Vested		(103,000	)		1.57
Forfeited		(39,000	)		2.12

Nonvested at end of year		87,600		$	1.77

As a result of these grants, as of December 31, 2014, there were 449,400 shares available for future grants under the 2006 Plan.

During 2014 and 2013, the Company recognized $148,500 and $0, respectively, of stock-based compensation expense attributable to employees and directors which was recorded in selling, general, and administrative expenses. At December 31, 2014, there is an estimated $72,773 in unearned stock-based compensation to be expensed through 2017 related to RSU's.