Business Conduct and Ethics

Background

DGSE Companies, Inc. was founded more than 25 years ago with this customer commitment: Provide superior service using the basic principles of honesty, integrity and trust. Today our customers, vendors and the business communities in which we operate continue to rely on our reputation as a company that maintains the highest standards of ethical business conduct.

This Business Conduct and Ethics Code applies to all directors, officers and other employees of the Company. This Code extends to relations between employees and their co-workers, and to conduct between employees and their managers. In addition, the Code extends to dealings between DGSE directors, officers and other employees, on the one hand, and DGSE's trade vendors, other suppliers, customers and competitors, on the other.


Code Summary

1. Forbids directors, officers and other employees from accepting any unauthorized financial gain, benefit, gift, service or favor from any of the Company’s trade vendors or suppliers of services.

6. Requires full and prompt disclosure of all material business events and developments.

2. Bans any conduct that has the potential for a conflict of interest; i.e., where the opportunity for personal gain might influence the way a director, officer or other employee carries out the duties and responsibilities of his or her position.

7. Requires strict compliance with all federal and state laws governing the Comapny's business operations, including, but not limited to:

  • collecting of state sales tax;
  • reporting large currency payments by customers;
  • complying with U.S. Customs regulations that require disclosure of currency and merchandise brought back into the United States;
  • forbidding insider stock trading in DGSE stock or other securities;
  • prohibiting corporate political contributions;
  • forbidding illegal payments to government officials;
  • prohibiting discrimination or harassment, including that of a sexual nature of any kind, of any employee, vendor or customer; and
  • governing wage and hour practices and policies.

3. Bans any conduct that has the appearance of impropriety; i.e., conduct that suggests an unauthorized conflict or potential conflict of interest.

4. Forbids directors, officers and other employees from disclosing confidential Company information to outsiders or from removing confidential information from Company premises (as defined below).

5. Requires that the Company's books and records, and its financial condition and transaction reports be kept accurately, honestly and completely.

Take a Common-Sense Test

If you would be embarrassed for your supervisor or co-workers to read about your conduct on the front page of tomorrow morning's newspaper or if the conduct is potentially harmful to the Company then …

Don't Do It

How To Report Violations

Any director, officer or other employee who has questions about potential conduct or believes a Code violation has occurred or is about to occur should follow the procedures described below.

You may also contact the Company's Chief Financial Officer ("CFO") 972-587-4022

Or call the DGSE Whistleblower Hotline at 800-916-7037

All contacts are kept confidential.

Fair Dealing

Honesty, integrity and trust are the underpinnings of DGSE's success and must be observed in all respects at all times. Directors, officers and other employees should endeavor to deal fairly with the Company's customers, suppliers and employees. Directors, officers and other employees should not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.

While all employees are expected to follow this Code, our directors, officers, and managers are held to a higher standard due to their roles with the Company. Directors, officers, and managers should lead by example, establish an open and respectful work environment, ensure compliance with this Code by employees reporting to them, respond timely to issues brought to their attention, and report concerns of any violation of this policy to the Chief Executive Officer (“CEO”) or Chief Financial Officer (“CFO”).


Conflicts of Interest

Policy

Conflicts of interest by company directors, officers and other employees are expressly forbidden. Any director, officer or other employee found to have accepted an unauthorized benefit, gift, service or favor from a vendor, customer or competitor of the Company may be in violation of this policy. A familial relationship or shared residence with a vendor or employee of a vendor may also be considered a conflict of interest. A director, officer or other employee found to be in violation of this policy is subject to disciplinary action, up to and including divesting him or herself of the interest, ending the business relationship or, if the conflict is not disclosed and approved, immediate termination of employment or other relationship with the Company.

Anytime a situation changes that creates a possible conflict of interest, the director, officer or other employee is responsible for submitting an updated Conflict of Interest form. Failure to do so may result in termination.

If a director, officer or other employee has any questions about potential conflicts of interest, he/she may seek clarification from the Company's HR department. In addition, should a director, officer or other employee become aware of a material transaction or relationship that reasonably could be expected to give rise to a conflict of interest, he/she should advise the Company's CEO, CFO or the DGSE Whistleblower Hotline (800-916-7037).

