UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
DGSE COMPANIES, INC. |
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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DGSE
Companies, Inc.
15850
DALLAS PARKWAY, SUITE 140
Dallas,
Texas 75248
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JUNE 10, 2015
Dear Stockholder:
As
a stockholder of DGSE Companies, Inc., you are hereby given notice of and invited to attend in person or by proxy our 2015 Annual
Meeting of Stockholders to be held at the Marriott Quorum, 14901 Dallas Parkway, Dallas, Texas 75254,
on Wednesday, June 10, 2015 at 10:00 a.m. (local time).
At this year’s stockholders’ meeting,
you will be asked to: (i) elect five directors to serve until the next annual meeting of stockholders and until their respective
successors shall have been duly elected and qualified; (ii) ratify the appointment of Whitley Penn LLP (“Whitley Penn”)
as our independent registered public accountants for the fiscal year ending December 31, 2015; and (iii) transact such other
business as may properly come before the meeting and any adjournment(s) thereof. Our Board of Directors unanimously recommends
that you vote: (a) FOR the directors nominated; and, (b) FOR the ratification of Whitley Penn. Accordingly, please give careful
attention to these proxy materials.
Only holders of record of our Common Stock
as of the close of business on April 29, 2015 are entitled to notice of and to vote at our annual meeting and any adjournment(s)
thereof. Our transfer books will not be closed.
You are cordially invited to attend the
annual meeting. Whether you expect to attend the annual meeting or not, please vote, sign, date and return in the self-addressed
envelope provided the enclosed proxy card as promptly as possible. If you attend the annual meeting, you may vote your shares in
person, even though you have previously signed and returned your proxy.
By Order of the Board of Directors, |
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/s/ C. Brett
Burford |
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C. Brett Burford |
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Secretary |
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Dallas, Texas
April 30, 2015
YOUR VOTE IS IMPORTANT.
PLEASE EXECUTE AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED
HEREIN.
TABLE OF CONTENTS
DGSE
Companies, Inc.
15850
DALLAS PARKWAY, SUITE 140
Dallas,
Texas 75248
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JUNE 10, 2015
To Our Stockholders:
This proxy statement (this “Proxy Statement”)
is furnished in connection with the solicitation of proxies by the Board of Directors (our “Board of Directors”
or “Board”) of DGSE Companies, Inc., a Nevada corporation (the “Company,” “we,” “us,”
“our,” and “DGSE”), to be used at our Annual Meeting of Stockholders to be held at the Marriott Quorum,
14901 Dallas Parkway, Dallas, Texas 75254, on Wednesday, June 10, 2015 at 10:00 a.m. (local time), or at
any adjournment or adjournments thereof. Our stockholders of record as of the close of business on April 29, 2015 (the “Record
Date”) are entitled to vote at our annual meeting.
Important Notice of Availability
of Proxy Materials for the Annual Meeting of Stockholders to be held on June 10, 2015.
Our proxy materials, including
our Proxy Statement for the 2015 Annual Meeting, 2014 Annual Report on Form 10-K for the year ended December 31, 2014 and
proxy card, were first sent to security holders on or about May 11, 2015 and are available on the internet at www.DGSECompanies.com.
VOTING PROCEDURES AND
REVOCABILITY OF PROXIES
The accompanying proxy card is designed to
permit each of our stockholders as of the Record Date to vote on each of the proposals properly brought before the annual meeting.
As of the Record Date, there were 12,253,846 shares of our common stock, par value $.01 per share (our “Common Stock”),
issued and outstanding and entitled to vote at the annual meeting. Each outstanding share of our Common Stock is entitled to one
vote.
The holders of a majority of our outstanding
shares of Common Stock entitled to vote, present in person or by proxy, will constitute a quorum for the transaction of business
at the annual meeting. If a quorum is not present, the annual meeting may be adjourned from time to time until a quorum is obtained.
Abstentions and broker non-votes will be counted
for the purpose of determining whether a quorum is present. Abstentions, but not broker non-votes, are treated as shares present
and entitled to vote. Broker non-votes are treated as shares present but not entitled to vote on the particular matter. Broker
non-votes occur when nominees, such as banks and brokers holding shares on behalf of beneficial owners, do not receive voting instructions
from the beneficial holders at least ten days before the meeting. If that happens, the nominees may vote those shares only on matters
deemed “routine” by the NYSE MKT Exchange (the “Exchange”), such as the ratification of auditors. Nominees
cannot vote on non-routine matters unless they receive voting instructions from beneficial holders, resulting in so-called “broker
non-votes.”
Assuming that a quorum is present, directors
will be elected by a plurality vote and the five nominees who receive the most votes will be elected. As a result, abstentions
and broker non-votes, if any, will not affect the outcome of the vote on this proposal. There is no right to cumulative voting
unless cumulative voting is requested at the Annual Meeting by a stockholder who has complied with the requirements set forth in
our bylaws with respect to cumulative voting.
Assuming that a quorum is present, the ratification
of the appointment of Whitley Penn LLP (“Whitley Penn”) as our independent registered public accountants for the fiscal
year ending December 31, 2015 and approval of any other matter that may properly come before the annual meeting, requires
the affirmative vote of a majority of the total votes cast on these proposals, in person or by proxy, is required to approve these
proposals. As a result, abstentions and broker non-votes, if any, will not affect the outcome of the vote on these proposals because
they are not considered votes cast. We believe that the proposal for the ratification of our independent registered public accounting
firm is considered to be a “routine” matter, and hence we do not expect that there will be a significant number of
broker non-votes on such proposal.
The accompanying proxy card provides space
for you to vote in favor of, against or to withhold voting for: (i) the nominees for the Board of Directors identified herein;
and (ii) the ratification of the appointment of Whitley Penn as independent registered public accountants of DGSE for the
fiscal year ending December 31, 2015. Our Board of Directors urges you to complete,
sign, date and return the proxy card in the accompanying envelope, which is postage prepaid for mailing in the United States.
When a signed proxy card is returned with choices
specified with respect to voting matters, the proxies designated on the proxy card will vote the shares in accordance with the
stockholder’s instructions. We have designated Nabil Lopez and Jessica Moore as proxies for the stockholders. If you desire
to name another person as your proxy, you may do so by crossing out the names of the designated proxies and inserting the name
of the other person to act as your proxy. In that case, it will be necessary for you to sign the proxy card and deliver it to the
person named as your proxy and for the named proxy to be present and vote at the annual meeting. Proxy cards so marked should not
be mailed to us.
If you sign your proxy card and return it to
us and you have made no specifications with respect to voting matters, your shares will be voted FOR: (i) the election of
the nominees for director identified herein; and (ii) the ratification of the appointment of Whitley Penn as our independent
registered public accountants for the fiscal year ending December 31, 2015.
You have the unconditional right to revoke
your proxy at any time prior to the voting of the proxy by taking any act inconsistent with the proxy. Acts inconsistent with the
proxy include notifying our Secretary in writing of your revocation, executing a subsequent proxy, or personally appearing at the
annual meeting and casting a contrary vote. However, no revocation shall be effective unless at or prior to the annual meeting
we have received notice of such revocation.
At least ten (10) days before the annual
meeting, we will make a complete list of the stockholders entitled to vote at the annual meeting open to the examination of any
stockholder for any purpose germane to the meeting. The list will be open for inspection during ordinary business hours at our
executive offices located at 15850 Dallas Parkway, Suite 140, Dallas, Texas 75248, and will also be made available to stockholders
present at the meeting.
