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, 2015, 845,634 have been exercised, 599,000 have expired, and 15,000 remain outstanding. No further issuances can be made 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 as of December 31, 2015.

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:

	Year Ended December 31,
	2015				2014
			Weighted				Weighted
			average exercise				average
	Shares		price		Shares		exercise price

Outstanding at beginning of year		5,030,000	$	14.93		5,347,500	$	14.20
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited		(5,000)		2.25		(317,500)		2.50

Outstanding at end of year		5,025,000	$	14.95		5,030,000	$	14.93

Options exercisable at end of year		5,025,000	$	14.95		5,030,000	$	14.93

Information about stock options outstanding at December 31, 2015 is summarized as follows:

		Options Outstanding and Excersiable
				Weighted average
				remaining			Weighted
				contractual life			average		Aggregate Intrinsic
Exercise price		Number outstanding		(Years)			exercise price		Value
$	2.13		10,000		NA	(1)	$	2.13		-
$	2.25		5,000		NA	(1)		2.25		-
$	6.00		10,000		0.2			6.00		-
$	15.00		5,000,000		0.8			15.00		-
			5,025,000						$	-

(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 $0.33 as of December 31, 2015.

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. The Company issued 42,600 shares of DGSE’s common stock to the independent directors on June 9, 2015 related to the September 2014 grant. On December 10, 2014, the Board awarded DGSE’s former 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. On February 18, 2015, the Company issued 15,000 shares of DGSE’s common stock to management and key employees pursuant to the RSU Award Agreement.

A summary of the status of our non-vested RSU grants issued under our 2006 Plan is presented below:

	Year Ended December 31,
	2015				2014
			Weighted average				Weighted average
	Number of		grant-date fair		Number of		grant-date fair
	RSUs		value		RSUs		value

Nonvested at beginning of year		87,600	$	1.77		-	$	-
Granted		-		-		229,600		1.74
Vested		(57,600)		1.59		(103,000)		1.57
Forfeited		(26,000)		2.12		(39,000)		2.12

Nonvested at end of year		4,000	$	2.12		87,600	$	1.77

As a result of these grants, as of December 31, 2015, there were 475,400 shares available for future grants under the 2006 Plan.

During 2015 and 2014, the Company recognized $36,882 and $148,500, respectively, of stock-based compensation expense attributable to employees and directors which was recorded in selling, general, and administrative expenses. At December 31, 2015, there is an estimated $2,440 in unearned stock-based compensation to be expensed through 2017 related to RSU’s.