falsehttp://www.amark.com/20220630#AccountsPayableAndOtherPayableshttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrent2021-09-300001591588A-Mark Precious Metals, Inc.http://fasb.org/us-gaap/2022#CostOfGoodsAndServicesSoldFYhttp://fasb.org/us-gaap/2022#CostOfGoodsAndServicesSold10001591588us-gaap:FurnitureAndFixturesMember2021-06-300001591588us-gaap:OperatingSegmentsMemberamrk:WholesaleSalesMember2021-06-300001591588us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMember2022-06-300001591588us-gaap:ForeignExchangeForwardMember2021-06-300001591588srt:AffiliatedEntityMemberamrk:InterestIncomefromLoanReceivableMember2021-07-012022-06-300001591588amrk:PriceRange3Member2022-06-300001591588amrk:NonCompeteAgreementsAndOtherIntangibleAssetsMember2021-06-300001591588amrk:DerivativeLiabilityMarginAccountsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:IntangiblesSubjectToAmortizationMember2021-06-300001591588us-gaap:EmploymentContractsMember2022-06-300001591588amrk:RetailTradingMember2022-06-300001591588us-gaap:FairValueInputsLevel3Memberamrk:DerivativeAssetOpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:DerivativeLiabilityMarginAccountsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:GradedSportsCardsAndSportsMemorabiliaMember2021-07-012022-06-300001591588amrk:SecuredLendingMember2022-06-300001591588amrk:A2014StockAwardandIncentivePlanMemberus-gaap:RestrictedStockUnitsRSUMember2022-06-300001591588us-gaap:FairValueInputsLevel2Memberamrk:ForwardContractMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-06-300001591588us-gaap:IntersegmentEliminationMemberamrk:WholesaleSalesMember2020-07-012021-06-300001591588amrk:BorrowedFromSuppliersMember2021-06-300001591588us-gaap:FairValueInputsLevel1Memberamrk:DerivativeAssetOpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:AssetUnderConstructionMember2022-06-300001591588us-gaap:FairValueInputsLevel2Memberamrk:OpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:AdditionalPaidInCapitalMember2021-07-012022-06-300001591588amrk:DerivativeLiabilityMarginAccountsMember2022-06-300001591588us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-06-300001591588amrk:ForwardContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:BullionAndNumismaticAndSemiNumismaticAndGradedSportsMemorabiliaMember2022-06-300001591588us-gaap:NonperformingFinancingReceivableMember2021-06-300001591588amrk:LoanToValueOfSeventyFivePercentOrMoreMemberamrk:BullionAndNumismaticAndSemiNumismaticAndGradedSportsMemorabiliaMember2022-06-300001591588amrk:PlantandEquipmentMember2021-06-300001591588amrk:PreciousMetalsHeldUnderFinancingArrangementsMember2022-06-300001591588amrk:WholesaleSalesMember2021-06-300001591588amrk:RetailTradingMemberus-gaap:IntersegmentEliminationMember2020-07-012021-06-3000015915882021-08-302021-08-300001591588amrk:SilverGoldBullIncMember2021-06-300001591588amrk:SellingShareholdersOfSilverGoldBullIncMember2022-06-272022-06-270001591588amrk:NonAccrualStatusMember2021-07-012022-06-300001591588amrk:RetailTradingMember2021-06-300001591588amrk:RetailTradingMemberus-gaap:IntersegmentEliminationMember2021-07-012022-06-300001591588us-gaap:LineOfCreditMemberamrk:TradingCreditFacilityMember2021-12-212021-12-210001591588amrk:CommemorativeCoinsMember2021-06-300001591588us-gaap:FutureMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588srt:AsiaPacificMember2020-07-012021-06-300001591588amrk:LoanAgreementTwoMember2022-06-300001591588us-gaap:EquityMethodInvesteeMember2020-07-012021-06-300001591588us-gaap:ShippingAndHandlingMember2020-07-012021-06-300001591588amrk:AMCapitalFundingLLCMember2021-07-012022-06-300001591588us-gaap:InventoriesMember2021-06-300001591588us-gaap:ShippingAndHandlingMember2021-07-012022-06-300001591588us-gaap:AdditionalPaidInCapitalMember2020-07-012021-06-300001591588us-gaap:CommodityContractMember2021-07-012022-06-300001591588amrk:USMintMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2020-07-012021-06-300001591588us-gaap:RestrictedStockUnitsRSUMember2021-09-200001591588us-gaap:BuildingMember2022-06-300001591588amrk:SpecialDividendMemberus-gaap:SubsequentEventMember2022-07-012022-08-310001591588amrk:NonAccrualStatusMember2020-07-012021-06-300001591588amrk:PriceRange3Member2021-07-012022-06-300001591588us-gaap:RestrictedStockUnitsRSUMember2021-06-3000015915882021-07-012022-06-300001591588us-gaap:FairValueInputsLevel1Memberamrk:DerivativeLiabilityMarginAccountsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:SilverGoldBullIncMember2022-06-270001591588us-gaap:EmployeeStockOptionMember2021-07-012022-06-300001591588amrk:WholesaleTradeAdvancesMember2021-06-300001591588country:US2020-07-012021-06-300001591588us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588srt:AffiliatedEntityMemberamrk:InterestIncomefromFinanceProductsMember2020-07-012021-06-300001591588amrk:BullionFinancingReceivableMember2021-07-012022-06-300001591588us-gaap:EmployeeStockOptionMember2020-07-012021-06-300001591588us-gaap:LandMember2021-06-3000015915882021-03-042021-03-040001591588us-gaap:FairValueInputsLevel1Memberus-gaap:ForwardContractsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588srt:AffiliatedEntityMemberamrk:InterestIncomefromFinanceProductsMember2021-07-012022-06-300001591588amrk:LiabilitiesOnBorrowedMetalsMember2020-07-012021-06-300001591588amrk:NonCompeteAgreementsAndOtherIntangibleAssetsMember2021-07-012022-06-300