Definitions

Benefit, Gift, Service or Favor - Means (a) money or loans, (b) gifts of merchandise or a service or (c) unless specifically authorized by DGSE's CEO in advance (as stated below), travel, hotel, meals or entertainment provided by a vendor or customers that exceeds normal and customary social contact or that which, if reciprocated by a director, officer or other employee, would not be covered under the Company's policies for expense reimbursement.

Conflict of Interest - Exists when the way a director, officer or other employee would ordinarily deal with a vendor, customer or competitor is influenced or could be perceived by others to be influenced or compromised by a benefit, gift, service or favor that the vendor, customer or competitor has given or promised the director, officer or other employee or by a familial relationship between the director, officer or other employee and the vendor, customer or competitor.

Competitor - Includes any business that engages, in whole or in part, in the manufacturing, wholesale or retail sale of jewelry or any other aspect of the Company's business.

Customer - Refers to any person who enters a DGSE store for any reason other than DGSE company business.

Director - Includes the director's spouse and immediate family members.

Employee - Includes the employee's spouse and immediate family members.

Officer - Includes the officer's spouse and immediate family members.

Vendor - Includes actual or potential trade vendors, suppliers, landlords, independent contractors and providers of professional and other services.

Guidelines

As a DGSE director, officer or other employee:

  • You, a relative or anyone who shares a residence with you may not accept payments of any nature from actual or potential vendors, customers or competitors.
  • You, a relative or anyone who shares a residence with you may not borrow money from actual or potential vendors or competitors or engage in other personal transactions with them (see Example B).
  • You, a relative or anyone who shares a residence with you may not serve on the board of directors of any vendor or competitor.
  • You, a relative or anyone who shares a residence with you may not hold any direct or indirect position in any corporation, partnership or organization with which the company does or may do business, or with which the company competes.
  • You, a relative or anyone who shares a residence with you may not conduct any business other than Company business on Company time or property.
  • You, a relative or anyone who shares a residence with you may not hold a more than five percent stock interest in any publicly held corporation, partnership or organization that does or may do business with or competes with DGSE. You may not hold any financial interest in any privately held corporation, partnership or organization that does or may do business with or competes with DGSE.
  • You, a relative or anyone who shares a residence with you may not offer to sell a prospective customer any jewelry or watches that you or they personally own.
  • You, a relative or anyone who shares a residence with you may not accept travel, lodging or unusual benefits or other entertainment from a vendor or competitor unless an executive officer has first determined that the acceptance of such benefits conforms to customary industry practice and will be a good use of your time.
  • The company may not lend money to a director or executive officer.

Examples of Conflicts of Interest

Example A

If a vendor offers to fly you to the Super Bowl, you must decline the offer since you could not reciprocate and be reimbursed for the cost under the Company's Expense Reimbursement Guidelines. If, on the other hand, a vendor takes you to a routine dinner, you can accept because you could reciprocate and turn in the cost of the meal for Company reimbursement.

Example B

It is customary in our industry for jewelry vendors to periodically sponsor dinner meetings, trade shows and other events where new products are introduced to buyers and other jewelry retailer representatives. DGSE has traditionally sent appropriate representatives to these and other similar events. In this and other comparable situations, vendors, landlords and other suppliers customarily pay for all or a portion of the cost of attending these events. These costs may include travel, hotel, meals and entertainment. Accordingly, if the Company's CEO determines in advance that such attendance serves the Comapny's business interests and would be a good use of your time, this Code will permit Company representatives to continue to go to these events at the expense of the sponsors.

Example C

If a vendor offers you and your spouse the opportunity to stay at his vacation home in the Bahamas, you must decline the offer, even though your use of the home may not involve any out-of-pocket costs to the vendor. Otherwise, such conduct on your part could be perceived as an attempt by the vendor to improperly influence you in the performance of your duties.