PROPOSAL I: ELECTION OF DIRECTORS
Five directors are proposed
to be elected at the annual meeting. If elected, each director will hold office until the next annual meeting of stockholders or
until his successor is elected and qualified. The election of directors will be decided by a plurality vote.
The five nominees for election as directors
to serve until the next annual meeting of stockholders and until their successors have been duly elected and qualified are C. Brett
Burford, James D. Clem, Dennis A. McGill, David S. Rector and Bruce A. Quinnell. All five nominees are members of our current Board
of Directors, and have served since the 2014 annual meeting of stockholders. All nominees have consented to serve if elected and
we have no reason to believe that any of the nominees named will be unable to serve. If any nominee becomes unable to serve: (i) the
shares represented by the designated proxies will be voted for the election of a substitute as our Board of Directors may recommend;
(ii) our Board of Directors may reduce the number of directors to eliminate the vacancy; or, (iii) our Board of Directors
may fill the vacancy at a later date after selecting an appropriate nominee.
The Compliance, Governance
and Nominating Committee of the Board nominated the individuals named below for election to our Board of Directors, and information
regarding the background and qualifications of each of the nominees is set forth below. See “Security Ownership of Certain
Beneficial Owners and Management” for additional information about the nominees, including their ownership of securities
issued by DGSE.
Name |
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Age |
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Director Since |
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Position |
James D. Clem |
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39 |
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2011 |
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Chairman of the Board, and Chief Executive Officer |
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C. Brett Burford |
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48 |
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2014 |
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Director, Chief Financial Officer, and Secretary |
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David S. Rector (1) |
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68 |
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2007 |
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Director and Chairman of the Compensation Committee |
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Dennis A. McGill (1) |
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66 |
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2014 |
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Director and Chairman of the Audit Committee |
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Bruce A. Quinnell (1) |
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66 |
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2014 |
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Lead Independent Director and Chairman of the Compliance, Governance and Nominating Committee |
(1) Member of the Audit Committee, Compensation Committee, and Compliance,
Governance and Nominating Committee
The following paragraphs summarize each nominee’s
principal occupation, business affiliations and other information.
James D. Clem has served as director of DGSE Companies, Inc.
since December 2011. Mr. Clem has served as a Chief Executive Officer and Chairman of the Board since April 17, 2014. Prior to
that he served as Chief Operating Officer of DGSE Companies, Inc. since December 2011. Mr. Clem was elected to the Board because
of his extensive jewelry and precious metal industry experience and other related experience. Prior to his current position, Mr.
Clem had served as our Vice President of Sales and Marketing since 2008. Prior to 2008, Mr. Clem was with the Heritage Organization,
LLC, an estate planning firm, for seven years as Vice President of Sales and Marketing and then Chief Operating Officer. Mr. Clem
holds a B.B.A. in business from the University of Texas at Arlington.
C. Brett Burford has served as a director of DGSE Companies,
Inc. since April 17, 2014. Mr. Burford has served as our Chief Financial Officer, Principal Financial Officer and Chief Accounting
Officer since August 31, 2012. The Board chose Mr. Burford for these positions because of Mr. Burford’s extensive experience
in finance, strategic planning, regulatory compliance and corporate governance. From 2008 to 2011, Mr. Burford served as Chief
Financial Officer of Craftmade International, Inc., a publicly-traded producer of ceiling fans and home décor items, where
Mr. Burford helped lead negotiations of the sale of Craftmade to a strategic buyer in late 2011. Prior to that, Mr. Burford worked
at Cadbury Schweppes Americas Beverages, the U.S. soft-drink division of London-based Cadbury Schweppes, PLC, which is now separately-traded
on the NYSE as Dr Pepper Snapple Group. Mr. Burford served in a variety of positions at Dr Pepper Snapple Group from 1997 to 2008,
including as Vice President, Finance, and as Vice President, Strategic Planning. Mr. Burford holds a B.S. in Finance from Oklahoma
State University, a Masters of Business Administration from the University of Texas at Dallas, and a Masters of Liberal Arts from
Southern Methodist University.
David S. Rector has served as a director since 2007 and was
elected as Chairman of our Compensation Committee in 2012. He also serves on the board of directors of Sevion Therapeutics, Inc,
Orbital Tracking Corp. and Fuse Science, Inc. Mr. Rector has previously served on the boards of California Gold Corp., Standard
Drilling, Inc., Valor Gold Corp., and Pershing Gold Corp. (formerly Sagebrush Gold, Ltd.), and previously served as a director
of Superior Galleries, Inc. from May 2003 until May 2007. Since 1985, he has served as a principal of David Stephen Group, which
provides enterprise consulting services to emerging and developing companies in a variety of industries. In January 2015, Mr. Rector
was appointed Interim Chief Executive Officer of Sevion Therapeutics, Inc. Previously Mr. Rector served as president, chief executive
officer and chief operating officer of Nanoscience Technologies, Inc., a development stage company engaged in the development and
commercialization of DNA nanotechnology. Mr. Rector holds a B.S. in business and finance from Murray State University. Mr. Rector
was elected to the Board because of his extensive experience in the precious metals industry and his experience in other related
enterprises.
Dennis A. McGill has served as a director,
and Chairman of our Audit Committee, since 2014. Mr. McGill has served as Chief Financial Officer over the past 35 years in various
industries including seventeen years in retail companies. Mr. McGill served as Executive Vice President and Chief Financial Officer
of Blockbuster Entertainment, Dallas, Texas from 2010 to 2013, where he helped lead the company through a bankruptcy reorganization,
and a change of ownership. Prior to that he served as Executive Vice President and Chief Financial Officer of Safety-Kleen Systems,
Inc., Plano, Texas from 2005 to 2010. Mr. McGill holds a B.S. in Business Administration, and a Masters of Business Administration
from the University of California, Berkeley, and is a Certified Public Accountant in the state of California. Mr. McGill was elected
to the Board based on his extensive business and financial management experience, including the numerous senior management and
Chief Financial Officer roles he has held.
Bruce A. Quinnell has served as a director,
and Chairman of our Compliance, Governance and Nominating Committee, since 2014. Mr. Quinnell served as Chairman of the Board and
Chairman of the Audit Committee for Tuesday Morning Corporation, Dallas, Texas from 2006 to 2012, and served as Chairman of the
Board and Chairman of the Audit Committee for Hot Topic, Inc., Los Angeles, California from 2002 to 2012. Mr. Quinnell served as
Vice Chairman of Borders Group, Inc., Ann Arbor, Michigan from 1999 to 2002, where he also held the role of President and Chief
Operating Officer from 1997 to 1999. Prior to that he held the role of President and Chief Operating Officer of Walden Book Company,
which was a subsidiary of Borders Group, from 1994 to 1997. Mr. Quinnell was elected to the Board based on his extensive business
and financial management experience, including the numerous board, senior management and Chief Financial Officer roles he has held.
Family Relationships
There are no family relationships
among our nominees for director, our officers or our key employees.
Vote Required
Directors will be elected
by a plurality of the votes cast by the holders of DGSE Common Stock voting in person or by proxy at the annual meeting. Abstentions
and broker non-votes will each be counted as present for purposes of determining the presence of a quorum, but will have no effect
on the vote for election of directors.