001591588us-gaap:FairValueInputsLevel1Memberus-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588srt:AffiliatedEntityMemberamrk:InterestIncomefromLoanReceivableMember2020-07-012021-06-300001591588amrk:CollectibleCardPartnersLLCMember2021-07-012022-06-300001591588us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberamrk:AMCapitalFundingLLCMember2022-06-300001591588srt:MaximumMemberus-gaap:ForwardContractsMember2021-07-012022-06-300001591588us-gaap:AdditionalPaidInCapitalMember2021-06-300001591588us-gaap:FinanceReceivablesMember2021-07-012022-06-300001591588us-gaap:SeniorSubordinatedNotesMemberamrk:AMCapitalFundingLLCMemberamrk:SecuredSeniorTermNotesSeries20181ClassBMember2018-09-300001591588us-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:FairValueInputsLevel2Memberamrk:DerivativeAssetOpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:RepurchaseArrangementsWithCustomersMember2022-06-300001591588country:AU2020-07-012021-06-3000015915882018-07-012018-12-310001591588amrk:AdoptionOfQuarterlyCashDividendPolicyMemberus-gaap:SubsequentEventMember2022-07-012022-08-310001591588us-gaap:FairValueInputsLevel2Memberamrk:OptionToPurchaseInterestInLongTermInvestmentMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:CustomerConcentrationRiskMemberamrk:SecuredLoansReceivableMember2021-06-300001591588us-gaap:RestrictedStockUnitsRSUMember2021-07-012022-06-3000015915882022-04-280001591588amrk:A2014StockAwardandIncentivePlanMember2022-06-300001591588amrk:LiabilitiesOnBorrowedMetalsMember2021-07-012022-06-300001591588us-gaap:RestrictedStockUnitsRSUMember2022-06-300001591588us-gaap:OperatingSegmentsMemberamrk:WholesaleSalesMember2021-07-012022-06-300001591588amrk:ConsignmentArrangementsWithCustomersMember2021-06-300001591588amrk:PriceRange04Member2021-07-012022-06-300001591588amrk:AMCapitalFundingLLCMember2018-09-300001591588amrk:NorthAmericaexcludingUSAMember2022-06-300001591588us-gaap:NonperformingFinancingReceivableMember2022-06-300001591588country:AU2022-06-300001591588us-gaap:RetainedEarningsMember2020-06-300001591588amrk:OpenPurchasesAndSalesCommitmentsMember2022-06-300001591588country:US2021-07-012022-06-300001591588amrk:PriceRange1Member2021-07-012022-06-300001591588amrk:DerivativeLiabilityMarginAccountsMember2021-06-300001591588amrk:OptionToPurchaseInterestInLongTermInvestmentMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:USMintMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-06-300001591588srt:MinimumMember2022-06-300001591588us-gaap:NoncontrollingInterestMember2021-07-012022-06-300001591588amrk:SilverGoldBullIncMember2022-06-300001591588us-gaap:FairValueInputsLevel1Memberus-gaap:ForwardContractsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:WholesaleSalesMember2021-07-012022-06-300001591588amrk:CustomerBMemberus-gaap:CustomerConcentrationRiskMemberamrk:SecuredLoansReceivableMember2021-07-012022-06-300001591588us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2022-06-300001591588amrk:AMCapitalFundingLLCMemberamrk:SecuredSeniorTermNotesSeries20181ClassBMember2018-09-300001591588amrk:FormerParentSGIMember2020-07-012021-06-300001591588amrk:RetailTradingMember2021-07-012022-06-300001591588amrk:IntangiblesSubjectToAmortizationMember2022-06-300001591588us-gaap:CustomerRelationshipsMembersrt:MinimumMember2021-07-012022-06-300001591588us-gaap:FairValueInputsLevel1Memberamrk:DerivativeLiabilityMarginAccountsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:CompanyBMember2021-06-300001591588us-gaap:EmploymentContractsMember2021-07-012022-06-300001591588srt:MaximumMember2021-07-012022-06-300001591588amrk:DerivativeLiabilityMarginAccountsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588srt:MinimumMemberamrk:NonCompeteAgreementsAndOtherIntangibleAssetsMember2021-07-012022-06-300001591588amrk:ThirdPartyProductFinancingArrangementsMember2020-07-012021-06-300001591588us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-06-300001591588us-gaap:FairValueInputsLevel3Memberamrk:DerivativeAssetOpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:PreciousMetalsHeldUnderFinancingArrangementsMember2021-06-300001591588amrk:A2014StockAwardandIncentivePlanMembersrt:DirectorMember2021-07-012022-06-300001591588us-gaap:ForeignExchangeForwardMember2022-06-300001591588us-gaap:TradeAccountsReceivableMember2021-06-300001591588amrk:FinancialAssetOriginatedWithThirdPartyMember2021-06-300001591588amrk:AmstassociatesllcMemberamrk:AMARKPRECIOUSMETALSINCMemberamrk:SilverTowneLPMember2021-04-010001591588amrk:AMCapitalFundingLLCMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2020-07-012021-06-300001591588us-gaap:CommonStockMember2022-06-300001591588amrk:DueFromBrokersMember2022-06-300001591588srt:AffiliatedEntityMember2021-07-012022-06-300001591588us-gaap:FinancialAssetOriginatedMember2022-06-300001591588amrk:OptionToPurchaseInterestInLongTermInvestmentMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:CompanyBMember2022-06-300001591588amrk:GoldlineLLCMember2017-08-310001591588us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMember2021-06-300001591588us-gaap:StateAndLocalJurisdictionMember2021-06-300001591588us-gaap:FairValueInputsLevel3Memberamrk:OpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:PlantandEquipmentMember2022-06-300001591588us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:IntersegmentEliminationMemberamrk:WholesaleSalesMember