Example D

If a jewelry repair person or other service provider is related to you (e.g., your spouse, sibling, parent or someone who shares a residence with you), you may not use that person for repairs or services at any Company store. Such a relationship can be perceived as an attempt by the independent contractor to gain influence or benefit from your employment at the Company.

Questions/Concerns

If you have concerns about whether a particular transaction or your involvement in a particular business deal or venture may present a conflict of interest, please discuss the matter first with your supervisor or reach out to a member of HR Department.


Corporate Opportunities

You may not

  • take for yourself personally opportunities that are discovered through
    the use of Company property, information or position


  • use Company property, information, or position for personal gain
  • compete with the Company.

Confidential Information

Policy

As a DGSE director, officer or other employee, you may work with or have access to Confidential Information about the Company. “Confidential Information” means information that is maintained as confidential by the Company and that is not readily available to the public or the Company’s competitors, and includes the following:

  • Customer, client and vendor data
  • Business techniques
  • Personnel records, employment information or personal employee information other than compensation
  • Payroll data
  • Financial data, sales and marketing activity and plans
  • Business and store-location plans
  • Store rankings
  • Strategic plans, forecasts, products and pricing
  • Size or terms of purchase orders
  • Audits involving the Company
  • Information contained in memoranda, reports, analyses, lists, schedules or electronic communications and all other documents prepared for internal use that are maintained as confidential and not readily available to third parties
  • Information pertaining to any lawsuits or government actions or investigations involving the Company that is not readily available to the public
  • All other proprietary information that is maintained as confidential by the Company and not reasonably accessible to the public.

Competitve Confidential Information

DGSE engages in free and fair competition. While we are a strong competitor in our marketplace, we will not use confidential information of our competitors to gain an unfair advantage. Employees have an obligation to themselves and to the Company to ensure that collection of competitive information is both legal and ethical. Employees are prohibited from bringing confidential and proprietary information from their former employers when beginning work at DGSE. Employees should never gather competitive information through misrepresentation, theft, or any other manner which access to illegal or proprietary information of competitors is not authorized. When in doubt, please seek guidance from the CFO.

Example

Question: You leave your employment at DGSE Companies. Your new employer, DGSE competitor, asks you to contact the top company sales people whose names, phone numbers and rankings you obtained at your last company meeting. Can you do it?

Answer: No. Even though you no longer work for DGSE, information that came into your possession during your employment at DGSE remains the property of DGSE, and is confidential and proprietary.

Computer Systems

The Company relies heavily on computer systems to meet its financial, informational and operational requirements. It is therefore imperative that computer data, software, hardware and networks be protected against alteration, damage, theft or unauthorized access.

Any unauthorized use or reproduction of proprietary or copyrighted software or corporate data is prohibited. This includes, but is not limited to, monthly Profit and Loss Statements, Gross Margin Analyses, Projections and Models, Inventory Analyses, CATS Reports, RIS Reports, Sales Data, Operating Expense Data, etc.

In addition, you are prohibited from participating in on-line discussions or so-called "chat rooms" regarding the Company's confidential business.

Examples

Question: Can you remove computer reports containing sales plans and performance ranking provided to you by the company?

Question: You notice on a popular chat room that one of the postings contains significant misstatements regarding the company that could cause the company harm. Can you correct them through your own posting?

Answer: No, this action constitutes a breach of confidentiality.


Answer: No. You should bring the statements to the attention of the company’s investor relations department or general counsel and let them decide whether a response is appropriate.


Maintenance of Books, Records
and Disclosure Procedures

DGSE will continue to observe the most stringent standards in keeping its books and records. All Company records must be complete and must accurately record and properly describe the transactions they reflect. All assets, liabilities, revenues and expenses shall be recorded in compliance with generally accepted accounting principles. Directors, officers and other employees are expected to cooperate fully with our internal and external auditors.

All transactions involving Company funds must be accurately reflected on the books of account. False or misleading entries in such books are strictly prohibited. The creation and maintenance of secret or unrecorded funds or assets are strictly prohibited. Knowledge of any such activity by any employee must be reported promptly to the CEO, CFO or the DGSE Whistleblower Hotline (800-916-7037).