THE BOARD OF DIRECTORS URGES YOU TO VOTE
“FOR”
EACH OF THE NOMINEES FOR DIRECTOR SET FORTH
ABOVE.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of the Record
Date, April 29, 2015, the beneficial ownership each stockholder known by us to own beneficially more than 5 percent of our outstanding
shares of Common Stock. Common Stock beneficially owned and percentage ownership as of April 29, 2015 was based on 12,253,846 shares
outstanding.
(1)
Title of
class | |
(2)
Name and address
of beneficial owner | |
(3)
Amount and
nature of beneficial ownership | | |
(4)
Percent
of class | | |
(5)
Sole Voting
Power | | |
(6)
Shared Voting
Power | | |
(7)
Sole Investment
Power | | |
(8)
Shared Investment
Power | |
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Common Stock | |
Elemetal, LLC (1) 15850 Dallas Parkway Dallas,
TX 75248 | |
| 9,695,042 | | |
| 56.2 | % | |
| 9,695,042 | | |
| - | | |
| 9,695,042 | | |
| - | |
Common Stock | |
Dr. L. S. Smith (2) 519 I-30, Suite 243 Rockwall, TX 75087 | |
| 1,211,797 | | |
| 9.9 | % | |
| 1,211,797 | | |
| - | | |
| 1,211,797 | | |
| - | |
| (1) | Elemetal, LLC (“Elemetal”) and its affiliates NTR Metals, LLC (“NTR”) and Landmark Metals, LLC hold
4,695,042 shares of our Common Stock. Elemetal also holds an option to purchase up to 5,000,000 shares of our Common Stock at an
exercise price of $15 per share. The option is vested and exercisable. |
| (2) | This information was disclosed in the Schedule 13D/A, filed with the SEC on November 21, 2014. |
The following table sets forth information
with respect to beneficial ownership of our Common Stock at the Record Date, April 29, 2015, by our principal executive officers,
by each of our directors, and by all executive officers and directors as a group. Except as otherwise noted, the address of each
of the following beneficial owners is c/o DGSE Companies, Inc., 15850 Dallas Parkway, Suite 140, Dallas, TX 75248.
(1)
Title
of class | |
(2)
Name
and address of
beneficial owner | |
(3)
Amount
and nature of beneficial ownership | | |
(4)
Percent
of class | | |
(5)
Sole
Voting Power | | |
(6)
Shared
Voting Power | | |
(7)
Sole
Investment Power | | |
(8)
Shared
Investment Power | |
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Common Stock | |
C. Brett Burford (1) | |
| 20,500 | | |
| 0.17 | % | |
| 20,500 | | |
| - | | |
| 20,500 | | |
| - | |
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Common Stock | |
James D. Clem (2) | |
| 135,425 | | |
| 1.11 | % | |
| 135,425 | | |
| - | | |
| 135,425 | | |
| - | |
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Common Stock | |
Dennis A. McGill (3) | |
| 14,200 | | |
| 0.12 | % | |
| 14,200 | | |
| - | | |
| 14,200 | | |
| - | |
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| | | |
| | | |
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Common Stock | |
Bruce A. Quinnell (4) | |
| 14,200 | | |
| 0.12 | % | |
| 14,200 | | |
| - | | |
| 14,200 | | |
| - | |
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Common Stock | |
David S. Rector (5) | |
| 38,350 | | |
| 0.31 | % | |
| 38,350 | | |
| - | | |
| 38,350 | | |
| - | |
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Common Stock | |
All Directors and Executive
Officers | |
| 222,675 | | |
| 1.82 | % | |
| 222,675 | | |
| - | | |
| 222,675 | | |
| - | |
| (1) | C. Brett Burford was named as CFO on August 31, 2012 and elected as a director on April 17, 2014. Mr. Burford has 20,500 shares,
12,500 unvested Restricted Stock Units, and no options. |
| (2) | James D. Clem was elected as a director and COO on December 20, 2011 and was subsequently named CEO and elected as Chairman
of the Board on April 17, 2014. Mr. Clem owns 135,425 shares, 12,500 unvested Restricted Stock Units, and no options. |
| (3) | Dennis A. McGill is an outside director, owns no shares and has 14,200 unvested Restricted Stock Units, and no options. |
| (4) | Bruce A. Quinnell is an outside director, owns no shares and has 14,200 unvested Restricted Stock Units, and no options. |
| (5) | David S. Rector is an outside director and owns 14,150 shares, has 10,000 options, and 14,200 unvested Restricted Stock Units. |
BOARD OF DIRECTORS AND COMMITTEES
Board Composition
Our Board is currently composed of five directors. Our Board has determined that current board members David S. Rector, Dennis
A. McGill and Bruce A. Quinnell are “independent” under the standards of the SEC and the Exchange. Under applicable
SEC and Exchange rules, the existence of certain “related person” transactions above certain thresholds between a
director and us are required to be disclosed and preclude a finding by our Board that the director is independent. In addition
to transactions required to be disclosed under SEC rules, our Board considered certain other relationships in making its independence
determinations, and determined in each case that such other relationships did not impair the director’s ability to exercise
independent judgment on our behalf.
Our directors are elected at an annual meeting of our shareholders
by the holders of shares entitled to vote in the election of directors, except in the case of vacancy, which can be filled by an
affirmative vote of a majority of the remaining directors. Each director is elected to serve until the annual meeting of shareholders
following his election or until he chooses to resign from his position.
Board Meetings
Our Board meets as often as necessary to perform its duties and
responsibilities. During the fiscal year ended December 31, 2014 (“Fiscal 2014”), the Board met seven times in person
or telephonically. All members of our Board were present at and participated in all meetings and all members attended the 2014
annual meeting. In addition, our Board acted by written consent four times. Management also regularly conferred with directors
between meetings regarding our affairs.
Audit Committee
The Audit Committee, established in accordance with Section 3(a)(58)(A)
of the Exchange Act, consisting of all three independent directors of our Board, is chaired by Dennis A. McGill, who is also an
“audit committee financial expert,” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K, promulgated under
the Securities Act. Mr. McGill is “independent,” as defined by the listing standards of the Exchange. The other members
of the Audit Committee are David S. Rector and Bruce A. Quinnell. Mr. Quinnell also qualifies as an “audit committee financial
expert.” The Audit Committee is primarily tasked with overseeing our financial reporting process, evaluation of independent
auditors and, where appropriate, exercising its duty to replace our independent auditors. Management is responsible for preparing
our financial statements, and the independent auditors are responsible for auditing those financial statements. During Fiscal
2014, the Audit Committee met six times in person or telephonically.
In addition to their regular activities, the
Audit Committee is available to meet with the independent auditors, the Chief Executive Officer or the Chief Financial Officer
whenever a special situation arises and meets as often as necessary to perform its duties and responsibilities. The charter for
the Audit Committee is available under the “Investors” menu of our corporate website at www.DGSECompanies.com. We certify
that we have adopted a formal written audit committee charter and that the Audit Committee reviews and reassesses the adequacy
of the charter annually.
Audit Committee Report
The Audit Committee has reviewed and discussed
the audited financial statements with management and Whitley Penn, our independent registered accounting firm, and all matters
required to be discussed by the American Institute of Certified Public Accountants, Professional Standards, Vol. 1, AU Section
380, as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T.