2021-07-012022-06-300001591588amrk:BullionFinancingReceivableMember2021-06-300001591588us-gaap:FairValueInputsLevel2Memberamrk:DerivativeLiabilityMarginAccountsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-3000015915882018-04-300001591588amrk:CustomerBMemberus-gaap:CustomerConcentrationRiskMemberamrk:SecuredLoansReceivableMember2020-07-012021-06-300001591588amrk:PriceRange1Member2022-06-300001591588us-gaap:FairValueInputsLevel1Memberamrk:OpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:CustomerConcentrationRiskMemberamrk:SecuredLoansReceivableMember2021-07-012022-06-300001591588amrk:ForwardContractMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-3000015915882020-07-012021-06-300001591588us-gaap:ComputerEquipmentMember2022-06-300001591588amrk:SecuredLendingMember2020-07-012021-06-300001591588amrk:PinehurstCoinExchangeIncMember2022-06-300001591588amrk:SecuredLendingMemberamrk:PreciousMetalsPurchasingPartnersLLCMember2021-07-012022-06-300001591588amrk:JMBullionIncMember2021-03-310001591588amrk:NextPercentageOfEmployersContributionMember2021-07-012022-06-300001591588us-gaap:LineOfCreditMemberamrk:TradingCreditFacilityMember2020-07-012021-06-300001591588amrk:FormerParentSGIMemberamrk:LoanAgreementOneMember2021-06-300001591588amrk:LoanToValueInExcessOfHundredPercentMember2021-06-300001591588us-gaap:SeniorSubordinatedNotesMemberamrk:AMCapitalFundingLLCMember2022-06-300001591588amrk:DerivativeAssetOpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:CustomerRelationshipsMember2021-06-3000015915882022-06-300001591588us-gaap:OperatingSegmentsMemberamrk:WholesaleSalesMember2022-06-300001591588us-gaap:InventoriesMember2022-06-300001591588amrk:SecuredLendingMember2021-06-300001591588us-gaap:FairValueInputsLevel3Memberus-gaap:ForwardContractsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:FairValueInputsLevel1Memberamrk:FutureContractsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:SellingShareholdersOfPinehurstCoinExchangeIncMember2021-08-272021-08-270001591588amrk:SunshineMintingIncMember2021-06-300001591588us-gaap:LineOfCreditMemberamrk:TradingCreditFacilityMember2021-06-300001591588srt:MaximumMemberamrk:SilverGoldBullIncMember2022-06-270001591588us-gaap:FairValueInputsLevel2Memberamrk:DerivativeAssetOpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:SecuredLendingMember2021-07-012022-06-300001591588amrk:SunshineMintingIncMember2022-06-300001591588us-gaap:SeniorSubordinatedNotesMemberamrk:SecuredSeniorTermNotesSeries20181ClassAMemberamrk:AMCapitalFundingLLCMember2022-06-300001591588srt:AfricaMember2020-07-012021-06-300001591588us-gaap:RetainedEarningsMember2021-06-300001591588srt:EuropeMember2022-06-300001591588amrk:CustomerBMemberus-gaap:CustomerConcentrationRiskMemberamrk:SecuredLoansReceivableMember2022-06-3000015915882021-09-202021-09-200001591588us-gaap:CustomerConcentrationRiskMemberamrk:SecuredLoansReceivableMember2022-06-300001591588us-gaap:RetainedEarningsMember2022-06-300001591588us-gaap:EquityMethodInvesteeMember2022-06-300001591588us-gaap:CustomerRelationshipsMembersrt:MaximumMember2021-07-012022-06-300001591588us-gaap:EquityMethodInvesteeMember2021-06-3000015915882021-06-300001591588us-gaap:DomesticCountryMember2022-06-3000015915882020-06-300001591588us-gaap:FairValueInputsLevel3Memberus-gaap:ForwardContractsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:GradedSportsCardsAndSportsMemorabiliaMember2022-06-300001591588us-gaap:LeaseholdImprovementsMember2021-06-300001591588us-gaap:CommodityContractMember2020-07-012021-06-300001591588us-gaap:FairValueInputsLevel2Memberus-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:ParentMember2021-07-012022-06-300001591588us-gaap:NoncontrollingInterestMember2021-06-300001591588srt:MinimumMemberus-gaap:EmploymentContractsMember2021-07-012022-06-3000015915882022-04-282022-04-280001591588amrk:NumismaticandSemiNumismaticMember2021-06-300001591588amrk:FinancialAssetOriginatedWithRelatedPartyMember2021-06-300001591588us-gaap:IntersegmentEliminationMemberamrk:WholesaleSalesMember2022-06-300001591588amrk:DerivativeAssetOpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:BullionFinancingReceivableMember2022-06-300001591588us-gaap:ParentMember2020-06-300001591588us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-06-300001591588us-gaap:SeniorSubordinatedNotesMemberamrk:AMCapitalFundingLLCMember2021-06-300001591588amrk:AMCapitalFundingLLCMember2022-06-300001591588us-gaap:FairValueInputsLevel3Member2021-07-012022-06-300001591588us-gaap:RetainedEarningsMember2021-07-012022-06-300001591588amrk:FuturesCommodityAndForwardsContractsAndOpenPurchaseAndSaleCommitmentsMember2020-07-012021-06-300001591588amrk:OpenPurchasesAndSalesCommitmentsMember2021-06-300001591588us-gaap:AdditionalPaidInCapitalMember2020-06-300001591588us-gaap:AssetUnderConstructionMember2021-06-300001591588amrk:FormerParentSGIMember2021-07-012022-06-300001591588us-gaap:FairValueInputsLevel1Memberamrk:DerivativeAssetOpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:NumismaticandSemiNumismaticMember2022-06-300001591588us-gaap:FinancialAssetOriginatedMember2021-06-300001591588us-gaap:LineOfCreditMemberamrk:TradingCreditFacilityMember2022-06-300001591588us-gaap:FairValueInputsLevel1Memberus-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588srt:EuropeMember2021-07-012022-06-300001591588amrk:WholesaleSalesMember2020-07-012021-