The Company requires cooperation and open communications with its internal and external auditors. It is illegal to take any action to fraudulently influence, coerce, manipulate or mislead any independent public or certified public accountant engaged in the performance of an audit or our financial statements.

The laws and regulations applicable to filings made with the Securities and Exchange Commission ("SEC"), including those applicable to accounting matters, are complex. While the ultimate responsibility for the information included in these reports rests with senior management, numerous other employees participate in the preparation of these reports or provide information included in these reports. The Company maintains disclosure controls and procedures to ensure that the information included in the reports that it files or submits to the SEC is collected and communicated to senior management in order to permit timely disclosure of the required information.

If you are requested to provide, review or certify information in connection with the Company's disclosure controls and procedures, you must provide the requested information or otherwise respond in a full, accurate and timely manner. Moreover, even in the absence of a specific request, you should report to the Company's senior management any information that you believe should be considered for disclosure in our reports that is not being appropriately considered.

If you have questions or are uncertain as to how the Company's disclosure controls and procedures may apply in a specific circumstance, promptly contact your supervisor or a more senior manager. The Company wants you to ask questions and seek advice. Additional information regarding how to report your questions or concerns (including on a confidential, anonymous basis) is included below in this Code under the heading "Code Violations."


Corporate Assets

You should protect the Company's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the company's profitability. All company assets should be used for legitimate business purposes.

The Company has extensive procedures designed to minimize both employee and third party theft. These procedures are dependent, however, on every employee's diligent observation of them. It is incumbent on each employee to follow the Company's procedures and to report to his or her supervisor or other senior management any lapses that occur in following the procedures.


News and Media Contact Policy

If you are contacted by any member of the media, you should refer the questioner to senior management for coordination, approval and response.

If a media inquiry relates to a pending or threatened legal matter, an employee who is asked for a statement from any member of the media should refer the questioner to senior management.

Without prior authorization from the Company’s CEO or CFO, no director, officer or other employee is permitted to reply or make statements on behalf of the Company to any reporter, journalist or commentator of any newspaper, magazine, radio or television station.

Explanation

Because we are a public company, we are obligated to provide full and prompt disclosure of all material developments or events to our stockholders and the public. All statements to the media or responses to inquiries from the media dealing with sales, profitability and financial performance must be coordinated through senior management. The company policy is that no company director, officer or other employee shall discuss sales, profitability or results of operations or any confidential information, as defined in thes Code, without prior authorization.

News Media Contact:

Chief Financial Officer

972-587-4024


Compliance with Applicable Laws

Policy

The company is committed to strict compliance with all federal and state laws governing its business operations. If you are uncertain as to whether or how a law applies to the Company, please contact your supervisor or the Company's CFO.

State Sales Tax

Directors, officers and other employees must at all times comply with state sales tax laws requiring the collection of taxes due on sales of merchandise. Any director, officer or other employee found to have accommodated a purchaser by willfully failing to charge applicable state sales tax on any transaction or who ships an "empty box" to an "out-of-state customer" trying to evade sales tax will be subject to immediate termination of employment, according to federal law.

Reporting Cash Payments of $10,000 or More

All directors, officers and other employees must strictly comply with U.S. Treasury regulations that require the Company to promptly report any transaction during which a customer makes a cash or currency payment of $10,000 or more. (Two separate purchases made with $10,000 aggregate cash still fall within U.S. Treasury regulations.)

U.S. Customs Regulations

All directors, officers and other employees traveling outside the United States must comply strictly with applicable U.S. Customs regulations. These rules require that you report U.S. currency brought back into the country and merchandise brought back from foreign countries.

EEO Policies

All directors, officers and other employees are required to make policy and procedure decisions on the principles of equal employment opportunity, as further described in the Company's Employee Handbook.

Illegal Payments to Government Officials

No director, officer or other employee shall make any payment to a domestic or foreign government official in order to obtain favored treatment with respect to the Company's business.