The Audit Committee has received written disclosures
and the letter from Whitley Penn required by applicable rules of the PCAOB regarding Whitley Penn’s communications with the
Audit Committee concerning independence, and the Audit Committee has discussed with Whitley Penn its independence.
Based on the review and discussions noted in
the preceding two paragraphs, the Audit Committee recommended to the Board that the audited financial statements be included in
our annual report on Form 10-K for the fiscal year ended December 31, 2014.
The Audit Committee acts pursuant to our Audit
Committee Charter. Each of the members of the Audit Committee qualifies as an independent director under the current listing standards
of the Exchange.
Compensation Committee
On August 31, 2012, the Board approved the creation of a Compensation
Committee comprised of our independent directors. The Compensation Committee is chaired by David S. Rector and is primarily concerned
with reviewing, approving and determining the compensation of our executive officers to ensure that we employ ethical compensation
standards and that our executive officers are fairly compensated based upon their performance and contribution to us. The Compensation
Committee meets as often as necessary to perform its duties and responsibilities. During Fiscal 2014, the Compensation Committee
met three times in person or telephonically. We have adopted a formal written Compensation Committee Charter, and the Audit Committee
reviews and reassesses the adequacy of the charter annually. The charter for the Compensation Committee is available under the
“Investors” menu of our corporate website at www.DGSECompanies.com.
Compliance, Governance, and Nominating Committee
On January 17, 2013, the Board approved the
creation of a Nominating and Corporate Governance Committee comprised of our independent directors, and on February 20, 2015 the
Board approved a resolution which changed the name of this committee to the Compliance, Governance, and Nominating Committee, and
also delegated certain additional responsibilities to the committee. The Compliance, Governance, and Nominating Committee is chaired
by Bruce A. Quinnell and is primarily concerned with matters relating to the Company’s director nominations process and procedures,
developing and maintaining the Company’s corporate governance policies, monitoring the Company’s compliance with its
code of conduct and ethics, and any related matters required by the federal securities laws. The Compliance, Governance, and Nominating
Committee meets as often as necessary to perform its duties and responsibilities. During Fiscal 2014, the Compliance, Governance,
and Nominating Committee met three times in person or telephonically.We have adopted a formal written Compliance, Governance, and
Nominating Committee Charter, and the Compliance, Governance, and Nominating Committee reviews and reassesses the adequacy of the
charter annually. The charter for the Compliance, Governance and Nominating Committee is available under the “Investors”
menu on our corporate website at www.DGSECompanies.com.
All nominees standing for election as a member
of our Board were selected by the Compliance, Governance, and Nominating Committee, based on a review of each individual’s
background, credentials and business experience.
The Compliance, Governance and Nominating Committee
will consider any nominations for director candidates validly made by stockholders in accordance with applicable laws, rules and
regulations and the provisions of the Company’s charter documents.
Leadership
Pursuant to our bylaws, the Chairman of our
Board shall be and is our Chief Executive Officer. On June 11, 2014, the Board passed a resolution to create the role of Lead Independent
Director, and at that same meeting elected Bruce A. Quinnell to fill that role. The Lead Independent Director consults with the
Chairman in setting the schedule and agenda for Board meetings, coordinates and moderates executive sessions of the independent
directors, acts as a liaison between the independent directors and the Chairman, and assists the Board and officers in providing
oversight for the Company’s governance guidelines and policies. As noted above, Mr. Quinnell also serves as chairman of the
Compliance, Governance, and Nominating Committee.
Pursuant to our bylaws, the Chairman of our
Board and Chief Executive Officer presides, when present, at all meetings of the shareholders and at all meetings of our Board.
The Chairman of our Board and Chief Executive Officer generally supervises over our affairs, shall have general and active control
of all of our business and shall see that all orders and resolutions of our Board and our shareholders are carried into effect.
We have determined this leadership structure appropriate given the need for a centralized model of oversight.
Risk Oversight
Like other companies, we face a variety of
risks, including investment risk, liquidity risk, and operational risk. Our Board believes an effective risk management system
should: (i) timely identify the material risks that we face; (ii) communicate necessary information with respect to material risks
to senior executives and, as appropriate, to the Board or the relevant committee of our Board of Directors; (iii) implement appropriate
and responsive risk management strategies consistent with our risk profile; and, (iv) integrate risk management into decision-making.
Our Board is tasked with overseeing risk oversight, and periodically meets with management and advisors regarding the adequacy
and effectiveness of our risk management processes and to analyze the most likely areas of future risk for us. In addition to the
formal compliance program, our Board encourages management to promote a corporate culture that incorporates risk management into
our corporate strategy and day-to-day business operations.
Code of Business Conduct & Ethics and Related Party Transaction
Policy
We have adopted a Code of Business Conduct
and Ethics that applies to our directors, officers and employees, as well as a Related Person Transaction Policy, that applies
to our directors (and director nominees), executive officers (or persons performing similar functions), and certain of our family
members, affiliates, associates and/or related persons, as well as stockholders owning at least 5% of our Common Stock. The latest
copies of our Code of Business Conduct and Ethics, and Related Person Transaction Policy are available under the “Investors”
menu on our corporate website at www.DGSECompanies.com. Any transactions between us and our officers, directors, principal shareholders,
or other affiliates have been on terms no less favorable to us than the Board believes could be obtained from unaffiliated third
parties on an arms-length basis. We intend to disclose future amendments to these policies, or waivers of such provisions, at the
same location on our website and also in public filings.
Shareholder Communication
Shareholders may send communications to our
Board, individual directors or officers through our Investor Relations Department, Attn: Mr. C. Brett Burford, Chief Financial
Officer and Secretary, c/o DGSE Companies, Inc., 15850 Dallas Parkway, Suite 140, Dallas, TX 75248, by phone at 972-587-4021, or
via email at investorrelations@dgse.com. Mr. Burford will forward all shareholder communications that, in his judgment, are appropriate
for consideration by members of our Board. Comments or questions regarding our accounting, internal controls or auditing matters
will be referred to members of the Audit Committee. Comments or questions regarding the nomination of directors and other corporate
governance matters will be referred to our Compliance, Governance, and Nominating Committee.
EXECUTIVE OFFICERS
The following table sets forth certain information
regarding the current executive officers of DGSE:
Name |
|
Age |
|
Employee or
Director Since |
|
Position |
James D. Clem |
|
39 |
|
2008 |
|
Chairman of the Board and Chief Executive Officer of DGSE Companies, Inc. |
|
|
|
|
|
|
|
C. Brett Burford |
|
48 |
|
2012 |
|
Chief Financial Officer and Secretary of DGSE Companies, Inc. |
James D. Clem has served as a Chief Executive Officer and
Chairman of the Board since April 17, 2014. Prior to that he served as director and Chief Operating Officer of DGSE Companies,
Inc. since December 2012. Mr. Clem was elected to the Board because of his extensive jewelry and precious metal industry experience
and other related experience. Mr. Clem began his career at DGSE as our Vice President of Sales and Marketing in 2008. Prior
to 2008, Mr. Clem was with the Heritage Organization, LLC, an estate planning firm, for seven years as Vice President of Sales
and Marketing and then Chief Operating Officer. Mr. Clem holds a B.B.A. in business from the University of Texas at Arlington.