06-300001591588us-gaap:IntersegmentEliminationMemberamrk:WholesaleSalesMember2021-06-300001591588us-gaap:FurnitureAndFixturesMember2022-06-300001591588us-gaap:EmployeeStockOptionMember2022-04-282022-04-280001591588us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-06-300001591588us-gaap:TradeAccountsReceivableMember2022-06-300001591588amrk:SilverTowneLPMember2020-07-012021-06-300001591588amrk:A2014StockAwardandIncentivePlanMembersrt:BoardOfDirectorsChairmanMember2021-07-012022-06-300001591588amrk:NorthAmericaexcludingUSAMember2020-07-012021-06-300001591588us-gaap:NoncontrollingInterestMember2022-06-300001591588us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2020-07-012021-06-300001591588us-gaap:FutureMember2021-06-300001591588amrk:USMintMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-06-300001591588amrk:NorthAmericaexcludingUSAMember2021-07-012022-06-300001591588amrk:JMBullionIncMember2021-07-012022-06-300001591588srt:AsiaPacificMember2021-07-012022-06-300001591588us-gaap:RestrictedStockUnitsRSUMember2022-04-282022-04-280001591588amrk:OpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:CompanyAMember2022-06-300001591588srt:MinimumMember2021-07-012022-06-300001591588amrk:BorrowedFromSuppliersMember2022-06-300001591588amrk:RetailTradingMember2020-07-012021-06-300001591588amrk:PreciousMetalsPurchasingPartnersLLCMember2020-07-012021-06-300001591588amrk:CompanyAMember2021-06-300001591588us-gaap:FairValueInputsLevel2Memberus-gaap:ForwardContractsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:BullionAndNumismaticAndSemiNumismaticAndGradedSportsMemorabiliaMemberamrk:LoanToValueOfLessThanSeventyFivePercentMember2022-06-300001591588us-gaap:SeniorSubordinatedNotesMemberamrk:SecuredSeniorTermNotesSeries20181ClassAMemberamrk:AMCapitalFundingLLCMember2018-09-300001591588amrk:HeldforSaleMember2021-06-300001591588amrk:ProductfinancingarrangementsMember2021-06-300001591588us-gaap:BuildingMember2021-06-300001591588amrk:USMintMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-07-012022-06-300001591588amrk:LoanToValueInExcessOfHundredPercentMember2022-06-300001591588amrk:WholesaleSalesMember2022-06-300001591588us-gaap:LeaseholdImprovementsMember2022-06-300001591588us-gaap:FairValueInputsLevel2Memberamrk:OpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:FairValueInputsLevel2Memberamrk:ForwardContractMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:BullionAndNumismaticAndSemiNumismaticAndGradedSportsMemorabiliaMember2021-06-300001591588us-gaap:LineOfCreditMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberamrk:TradingCreditFacilityMember2021-12-212021-12-210001591588amrk:SilverGoldBullIncMember2021-07-012022-06-300001591588us-gaap:RestrictedStockUnitsRSUMember2020-07-012021-06-300001591588us-gaap:CommonStockMember2020-07-012021-06-300001591588amrk:PinehurstCoinExchangeIncMember2021-08-012021-08-310001591588amrk:FutureContractsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:EmploymentContractsMember2021-06-300001591588srt:AfricaMember2021-07-012022-06-300001591588amrk:FormerParentSGIMemberamrk:LoanAgreementTwoMember2022-06-300001591588amrk:SilverTowneMintMember2016-08-310001591588us-gaap:DevelopedTechnologyRightsMember2022-06-300001591588us-gaap:RetainedEarningsMember2020-07-012021-06-3000015915882021-09-242021-09-240001591588us-gaap:FairValueInputsLevel3Memberamrk:EquityVolatilityMember2022-06-3000015915882022-08-230001591588us-gaap:ParentMember2021-06-300001591588amrk:SilverGoldBullIncMember2022-06-300001591588us-gaap:ForwardContractsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:ComputerEquipmentMember2021-06-300001591588us-gaap:FutureMember2022-06-300001591588amrk:FormerParentSGIMember2022-06-300001591588amrk:FirstPercentageOfEmployersContributionMember2021-07-012022-06-300001591588us-gaap:NoncontrollingInterestMember2020-07-012021-06-300001591588us-gaap:StateAndLocalJurisdictionMember2022-06-300001591588amrk:ThirdPartyProductFinancingArrangementsMember2021-07-012022-06-300001591588us-gaap:TrademarksMember2021-06-300001591588country:US2022-06-300001591588us-gaap:ParentMember2020-07-012021-06-300001591588amrk:ConsignmentArrangementsWithCustomersMember2022-06-300001591588us-gaap:SoftwareDevelopmentMember2021-06-300001591588us-gaap:OperatingSegmentsMemberamrk:WholesaleSalesMember2020-07-012021-06-300001591588us-gaap:FairValueInputsLevel2Memberus-gaap:ForwardContractsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588srt:AffiliatedEntityMember2020-07-012021-06-300001591588us-gaap:LandMember2022-06-300001591588amrk:NonCompeteAgreementsAndOtherIntangibleAssetsMember2022-06-300001591588us-gaap:FutureMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:DomesticCountryMember2021-06-300001591588amrk:DerivativeLiabilityMarginAccountsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588srt:MaximumMemberamrk:NonCompeteAgreementsAndOtherIntangibleAssetsMember2021-07-012022-06-300001591588us-gaap:CustomerRelationshipsMember2022-06-300001591588srt:EuropeMember2021-06-300001591588us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-06-300001591588amrk:JMBullionIncMemberamrk:AMARKPRECIOUSMETALSINCMember2021-03-310001591588us-gaap:FairValueInputsLevel2Memberamrk:FutureContractsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-3000015915882021-12-310001591588amrk:ProductfinancingarrangementsMember2022-06-300001591588us