Compliance with Federal Securities Laws

The Company is a public company and is required to maintain books and records, to distribute information to its stockholders, and to file various information with NYSE MKT and the SEC. Directors, officers and other employees are required to endeavor to fulfill these obligations in a full, fair, complete, accurate, timely and understandable manner. These matters are discussed more fully under the heading "Maintenance of Books, Records and Disclosure Procedures."

No director, officer or other employee may purchase or sell DGSE common stock or other securities when he/she has personal knowledge of material non-public information about the Company's business, prospects or financial condition. In addition, no director, officer or other employee is permitted to "tip" any relative or friend by disclosing non-public information about the Company.

No director, officer or other employee may purchase or sell the securities of a company vendor or other party with which the company is doing business when he/she has personal knowledge of material non-public information about the vendor's or other party's business, prospects or financial condition as a result of working for that company. Similarly, no director, officer or other employee is permitted to "tip" any relative or friend by disclosing material non-public information about the vendor or other party.

Examples of non-public information that might be deemed material include

  • quarterly or annual results;
  • internal earnings estimates, especially if significantly different from "street" estimates;
  • sales information;
  • financial liquidity problems or management changes;
  • stock or debt offerings;
  • negotiations concerning significant mergers, acquisitions or divestitures;
  • dividend recommendations, stock splits, stock repurchase programs, tender offers or exchange offers; and
  • significant litigation or labor disputes.

Either positive or adverse information may be material, and material undisclosed developments in matters previously disclosed may also constitute material non-public information. Also, as the magnitude of a potential event or transaction increases, and the greater the chance it will actually occur, the more likely it is that information regarding that event or transaction may be deemed material. Information is considered to be available to the public only when it has been released to the public through appropriate channels (e.g., by means of a press release or SEC filing) and enough time has elapsed to permit the market to absorb and evaluate the information. Once public release has occurred, information will normally be regarded as absorbed and evaluated within two or three business days thereafter.

Stock Trading Prohibited During Blackout Periods

In order to assure strict compliance with this policy, no directors, officers or other employees who are specifically designated as "insiders" by the Company legal counsel shall be permitted to purchase or sell DGSE securities during "blackout" periods when quarterly financial information is being calculated internally and when holiday sales trends are developing.

Blackout Dates

Open Dates

Blackout dates include the periods beginning on the first day after the end of a fiscal quarter and ending two full trading days after the company publicly announces its quarterly or full year, as applicable, results of operations.

The dates other than blackout dates are open dates, and generally purchases and sales are permitted. However, even during open dates, directors, officers and other employees (and their respective related accounts) who are subject to the blackout requirements set forth above must receive advance clearance from senior management prior to executing a purchase or sale of DGSE common stock or other securities. If senior management clears the proposed trade, such trade must be consummated within 10 days of receipt of approval, if at all.

Participating in Investigations

The Company will promptly and thoroughly investigate all reports of violation of this Code and will maintain the confidentiality to the extent possible without impeding the investigation process. However, in order to conduct a thorough investigation, the Company needs the participation of all employees who may have information or knowledge regarding a potential violation of this Code. The Company expects all employees fully and honestly to participate in and cooperate with investigations.

Cooperation with Lawsuits and Government Investigations

From time to time, the Company may be involved in lawsuits or government investigations/audits. Only approved employees are authorized to participate in legal proceedings and government investigations or audits as instructed by the President or Company legal counsel. Any employee who becomes aware of any such legal matter, such as receiving a copy of a lawsuit or a request for information from a government agency, should notify the President or Company legal counsel. You should also notify the President or Company legal counsel immediately if you become aware of any threatened or potential litigation involving the Company. The Company expects employees to cooperate fully with the Company’s legal counsel in connection with all lawsuits or government investigations/audits.

Nothing in this Code shall be construed to limit the right of employees, officers or directors to

  • respond accurately and fully to any question, inquiry, or request for information required by legal process;
  • disclose information to any governmental agency with regulatory or oversight responsibilities for companies such as DGSE; or,
  • participate in any proceeding before an administrative agency responsible for enforcing labor and employment laws such as the Equal Employment Opportunity Commission or the National Labor Relations Board.