C. Brett Burford was appointed as our
Chief Financial Officer, Principal Financial Officer and Chief Accounting Officer on August 31, 2012. The Board chose Mr. Burford
for these positions because of Mr. Burford’s many years of experience in finance, strategic planning, regulatory compliance
and corporate governance. From 2008 to 2011, Mr. Burford served as Chief Financial Officer of Craftmade International, Inc., a
publicly-traded producer of home décor items, where Mr. Burford helped lead negotiations of the sale of Craftmade to a strategic
buyer in late 2011. Prior to that, Mr. Burford worked at Cadbury Schweppes Americas Beverages, the U.S. soft-drink division of
London-based Cadbury Schweppes, PLC, which is now separately-traded on the NYSE as Dr Pepper Snapple Group. Mr. Burford served
in a variety of positions at Dr. Pepper Snapple Group from 1997 to 2008, including as Vice President, Finance, and as Vice President,
Strategic Planning. Mr. Burford received a B.S. in Finance from Oklahoma State University in 1989, a Masters of Business Administration
from the University of Texas at Dallas in 1996 and a Masters of Liberal Arts from Southern Methodist University in 2004.
EXECUTIVE COMPENSATION
Our Board is responsible
for establishing and administering our executive compensation and employee benefit programs in the context of our overall goals
and objectives. This Board duty has been delegated to the Compensation Committee of our Board of Directors (the “Compensation
Committee”) in accordance with the Compensation Committee's Charter. The Compensation Committee reviews the executive compensation
program at least annually and approves appropriate modifications to executive officer compensation, including specific amounts
and types of compensation. The Compensation Committee is responsible for establishing the compensation of the CEO and executive
officers. The Compensation Committee establishes the annual compensation of the non-employee directors and oversees our equity
compensation plans, including the administration of our stock-based compensation plans.
The
objectives of our compensation program are to: (i) provide a competitive, comprehensive compensation package to attract, retain
and motivate highly talented personnel at all levels of our organization; and, (ii) provide incentives and rewards for implementing
and accomplishing our short-term and long-term strategic and operational goals and objectives. Therefore, we strive to structure
compensation packages that are competitive within the industry, while maintaining and promoting our interests, as well as the interests
of our shareholders.
We
believe that specific levels of executive compensation should reflect the responsibilities of each position within our company,
the relative value of the position and the competition for quality, key personnel in our industry. Our executive compensation program
includes three primary components:
|
· |
Base salary. Base salary is the guaranteed element of an executive’s annual cash compensation. The level of base salary reflects the Compensation Committee’s assessment of the employee’s long-term performance, his or her skill set and the market value of that skill set. |
|
· |
Annual cash bonus opportunities. Performance-based incentive cash bonuses are intended to reward executives for achieving specific financial and operational goals both at a corporate and an individual level. |
|
· |
Long-term incentive awards. Long-term incentives are provided through grants of stock options and restricted stock units intended to encourage our executives to take steps that they believe are necessary to ensure our long-term success, and to align their interests with our other shareholders. |
Advice of Compensation Consultant
In 2012, prior to the formation of our Compensation
Committee, our Board, performing the function of a compensation committee, retained an independent compensation consultant, Paradox
Compensation Advisors (“Paradox”), to analyze our executive compensation program as compared to our peers. Paradox
also advised the Compensation Committee regarding appropriate elements of a competitive executive compensation structure, including
fixed and at-risk elements, short-term and long-term incentives, and cash and equity components. Paradox reported the results of
its analysis of our total executive compensation packages for positions held by members of our executive leadership team, as well
as specific components of those packages, as compared to executives holding similar positions at similarly-sized companies and/or
labor market peers in related industries.
In February 2015, as part of a set of corporate
governance reforms that the Board implemented, the Compensation Committee recommended and the Board approved an Executive Compensation
Policy. As part of this policy the Compensation Committee is required to retain an independent compensation consultant at least
once every three years to review the Company’s compensation philosophy and plan to ensure that the criteria, factors, and
policies and procedures for determining compensation comport with current best practices. Such consultant shall make recommendations
to the Compensation Committee and/or the entire Board regarding any appropriate actions to better align executive and director
compensation with shareholder interests and long-term value creation. Accordingly, the Compensation Committee has again engaged
Paradox, and expects Paradox to complete its review during the second quarter of Fiscal 2015.
Components of 2014 Executive Officer
Compensation
Due to the significant changes in our executive
leadership in recent years, both current named executives received revised compensation agreements during the years ended December
31, 2012 and 2013. The Compensation Committee’s decisions regarding executive compensation reflected its continued desire
to bring our executive compensation program in line with our compensation objectives stated above.
Our executive compensation
program is comprised of both fixed and variable elements, with both cash and equity components, including a base salary and annual
cash incentives and bonus opportunities. Currently only Mr. Burford has a cash bonus specifically designated as part of his compensation
agreement, although Mr. Clem is able to receive a cash bonus at the discretion of the Compensation Committee. Both Mr. Clem’s
and Mr. Burford’s contracts contemplate an equity bonus as part of their compensation plan, but neither are prescriptive
as to the level or type of equity compensation.
Based on the Paradox
survey, in 2013 the Compensation Committee approved a long-term equity-based compensation plan for officers and key employees,
whereby 125,000 Restricted Stock Units (“RSUs”) were approved for granting to eligible recipients. These RSUs were
actually granted in early 2014, and are discussed further in the Outstanding Equity Awards section below. Additionally, in December
2014 the Compensation Committee approved an additional grant of 75,000 RSUs to Mr. Clem, the Company’s Chief Executive, which
vested immediately and resulted in the issuance of 75,000 shares of Common Stock to Mr. Clem at that time.
Summary Compensation Table
The following tables and discussion sets forth
the compensation paid or accrued to our Chief Executive Officer (or person acting in a similar capacity), and our two most highly
compensated executive officers other than our Chief Executive Officer, for all services rendered to us by these individuals in
all capacities for Fiscal 2014 and the year ended December 31, 2013 (“Fiscal 2013”).
Name and Principal Position | |
Fiscal Year | |
Salary($) | | |
Bonus($) | | |
Stock Awards | | |
Total Compensation | |
| |
| |
| | | |
| | | |
| | | |
| | |
James D. Clem | |
2013 | |
| 325,000 | | |
| - | | |
| - | | |
| 325,000 | |
CEO; COO (1) | |
2014 | |
| 325,000 | | |
| - | | |
| 99,688 | | |
| 424,688 | |
| |
| |
| | | |
| | | |
| | | |
| | |
C. Brett Burford | |
2013 | |
| 244,615 | | |
| - | | |
| - | | |
| 244,615 | |
CFO (2) | |
2014 | |
| 300,000 | | |
| 37,500 | | |
| 13,438 | | |
| 350,938 | |
| |
| |
| | | |
| | | |
| | | |
| | |
James J. Vierling | |
2013 | |
| 535,000 | | |
| - | | |
| - | | |
| 535,000 | |
CEO & President (3) | |
2014 | |
| 185,192 | | |
| - | | |
| 21,500 | | |
| 206,692 | |
| (1) | James D. Clem was elected by the Board to the role of Chairman of the Board and CEO upon the resignation of James J. Vierling
on April 17, 2014. Prior to this election, Mr. Clem served as the Company's COO. |
| (2) | C. Brett Burford was named as CFO on August 31, 2012. |
| (3) | James J. Vierling was elected as the Company's Chairman of the Board, CEO and President on October 25, 2012. Mr. Vierling resigned
from these roles on April 17, 2014. |
Employment Agreements
C. Brett Burford. On October 29, 2013, the Board of Directors
approved that certain Employment Agreement, dated October 29, 2013, to be effective September 1, 2013, by and between the Company
and Mr. Burford, the Company’s Chief Financial Officer. Pursuant to the Employment Agreement and effective September 1, 2013,
Mr. Burford’s annual salary will be at least $300,000 for an initial term of three years. Under the Employment Agreement,
Mr. Burford will also be eligible once per year for a bonus payment equal to 25 percent of his then existing salary. Such bonus
payments are contingent upon the achievement of performance goals mutually agreed upon by Mr. Burford and the Chief Executive Officer
of the Company.