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberamrk:AMCapitalFundingLLCMember2021-07-012022-06-300001591588amrk:HeldforSaleMember2022-06-300001591588amrk:AMARKPRECIOUSMETALSINCMemberamrk:AmstassociatesllcMember2021-04-010001591588us-gaap:LineOfCreditMembersrt:MinimumMemberamrk:TradingCreditFacilityMember2021-07-012022-06-300001591588us-gaap:ForwardContractsMember2021-06-300001591588amrk:FuturesCommodityAndForwardsContractsAndOpenPurchaseAndSaleCommitmentsMember2021-07-012022-06-300001591588amrk:GradedSportsCardsAndSportsMemorabiliaMember2021-06-300001591588us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:RepurchaseArrangementsWithCustomersMember2021-06-300001591588amrk:NorthAmericaexcludingUSAMember2021-06-300001591588us-gaap:SeniorSubordinatedNotesMemberamrk:AMCapitalFundingLLCMember2018-09-012018-09-300001591588country:AU2021-07-012022-06-300001591588us-gaap:MeasurementInputRiskFreeInterestRateMemberus-gaap:FairValueInputsLevel3Member2022-06-3000015915882021-03-012021-03-310001591588us-gaap:DevelopedTechnologyRightsMember2021-06-300001591588amrk:EbitdaVolatilityMemberus-gaap:FairValueInputsLevel3Member2022-06-300001591588srt:MaximumMemberus-gaap:EmploymentContractsMember2021-07-012022-06-300001591588us-gaap:FairValueInputsLevel1Memberamrk:OpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588srt:AsiaMember2022-06-300001591588amrk:PinehurstCoinExchangeIncMember2021-06-300001591588us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-06-300001591588us-gaap:SoftwareDevelopmentMember2022-06-300001591588amrk:DueFromBrokersMember2021-06-300001591588amrk:JMBullionIncorporationMember2021-03-310001591588us-gaap:DevelopedTechnologyRightsMember2021-07-012022-06-300001591588amrk:LoanToValueOfSeventyFivePercentOrMoreMemberamrk:BullionAndNumismaticAndSemiNumismaticAndGradedSportsMemorabiliaMember2021-06-300001591588us-gaap:ForwardContractsMember2022-06-300001591588srt:MaximumMember2022-06-300001591588amrk:NumismaticandSemiNumismaticMember2021-07-012022-06-300001591588us-gaap:CustomerRelationshipsMember2021-07-012022-06-300001591588amrk:PriceRange2Member2022-06-300001591588amrk:FinancialAssetOriginatedWithThirdPartyMember2022-06-300001591588us-gaap:EquityMethodInvesteeMember2021-07-012022-06-300001591588us-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:ForwardContractsMember2021-06-300001591588amrk:OpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588srt:EuropeMember2020-07-012021-06-300001591588amrk:PriceRange2Member2021-07-012022-06-300001591588us-gaap:ForwardContractsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588srt:AsiaMember2021-06-300001591588us-gaap:NoncontrollingInterestMember2020-06-300001591588amrk:PreciousMetalsPurchasingPartnersLLCMember2021-07-012022-06-300001591588us-gaap:TrademarksMember2022-06-300001591588amrk:ForwardContractMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:ParentMember2022-06-300001591588amrk:FormerParentSGIMemberamrk:LoanAgreementOneMember2022-06-300001591588us-gaap:FutureMember2021-07-012022-06-300001591588amrk:ForwardContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:CommonStockMember2021-07-012022-06-300001591588us-gaap:CustomerConcentrationRiskMemberamrk:SecuredLoansReceivableMember2020-07-012021-06-300001591588us-gaap:AdditionalPaidInCapitalMember2022-06-300001591588us-gaap:ForwardContractsMember2022-06-300001591588us-gaap:FairValueInputsLevel3Memberamrk:OpenPurchasesAndSalesCommitmentsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:PriceRange04Member2022-06-300001591588amrk:FinancialAssetOriginatedWithRelatedPartyMember2022-06-300001591588us-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588country:US2021-06-300001591588amrk:AMCapitalFundingLLCMember2020-07-012021-06-300001591588us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2021-07-012022-06-300001591588us-gaap:CommonStockMember2020-06-300001591588us-gaap:FairValueInputsLevel2Memberamrk:DerivativeLiabilityMarginAccountsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:ForwardContractMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:ForwardContractMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588amrk:WholesaleTradeAdvancesMember2022-06-300001591588amrk:LoanAgreementOneMember2022-06-300001591588amrk:BullionAndNumismaticAndSemiNumismaticAndGradedSportsMemorabiliaMemberamrk:LoanToValueOfLessThanSeventyFivePercentMember2021-06-300001591588us-gaap:LineOfCreditMembersrt:MaximumMemberamrk:TradingCreditFacilityMember2021-12-210001591588us-gaap:SeniorSubordinatedNotesMemberamrk:AMCapitalFundingLLCMemberamrk:SecuredSeniorTermNotesSeries20181ClassBMember2022-06-300001591588us-gaap:FairValueInputsLevel2Memberus-gaap:FutureMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588us-gaap:LineOfCreditMemberamrk:TradingCreditFacilityMember2021-07-012022-06-300001591588amrk:CommemorativeCoinsMember2022-06-300001591588amrk:FormerParentSGIMember2021-06-300001591588amrk:FutureContractsMemberus-gaap:FairValueMeasurementsRecurringMember2021-06-300001591588us-gaap:CommonStockMember2021-06-300001591588amrk:OptionToPurchaseInterestInLongTermInvestmentMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001591588amrk:A2014StockAwardandIncentivePlanMember2021-07-012022-06-300001591588amrk:SilverGoldBullIncMember2022-06-012022-06-30amrk:Reportable_segmentsxbrli:pureiso4217:USDxbrli:sharesamrk:Investmentxbrli:sharesamrk:Productamrk:Coinamrk:Loaniso4217:USD