Code Administration and Violation

Responsible Corporate Officers - CEO and CFO

Good Judgment Rule

The Company's senior management, in conjunction with legal counsel, is responsible for interpreting the Code and responding to specific questions from directors, officers and other employees about its application. DGSE will make every effort to provide consistent treatment and guidance for prospective conduct.

Although this Code attempts to deal with many types of business conduct considered to be unethical, improper or detrimental to DGSE's reputation or interests, no company policy can anticipate every situation that may arise during the course of your employment. You are, therefore, advised to use good judgment in dealing with issues that confront you in applying the Code to situations not specifically covered by the Code. Always conduct your job responsibilities honestly. If you have any question concerning whether your conduct violates this Code, please discuss it with your supervisor or a member of the HR Department. Together, we will determine whether your conduct may potentially violate this Code.

Requests for Exceptions and Waivers

While most Code policies must be strictly followed, exceptions may be possible. For example, a minor conflict of interest situation can sometimes be resolved simply by disclosure of the possible conflict to all interested parties. If you believe that an exception to any of the policies is appropriate, you should first contact your supervisor. If the immediate supervisor agrees that an exception is appropriate, the approval of senior management shall then be sought. Exceptions to the Code for directors and executive officers may be made only by the Company’s board of directors (the "Board"), or a Board committee, and exceptions for directors or the Company’s CEO, CFO, or other executive officers, or persons performing similar functions, must be immediately disclosed on Form 8-K, or, if permitted by applicable securities laws, the Company’s website.

In cases where you are unable to decide whether a course of conduct is permissible, you are encouraged to ask for guidance from senior management, who may choose to seek guidance from legal counsel. Such questions should be directed to the Company's CFO. All inquiries will be kept confidential to the extent possible, and questions may be submitted on a "no-name" basis.

Code Violation

If you have violated this Code, you are subject to disciplinary action. Depending on the nature of the violation, this action could include immediate termination of employment or other relationship with DGSE without prior notice.

You have a duty to promptly bring to the Company's attention any situation in which this Code has been - or is about to be - violated, regardless of whether you are involved. The Company's board has adopted a Whistleblower Policy. Any director, officer or other employee may obtain a copy of the policy by contacting the Company's CFO. The policy also is available on the Company's website.

No retaliatory action will be taken against an employee for reporting alleged violations to the company in good faith.

Officers and other employees should report such violations to their supervisors or to the next successive level of reporting authority. Directors should report such violations to the CEO or CFO. If you are aware of a violation that you believe could materially harm the Company, its shareholders, or others that is not being properly addressed, you are encouraged to contact any member of senior management, or the DGSE Whistleblower Hotline (800-916-7037).

Nothing in the Code shall be deemed to alter any employment-at-will or other status of an employee or to otherwise create for an employee an enforceable right against the Company, its directors, officers or against any other employee or third party.

No Retaliation

The Company will not permit retaliation of any kind by or on behalf of the Company against its directors, officers or employees for filing good-faith reports or complaints of violations of this Code or other illegal or unethical conduct. Any Company employee, including officers and managers, who is involved in any form of retaliation against an employee who reports misconduct or cooperates in any investigation related to a potential violation of this Code, will be subject to disciplinary action, up to and including termination. Such retaliation is a violation of this Code.


Public-Company Reporting

As a public company, it is of critical importance that the Company’s filings with the SEC be accurate and timely. Depending on your position with the Company, you may be called upon to provide necessary information to ensure the Company’s public records are complete, fair, and understandable. The Company expects you to take this responsibility very seriously and to provide prompt and accurate answers to inquiries related to the Company’s public-disclosure requirements.

Avenues to Seek Guidance on Ethical Issues

DGSE provides many resources and opportunities to its employees to seek guidance regarding compliance with this Code. All of these resources are here to help, so please do not hesitate to seek their guidance. Only if we all work together will we be able to uphold the ethical standards set forth in this Code. The following avenues are available for any questions concerning the applicability of this Code:

  • Your supervisor
  • HR Department
  • CFO
  • CEO