James D. Clem. On January 1, 2012, the Board of Directors
approved that certain Employment Agreement, by and between Mr. Clem and DGSE, as amended, in which we have agreed to pay Mr. Clem
an annual salary of $325,000. Under the terms of Mr. Clem’s Employment Agreement, as amended, Mr. Clem is not entitled to
any mandatory bonus. Mr. Clem is eligible to receive an annual performance bonus at the discretion of our Board of Directors.
Outstanding Equity
Awards at Fiscal Year End
In January of 2014 the
Compensation Committee granted 112,000 RSUs to the Company’s officers and certain key employees. Each RSU is convertible
into one share of Common Stock, par value $0.01, of the Company without additional payment pursuant to the terms of the Restricted
Stock Unit Award Agreement, dated January 23, 2014, between the Issuer and each recipient (the "RSU Award Agreement").
One-fourth (or 28,000) of the RSUs vested and were exercisable as of the date of the grant, and an additional one-fourth of the
RSUs (calculated using the total number of RSUs at the time of grant) vest and will be exercisable on each subsequent anniversary
of the date of grant until 100 percent of the RSUs have vested, subject to the each recipients continued status as an employee
on each such date and other terms and conditions of set forth in the RSU Award Agreement. Upon termination of service of the recipient
to the Company, other than by reason of death or disability, any RSUs that have not vested will be forfeited and the award of such
units shall terminate.
The following table sets
forth information concerning outstanding RSUs that have not vested for each named executive officer as of the end of Fiscal 2014:
Name and Principal Position | |
Number of Securities Underlying Unvested RSUs (#) | | |
RSU Exercise Price ($) | | |
RSU Vesting Date | |
| |
| | |
| | |
| |
James D. Clem | |
| 18,750 | | |
| | (1) | |
| | (2) |
CEO, Chairman of the Board | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
C. Brett Burford | |
| 18,750 | | |
| | (1) | |
| | (2) |
CFO | |
| | | |
| | | |
| | |
| (1) | All stock issued pursuant to RSUs will be granted at no cost to the recipient. The Company will recognize stock compensation
expense based on the market price of the stock on the date that it issues, pursuant to the RSUs. |
| (2) | RSUs granted to management in January 2014 vested 25% at that time, and continue to vest 25% each year on the anniversary of
issuance, until fully vested. Accordingly, subsequent to December 31, 2014, in January 2015, an additional 25% of these management
RSUs vested and the underlying shares were issued, leaving Mr. Clem and Mr. Burford each with 12,500 unvested shares as of the
record date. All unvested RSUs will be forfeited should the recipient leave the employment of the Company. |
Compensation of Directors
On August 15, 2014 the Compensation Committee
recommended that independent directors be paid cash compensation of $20,000 per year, to be paid in $5,000 quarterly increments
due on the day of each quarterly board meeting. In addition, the Compensation Committee recommended that independent directors
be paid $20,000 per annum in equity awards in the form of RSUs to be issued on the date annually of the Annual Meeting for the
approaching fiscal year. On a one-time, initial basis, the Compensation Committee recommended that the 2014 equity award should
be issued as soon as practicable, and on the date of the Annual Meeting, per the guideline, thereafter. These RSUs should vest
100% at the earlier of 12 months, or the day prior to the next shareholder meeting. The full Board subsequently approved these
recommendations. As a result, on September 24, 2014, the Board awarded the three independent directors a total of 42,600 RSUs as
compensation for their Board service. 100% of these RSUs will vest as of the earlier of the one year anniversary of their award,
or on the day prior to DGSE’s 2015 Annual Meeting of Stockholders.
Our directors do not receive meeting fees for
Board or committee meeting attendance. In addition to the quarterly payments, we reimburse our directors for their reasonable expenses
incurred while attending meetings of our Board and its Committees or conducting other company business. We do not provide any health
insurance, retirement or other benefit programs to our independent directors.
Our employee directors receive no separate
compensation for their services as directors.
The following table sets forth the total compensation
paid to our directors for their service on our Board and committees of the Board during Fiscal 2014.
Name | |
Director Fees Paid in Cash ($) | | |
Stock Awards (1) | | |
All Other Compensation | | |
Total ($) | |
Craig Alan-Lee (2) | |
| 18,071 | | |
| - | | |
| - | | |
| 18,071 | |
C. Brett Burford (3) | |
| - | | |
| - | | |
| - | | |
| - | |
James D. Clem (3) | |
| - | | |
| - | | |
| - | | |
| - | |
William P. Cordeiro (4) | |
| 19,462 | | |
| - | | |
| - | | |
| 19,462 | |
Dennis A. McGill (5) | |
| 10,000 | | |
| - | | |
| - | | |
| 10,000 | |
Bruce A. Quinnell (5) | |
| 10,000 | | |
| - | | |
| - | | |
| 10,000 | |
David Rector | |
| 23,000 | | |
| - | | |
| - | | |
| 23,000 | |
James J. Vierling (6) | |
| - | | |
| - | | |
| - | | |
| - | |
| (1) | Mr. Rector, Mr. McGill, and Mr. Quinnell each received a grant of 14,200 RSUs on September 24, 2014. These RSUs will vest 100%
on the earlier of the one year anniversary of their issuance, or on the day prior to the Company's next annual meeting of shareholders.
These RSUs have no value until vesting, but the value of the underlying shares as of the date of issuance was $1.41 per share,
or $19,880 for each grant of 14,200 shares. |
| (2) | Craig Alan-Lee was an independent director for all of 2013, and served as a director in 2014 prior to the 2014 Annual Meeting
of Shareholders. Mr. Alan-Lee did not stand for re-election in 2014, and therefore served only until the date of the shareholder
meeting, June 11, 2014. |
| (3) | In addition to their executive management roles, Mr. Clem and Mr. Burford also serve as inside directors for DGSE. Mr. Clem
and Mr. Burford do not receive any compensation for their roles as inside directors. |
| (4) | William P. Cordeiro was an independent director for all of 2013, and served as a director in 2014 prior to the 2014 Annual
Meeting of Shareholders. Mr. Cordeiro did not stand for re-election in 2014, and therefore served only until the date of the shareholder
meeting, June 11, 2014. |
| (5) | Dennis A. McGill and Bruce A. Quinnell were elected as independent directors on June 11, 2014. |
| (6) | James J. Vierling served as CEO, director and Chairman of the Board until April 17, 2014. Mr. Vierling did not receive any
compensation for his roles as director and Chairman of the Board. |
Equity Compensation Plan Information
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.
In January 2014 we granted 112,000 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 the 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.
As a result of these grants, as of December
31, 2014, there were 449,400 shares available for future grants under the 2006 Plan.