 

3

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

Commission File Number: 001-36347

 

img204058185_0.jpg 

A-MARK PRECIOUS METALS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State of Incorporation)

 

11-2464169

(IRS Employer I.D. No.)

 

2121 Rosecrans Ave. Suite 6300
El Segundo, CA 90245

(Address of principal executive offices) (Zip Code)

(310) 587-1477

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

AMRK

NASDAQ Global Select Market

 

 

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes. ☑ No. ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes. ☑ No. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes. ☐ No.

Aggregate market value of registrant’s common stock held by non-affiliates of the registrant on December 31, 2021, based upon the closing price of Common Stock on such date as reported by NASDAQ Global Select Market, was approximately $522,917,978. Shares of common stock known to be owned by directors and executive officers of the Registrant subject to Section 16 of the Securities Exchange Act of 1934 are not included in the computation. No determination has been made that such persons are “affiliates” within the meaning of Rule 12b-2 under the Exchange Act.

As of August 23, 2022, the registrant had 23,383,221 shares of common stock outstanding, par value $0.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2022 Annual Meeting of Shareholders, scheduled to be held on October 27, 2022, are incorporated into Part III.

 

 

 


 

 

A-MARK PRECIOUS METALS, INC. AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K

For the Year Ended June 30, 2022

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I

 

 

 

 

 

Item 1.

Description of Business

 

3

 

Item 1A.

Risk Factors

 

12

 

Item 1B.

Unresolved Staff Comments

 

25

 

Item 2.

Properties

 

25

 

Item 3.

Legal Proceedings

 

25

 

Item 4.

Mine Safety Disclosures

 

25

 

 

 

 

 

PART II

 

 

 

 

 

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

25

 

Item 6.

Selected Financial Data

 

27

 

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

 

55

 

Item 8.

Consolidated Financial Statements and Supplemental Data

 

56

 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

103

 

Item 9A.

Controls and Procedures

 

103

 

Item 9B.

Other Information

 

104

 

 

 

 

 

PART III

 

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

 

104

 

Item 11.

Executive Compensation

 

104

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

104

 

Item 13.

Certain Relationships and Related Transactions, and Director Independence

 

104

 

Item 14.

Principal Accountant Fees and Services

 

104

 

 

 

 

 

PART IV

 

 

 

 

 

Item 15.

Exhibits and Financial Statement Schedules

 

105

Exhibit Index

 

 

 

105

Signatures

 

 

 

107

 

 

 

 

 

 

 

 

2


 

PART I — FINANCIAL INFORMATION

 

ITEM 1. DESCRIPTION OF BUSINESS

Overview

A-Mark, also referred to (together with its subsidiaries) as "we", "us" and the "Company", is a fully integrated precious metals platform that offers an array of gold, silver, platinum, palladium, and copper bullion, numismatic coins, and related products to wholesale and retail customers via a portfolio of channels. The Company conducts its operations through three complementary segments: Wholesale Sales & Ancillary Services, Secured Lending, and Direct-to-Consumer. The Company’s global customer base spans sovereign and private mints, manufacturers and fabricators, refiners, dealers, financial institutions, industrial users, investors, collectors, and e-commerce and other retail customers.

Specifically, A-Mark:

operates as a wholesaler of gold, silver, platinum, and palladium bullion and related products, including bars, wafers, grain, and coins;
distributes gold and silver coins and bars from sovereign and private mints;
sells to and purchases from the retail community;
provides financing and other services relating to the purchase and sale of bullion and numismatics;
offers secure storage for precious metal products;
provides our customers a platform of turn-key logistics services; and
provides a variety of custom fabricated gold and silver bullion and other specialty products through sovereign and private mint suppliers and its mint operations.

A-Mark believes it has one of the largest customer bases in each of its markets and provides one of the most comprehensive offerings of products and services in the precious metals trading industry. Our global customer base, spanning five continents, includes mints, manufacturers and fabricators, refiners, coin and bullion dealers, e-commerce retailers, banks and other financial institutions, commodity brokerage houses, industrial users of precious metals, investors, collectors, and retail customers.

A-Mark believes its businesses largely function independently of the price movement of the underlying commodities. However, factors such as global economic activity or uncertainty, including as a consequence of the COVID-19 pandemic, and inflationary trends, which affect market volatility, have the potential to impact demand, volumes, and margins.

History

A-Mark was founded in 1965 and has grown into a significant participant in the bullion and coin market. A-Mark became a wholly-owned subsidiary of Spectrum Group International, Inc. ("SGI") in 2005. In March 2014, SGI distributed all of the shares of common stock of A-Mark to its stockholders, effecting a spinoff of A-Mark from SGI. As a result of this distribution, the Company became a publicly traded company independent from SGI.

Over the years, A-Mark has been steadily expanding its products and services. In 1986, A-Mark became an authorized purchaser of gold and silver bullion coins struck by the United States Mint. Similar arrangements with other sovereign mints followed, so that by the early 1990s, A-Mark had (and continues to have) relationships with all major sovereign mints offering bullion coins and bars internationally.

In 2005, the Company launched Collateral Finance Corporation ("CFC"), a wholly-owned subsidiary, for the purpose of making secured loans primarily collateralized by bullion and numismatic material. Since then, CFC has expanded the value of its aggregate loan portfolio and number of its customers and makes secured loans collateralized by graded sport cards and sports memorabilia. CFC has achieved its growth through both loan origination and acquisitions of loan portfolios from wholesale customers of A-Mark.

The Company opened an overseas office in Vienna, Austria in 2009, for the purpose of marketing A-Mark's goods and services in the international markets. The office operates through A-Mark Trading AG ("AMTAG"), a wholly-owned subsidiary of the Company. In 2012, the Company formed Transcontinental Depository Services, LLC. ("TDS"), a wholly-owned subsidiary, for the purpose of providing customers with turn-key global storage solutions for their precious metal products.