The following table summarizes
options to purchase shares of Common Stock, and RSUs, outstanding as of December 31, 2014:
Plan Category | |
Column (a): Number of securities to be issued upon exercise of options | | |
Column (b): Weighted average exercise price of outstanding options | | |
Column (c): Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |
Equity compensation plans approved by security holders | |
| 117,600 | (1) | |
| 3.46 | (2) | |
| 449,400 | |
Equity compensation plans not approved by security holders | |
| None | | |
| - | | |
| None | |
| |
| 117,600 | | |
| 3.46 | | |
| 449,400 | |
| (1) | Includes 87,600 RSUs that were not vested as of December 31, 2014. |
| (2) | Weighted average exercise price does not include 87,600 RSUs issued to employees, management and directors of DGSE as incentive
compensation for their continued services. Pursuant to the terms of individual Restricted Stock Unit Award Agreements, such RSUs
will vest over time, contingent upon the continued service to DGSE by the recipient. Each vested RSU may be converted into one
share of Common Stock, par value $0.01, of DGSE without additional consideration (other than such conversion and reduction in the
number of RSUs held). |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, we engage in business transactions
with our controlling shareholder, NTR and other related parties. Set forth below in the section entitled “Related Party Transactions”
is a summary of such transactions.
Relationship with Elemetal, LLC.
Elemetal is a global precious metals conglomerate
based in Dallas, Texas. Its principal holdings include OPM Metals, an Ohio-based large scale precious metal refiner (“OPM”),
NTR Metals, a Texas-based retail refiner of precious metals (“NTR”), Elemetal Capital, a leading trader in the precious
metals industry, Provident Metals, an online retailer of bullion and precious metal products, and Echo Environmental, a Texas-based
firm focusing on electronic waste recycling and precious metal recovery.
Through a series of transactions beginning
in 2010, NTR became the largest shareholder of our Common Stock. In April 2012 NTR announced its merger with OPM, the largest American-owned
refiner of “good delivery” gold and silver. The combined company was originally called Global Metals Holdings, and
has since been rechristened Elemetal. In January 2013 NTR announced it would contribute 4,393,142 of its shares of our Common Stock
to Elemetal, in exchange for ownership units in Elemetal. NTR also agreed to contribute its option to buy 5,000,000 additional
shares of DGSE.
In addition to being our largest shareholder,
Elemetal is our primary supplier for bullion products and is our primary refiner of recyclable precious metal. These and other
transactions with Elemetal are more fully described below in Related Party Transactions.
Related Party Transactions
DGSE has a corporate policy governing the identification,
review, consideration and approval or ratification of transactions with related persons, as that term is defined in the Instructions
to Item 404(a) of Regulation S-K, promulgated under the Securities Act (“Related Party”). Under this policy, all Related
Party transactions are identified and approved prior to consummation of the transaction to ensure they are consistent with DGSE’s
best interests and the best interests of its stockholders. Among other factors, DGSE’s Board considers the size and duration
of the transaction, the nature and interest of the of the Related Party in the transaction, whether the transaction may involve
a conflict of interest and if the transaction is on terms that are at least as favorable to DGSE as would be available in a comparable
transaction with an unaffiliated third party. DGSE’s Board reviews all Related Party transactions at least annually to determine
if it is in DGSE’s best interests and the best interests of DGSE’s stockholders to continue, modify, or terminate any
of the Related Party transactions. DGSE’s Related PersonTransaction Policy is available for review in its entirety under
the “Investors” menu of the Company’s corporate relations website at www.DGSECompanies.com.
NTR is an affiliate of DGSE’s largest
shareholder, Elemetal. In 2014, NTR was also DGSE’s primary refiner and bullion trading partner. In 2014, 23% of sales and
26% of purchases were transactions with NTR, and in 2013 these transactions represented 31% of DGSE’s sales and 37% of DGSE’s
purchases. As of December 31, 2014, the Company was obligated to pay $3,721,144 to NTR as a trade payable, and has a $34,343 receivable
from NTR.
On July 19, 2012, the Company entered into
the Loan Agreement with NTR, pursuant to which NTR agreed to provide the Company with a guidance line of revolving credit in an
amount up to $7,500,000. The Loan Agreement provides that the Loan Agreement will terminate—and DGSE’s Obligations
will be due and payable– upon the earlier of: (i) August 1, 2014; (ii) the date that is twelve months after DGSE receives
notice from NTR demanding the repayment of the Obligations; (iii) the date the Obligations are accelerated in accordance with the
terms of the Loan Agreement; or, (iv) the date on which the commitment terminates under the Loan Agreement. In connection with
the Loan Agreement, DGSE granted a security interest in the respective personal property of each of its subsidiaries. The loan
carries an interest rate of two percent (2%) per annum for all funds borrowed pursuant to the Loan Agreement. Proceeds received
by DGSE pursuant to the terms of the Loan Agreement were used for repayment of all outstanding financial obligations incurred in
connection with that certain Loan Agreement, dated as of December 22, 2005, between DGSE and Texas Capital Bank, N.A., and additional
proceeds are expected were used as working capital in the ordinary course of business. On February 25, 2014, we entered into a
one-year extension of the Loan Agreement with NTR, extending the termination date to August 1, 2015, and on February 4, 2015, we
entered into an additional two-year extension, extending the termination date to August 1, 2017. All other terms of the agreement
remain the same. As of December 31, 2014, the outstanding balance of the NTR loan was $2,303,359.
In April 2013 DGSE moved its principal corporate
offices to office space at 15850 Dallas Parkway, Suite 140, Dallas, Texas. This property is owned by an affiliate of Elemetal and
also serves as their headquarters. DGSE leases space in the building subject to a lease that will expire in December 2015. In Fiscal
2014 and Fiscal 2013 the Company recognized rent expense of $52,500 and $35,000, respectively, related to this lease.
In the fourth quarter of Fiscal 2013 the Company
established a wholly owned subsidiary named Carbon Fund One, LLC to act as the general partner (the “General Partner”)
for Carbon Fund One, LP (the “Fund”), which was established at the same time. The Fund was an investment fund specializing
in the buying and selling of gemstones. The General Partner receives a one percent ownership interest of the Fund, and is paid
2% carried interest on assets under management by the Fund, and 20% of net earnings before distributions to the limited partners.
The Fund was intended to provide an investment vehicle for individuals interested in investment opportunities in diamonds and gemstones,
and provide incremental value to the Company’s shareholders by utilizing the Company’s expertise, infrastructure, and
retail and wholesale customer base, to generate additional profit through earnings from its role as General Partner. Ultimately,
DGSE’s management made the decision to end its involvement in the Fund, and the General Partner has begun winding down the
Fund’s activities and liquidating all remaining inventory. The Fund transacted business with the Company from time to time,
including buying gemstones from and selling gemstones to the Company. In Fiscal 2014, the Company made sales of $37,148 to the
Fund, had purchases of $152,328 from the Fund, and owed the Fund $136,755 as of December 31, 2014 in trade payables. In Fiscal
2013, the Company made sales of $423,107 to the Fund, had purchases of $78,408 from the Fund, and did not owe the Fund anything
as of December 31, 2013. Additionally, in 2014 the General Partner generated net income of $35,120 from its role with the Fund,
while in Fiscal 2013, the General Partner lost $78,213, which was driven by expenses related to the startup of the Fund.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT
OF
WHITLEY PENN AS INDEPENDENT AUDITORS OF DGSE
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015
The Audit Committee has appointed Whitley Penn
as our independent registered accountants to audit our financial statements for the fiscal year ending December 31, 2015, and has
further directed that management submit the selection of independent registered accountants for ratification by our stockholders
at the annual meeting. Stockholder ratification of the selection of Whitley Penn is not required by our bylaws or otherwise. However,
we are submitting the selection of Whitley Penn to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Whitley Penn. Even
if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent accounting
firm at any time during the year if it is determined that such a change would be in the best interests of DGSE and our stockholders.
Representatives of the firm of Whitley Penn
are expected to be present at our annual meeting and will have an opportunity to make a statement, if they so desire, and will
be available to respond to appropriate questions.
In accordance with the requirements of the
Sarbanes-Oxley Act of 2002 and the Audit Committee’s charter, all audit and audit-related work and all non-audit work performed
by our independent accountants, Whitley Penn, is approved in advance by the Audit Committee, including the proposed fees for such
work. The Audit Committee is informed of each service actually rendered.
The following table presents fees for the audits
of our annual Consolidated Financial Statements for Fiscal 2014 and Fiscal 2013.
Type of Fees | |
2014 | | |
2013 | |
| |
| | |
| |
Audit Fees | |
$ | 265,459 | | |
$ | 295,254 | |
| |
| | | |
| | |
Tax Fees | |
$ | 31,365 | | |
$ | 62,560 | |
| |
| | | |
| | |
Total Fees to Whitley Penn | |
$ | 296,824 | | |
$ | 357,814 | |
The amounts for audit fees include generally
the fees charged for: (i) the audit of our annual Consolidated Financial Statements; and, (ii) the reviews of our quarterly financial
statements. The tax fees were primarily for tax return preparation and tax-related services, including the preparation of all applicable
state tax returns.
Applicable law and regulations provide an exemption
that permits certain services to be provided by our outside auditors even if they are not pre-approved. We have not relied on this
exemption at any time since the Sarbanes-Oxley Act was enacted.
We originally engaged the firm of Whitley Penn
in May 2012, as our principal independent accountant to audit our financial statements. The members of our Board of Directors unanimously
approved the engagement of Whitley Penn. Prior to the engagement of Whitley Penn, neither we nor any person on our behalf consulted
Whitley Penn regarding either: (i) the application of accounting principles to a specified completed or proposed transaction or
the type of audit opinion that might be rendered on our financial statements; or, (ii) any matter that was the subject of a disagreement
(as defined in Item 304(a)(1)(iv) of Regulation S-K, promulgated under the Securities Act and the related instructions to such
Item) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K, promulgated under the Securities Act).
Vote Required
The affirmative vote of a majority of the votes
cast at the meeting at which a quorum representing a majority of all outstanding shares of our Common Stock is present and voting,
either in person or by proxy, is required for the ratification of our independent registered accountants.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF Whitley Penn AS INDEPENDENT AUDITORS
OF DGSE FOR THE FISCAL YEAR ENDING December 31, 2015.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires
our directors and officers and persons who beneficially own more than ten percent of our Common Stock to file with the SEC reports
of beneficial ownership on Forms 3 and changes in beneficial ownership of our Common Stock and other equity securities on Forms
4 or 5. SEC regulations require all officers, directors and greater than 10 percent stockholders to furnish us with copies of all
Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4
and amendments thereto furnished to us during Fiscal 2014, and Forms 5 and amendments thereto furnished to us with respect to Fiscal
2014, and any written representations from reporting persons that no Form 5 is required, we are not aware of any person who, at
any time during Fiscal 2014, was a director, officer or beneficial owner of more than 10 percent of our Common Stock who failed
to file on a timely basis, as disclosed in the above forms, reports required by Section 16(a) of the Exchange Act during Fiscal
2014 except as follows:
A Form 4 filed by each of C. Brett Burford,
James D. Clem and James J. Vierling on January 31, 2014 was not timely filed. A Form 3 filed by each of Bruce A. Quinnell and Dennis
A. McGill on September 25, 2014 was not timely filed. A Form 4 filed by Dr. L.S. Smith on November 21, 2014 was not timely filed.
STOCKHOLDER COMMUNICATIONS
AND PROPOSALS
We have adopted a formal process by which stockholders
may communicate with our Board of Directors. Our Board recommends that stockholders initiate any communications with the Board
in writing and send them in care of the investor relations department by mail to our principal offices at 15850 Dallas Parkway,
Suite 140, Dallas, Texas 75248. This centralized process will assist the Board in reviewing and responding to stockholder communications
in an appropriate manner. The name of any specific intended Board recipient should be noted in the communication. The Board of
Directors has instructed the investor relations department to forward such correspondence only to the intended recipients; however,
the Board has also instructed the investor relations department, prior to forwarding any correspondence, to review such correspondence
and, in its discretion, not to forward certain items if they are deemed of a personal, illegal, commercial, offensive or frivolous
nature or otherwise inappropriate for the Board’s consideration. In such cases, that correspondence will be forwarded to
our corporate secretary for review and possible response. This information is also contained on our website at www.DGSECompanies.com.
Stockholder proposals made in compliance with
Rule 14(a)-8 of the Exchange Act to be presented at our Annual Meeting of Stockholders to be held in 2016, for inclusion in our
proxy statement and form of proxy relating to that meeting, must be received on or before January 3, 2016. Stockholder proposals
made outside the process describe in Rule 14(a)-8 of the Exchange Act must be received by March 19, 2016. Such stockholder proposals
must comply with our bylaws and the requirements of Regulation 14A of the Exchange Act.
Rule 14a-4 of the Exchange Act governs
our use of discretionary proxy voting authority with respect to a stockholder proposal that is not addressed in the proxy statement.
With respect to our 2016 Annual Meeting of Stockholders, if we are not provided notice of a stockholder proposal by March 19, 2016,
we will be permitted to use our discretionary voting authority when the proposal is raised at the meeting, without any discussion
of the matter in the proxy statement.
PERSONS MAKING THE SOLICITATION
The enclosed proxy is solicited on behalf of our Board of Directors.
We will pay the cost of soliciting proxies in the accompanying form. Our officers may solicit proxies by mail, telephone, telegraph
or fax. Upon request, we will reimburse brokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred
by them in forwarding proxy material to beneficial owners of our shares of Common Stock.
OTHER MATTERS
The Board of Directors is not aware of any
matter to be presented for action at the meeting other than the matters set forth herein. Should any other matter requiring a vote
of stockholders arise, the proxies in the enclosed form confer upon the person or persons entitled to vote the shares represented
by such proxies’ discretionary authority to vote the same in accordance with their best judgment in the interest of DGSE.
FINANCIAL STATEMENTS
A copy of our Annual Report on Form 10-K for
the fiscal year ended December 31, 2014, including financial statements, accompanies this proxy statement. The Annual Report
is not to be regarded as proxy soliciting material or as a communication by means of which any solicitation is to be made. A copy
of our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC, is available (excluding
exhibits) without cost to stockholders upon written request made to Investor Relations, DGSE Companies, Inc., 15850 Dallas Parkway,
Suite 140, Dallas, Texas 75248 or online at our http://dgsecompanies.com/contact .
By Order of the Board of Directors, |
|
|
|
/s/ C. Brett Burford |
|
C. BRETT BURFORD |
|
Secretary |
|
April 30, 2015
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