3


 

In July 2015, the Company launched its Las Vegas-based logistics fulfillment center, A-M Global Logistics, LLC. ("AMGL" or "Logistics"), a wholly-owned subsidiary, for the purpose of providing our customers a platform of complementary services, including packaging, shipping, handling, receiving, processing, and inventorying of precious metals and custom coins on a secure basis.

In August 2016, the Company formed a joint venture, AM&ST Associates, LLC. ("AMST"), with SilverTowne, L.P., an Indiana-based fabricator of silver bullion products, for the purpose of acquiring and operating SilverTowne, L.P.'s minting business unit ("SilverTowne Mint" or the "Mint"). Since the formation of AMST, the Company has invested in minting equipment and fabrication tools to expand output capabilities, increase production efficiencies and improve product quality, and has leveraged the Mint’s fabrication capabilities and coin die portfolio to expand our custom coin programs, as well as to introduce new custom products for individual customers. In April 2021, the Company purchased the 31% interest in AMST previously held by the joint venture partner and now owns 100% of AMST.

In August 2017, the Company acquired substantially all of the assets of Goldline, LLC, a direct retailer of precious metals to the investor community, and now conducts those operations through its subsidiary Goldline, Inc. ("Goldline"). Goldline LLC was formed in 1960 and became well-known to collectors and investors for its distribution of gold, silver, and platinum bullion coins and bars, in part, due to its television, radio, and internet marketing and customer service outreach. Since our acquisition, Goldline has expanded its product offerings and improved its delivery times.

In September 2018, the Company formed AM Capital Funding, LLC. (“AMCF”), a wholly owned subsidiary of CFC, for the purpose of issuing and administering privately placed notes, which are collateralized by secured loans (contributed from CFC) and bullion product (purchased from A-Mark). The notes are Secured Senior Term Notes (collectively, the "Notes"): Series 2018-1, Class A in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million. The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%. The Notes have a maturity date of December 15, 2023.

In August 2019, Goldline entered into a joint venture agreement with one of the Company's related parties to form Precious Metals Purchasing Partners, LLC ("PMPP"), a 50% owned subsidiary, primarily for the purpose of purchasing precious metals from the partners' retail customers for resale back into the marketplace. PMPP commenced operations in fiscal 2020.

In September 2014, the Company made an initial equity investment in JM Bullion, Inc. (“JMB”), and in October 2016, we made an additional investment in JMB, increasing our equity interest to approximately 20.5%. In March 2021, the Company acquired the 79.5% interest in JMB that we did not previously own. JMB is a leading e-commerce retailer providing access to a broad array of gold, silver, copper, platinum, and palladium products through its own websites and marketplaces. In April 2022, JMB commercially launched the CyberMetals online platform, where customers can purchase fractional ounces of digital gold, silver, platinum, and palladium in a range of denominations, with the option to convert their digital holdings to fabricated precious metals products via an integrated redemption flow with JMB. JMB operates six separately branded, company-owned websites targeting specific niches within the precious metals retail market, including JMBullion.com, ProvidentMetals.com, Silver.com, Cybermetals.com, GoldPrice.org, and SilverPrice.org. JMB had approximately 1.8 million total customers as of June 30, 2022, and approximately 615,800 active customers for year ended June 30, 2022.

In April 2021, CFC Alternative Investments, LLC, a newly-created wholly-owned subsidiary of CFC, formed a joint venture with a third party known as Collectible Card Partners, LLC, which was established for the purpose of making commercial loans collateralized by graded sports cards and sports memorabilia.

Through strategic relationships with its customers and suppliers and vertical integration across its markets, A-Mark seeks to grow its business volume, expand its presence in non-U.S. markets around the globe, and enlarge its offering of complementary products and services. A-Mark seeks to continue its expansion by building on its strengths and what it perceives to be its competitive advantages. These include:

integrated operations that span trading, distribution, logistics, minting, storage, hedging, financing, and consignment products and services;
an extensive and varied customer base that includes banks and other financial institutions, coin dealers, collectors, private investors, retail customers, investment advisors, industrial manufacturers, refiners, sovereign and private mints, and mines;
the ability to cost effectively acquire and retain new retail customers, with over 615,800 active customers on the JMB platform and approximately 7,900 active Goldline customers;
the ability to offer secured financing to customers;
secure storage and turn-key logistic services for precious metals products;
long-standing relationships with the United States Mint and other sovereign mints, including a working relationship with the United States Mint of over 35 years;

4


 

access to primary market makers, suppliers and refiners that, along with government mints, provide a dependable supply of precious metals and precious metal products;
minting operations which produce silver bullion and custom coins, allowing for a ready response to changing market demands;
the ability to design and fabricate proprietary silver products for customers;
the largest precious metals dealer network in North America;
depository relationships in major financial centers around the world;
experienced traders who also effectively manage A-Mark's exposure to commodity price risk; and
a strong management team, with over 100 years of collective industry experience.

As part of our growth strategy, we are focused on:

Continuing to grow our direct-to-consumer brands—We fully own six unique direct-to-consumer brands and have minority ownership interests in two additional direct-to-consumer brands. Each of these brands has a differentiated market positioning and target customer demographic, which allows us to tailor our merchandising, pricing, and advertising strategies to maximize the growth and profitability of each brand. We plan to continue to invest in the Direct-to-Consumer segment, to facilitate both the acquisition of new customers and the retention of our existing customers.
Cross-selling existing A-Mark products and services to JMB customers—As of June 30, 2022, JMB had over 1.8 million total customers and 615,800 active customers. We believe there is a significant opportunity to offer new products and services provided by A-Mark to this customer base, including new, proprietary minted precious metals products, secure storage and logistics, and product repurchases.
Leveraging our minting capabilities to sell additional proprietary products—We have long-standing relationships with the United States Mint and other major international sovereign mints. We also own one mint, SilverTowne, and have a noncontrolling interest in another mint. We leverage our relationships with these mints to offer proprietary products to our wholesale and direct-to-consumer customers. The acquisition of JMB has provided us with a significantly larger direct-to-consumer customer base, allowing us to increase the number of proprietary products we design, source, and ultimately sell.
Expanding our global footprint—We currently serve customers on five continents. Although the significant majority of our current sales are to customers located in the United States, we believe there is a meaningful opportunity to expand our capabilities in order to offer additional products and services to customers in Canada, Europe, and Asia.
Leveraging technology to deliver new products and increased services to customers—We are dedicating significant time and resources to enhance our technology platform and capabilities across all aspects of our business and the addition of JMB is helping to enhance these efforts. We intend to develop new digital products that will allow customers to more easily buy, sell, and arrange for storage of physical metal products through a mobile interface. We also intend to continue to improve our customer interfaces to allow more seamless order processing, better cross-selling of products and services across our business units and to increase our new customer targeting and acquisition strategies.
Pursuing strategic investments and acquisitions—Since our initial investment in JMB in 2014, we have acquired Goldline, made minority investments in two additional direct-to-consumer precious metals retailers, acquired the entire equity interest in JMB, acquired the entire equity interest in SilverTowne Mint and acquired a noncontrolling interest in a private mint. We intend to continue to evaluate new investment and acquisition opportunities that allow us to broaden our product offerings, allow us to better serve our existing customer base, enter new geographic regions and target new customer demographics.

Business Segments

The Company conducts its operations in three reportable segments: (i) Wholesale Sales & Ancillary Services , (ii) Direct-to-Consumer, and (iii) Secured Lending. Each of these reportable segments represents an aggregation of operating units that meets the aggregation criteria set forth in the Segment Reporting Topic 280 of the Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification (“ASC”). (See Note 19 to the Company’s consolidated financial statements.)

The Wholesale Sales & Ancillary Services and Direct-to-Consumer segment name changes had no impact on the Company's historical financial position, results of operations, cash flow, or segment level results previously reported.

5


 

Wholesale Sales & Ancillary Services

A-Mark operates through several business units that comprise the Wholesale Sales & Ancillary Services segment, including Industrial, Coin and Bar, Trading and Finance, Storage, Logistics, and Mint.

Industrial. Our Industrial unit sells gold, silver, platinum, and palladium to industrial and commercial users. Customers include coin fabricators such as mints and industrial manufacturers, encompassing electronics and component parts companies and refiners. Depending on the intended usage, the metals are either investment or industrial grade and are generally in the form of bars or grains.

Coin and Bar. Our Coin and Bar unit deals in over 1,800 different products, including gold and silver coins from around the world and gold, silver, platinum and palladium bars and ingots in a variety of weights, shapes, and sizes. Our customers include coin and bullion dealers, banks and other financial institutions, commodity brokerage houses, manufacturers, investors, investment advisors, and collectors who qualify as “eligible commercial entities” and “eligible contract participants,” as those terms are defined in the Commodity Exchange Act.

We are an authorized distributor (and, in the case of the United States Mint, an authorized purchaser) of gold and silver coins for all of the major sovereign mints and various private mints. The sovereign mints include the United States Mint, the Australian (Perth) Mint, the Austrian Mint, the Royal Canadian Mint, the China Mint, Banco de Mexico, the South African Mint (Rand Refinery) and the Royal Mint (United Kingdom). We purchase and take delivery of coins from the mints for resale to coin dealers, financial institutions, and other qualified purchasers.

Our distribution and purchase agreements with the mints are non-exclusive and may be terminated by the mints at any time, although in practice our relationship with the mints are long-standing, in some cases, as with the United States Mint, extending back for over 35 years. In some cases, we have developed exclusive products with sovereign and private mints for distribution through our dealer network.

In our Industrial and Coin and Bar units, orders are taken telephonically and on an electronic trading platform that can be accessed by qualified wholesale customers at www.amark.com. Pricing is generally based on screen quotes for bullion transactions in the spot market, with two-day settlement, although special pricing and extended settlement terms are also available. Almost all customers in these units take physical delivery of the precious metal. Product is shipped upon receipt of payment, except where the purchase is financed under credit arrangements between A-Mark and the customer. We have relationships with precious metal depositories around the world to facilitate shipment of product from our inventory to these customers, in many cases for next day delivery. Product may either be shipped to the customer's location or delivered to a depository or other storage facility designated by the customer. The Company also periodically loans metals to customers on a short-term consignment basis and may charge interest fees based on the value of the metals loaned.

Trading and Finance. Our Trading and Finance units engage in commodity hedging as well as borrowing and lending transactions in support of our Industrial and Coin and Bar units.

The Trading unit hedges the commodity risk on A-Mark's inventory in order to protect A-Mark from market price fluctuations. A-Mark maintains relationships with major market-makers and multiple futures brokers in order to provide a variety of alternatives for its hedging needs. Our traders employ a combination of future and forward contracts to hedge our market exposure. Because it seeks to substantially hedge its market exposure, A-Mark believes that its business largely functions independently of the price movements of the underlying commodities. Through its hedging activities, A-Mark may also earn contango yields, in which futures price are higher than the current spot prices, or backwardation yields, in which futures prices are lower than the spot prices. A-Mark also offers precious metals price quotes in a number of foreign currencies.

Our Finance unit engages in precious metals borrowing and lending transactions and other customized financial transactions with or on behalf of our customers and other counterparties. These arrangements range from simple hedging structures to complex inventory finance arrangements and forward purchase and sale structures, tailored to the needs of our customers.

Storage. Our Transcontinental Depository Services, LLC ("TDS") subsidiary provides storage solutions for precious metals and numismatic coins for financial institutions, dealers, investors, and collectors worldwide. TDS contracts on behalf of our clients with independent secure storage facilities in the United States, Canada, Europe, Singapore, and Hong Kong, for either fully segregated or allocated storage. We assist our clients in developing appropriate storage options for their particular requirements, and we manage the operational aspects of the storage with the third party facilities on our clients' behalf. TDS’s marketing efforts are conducted both in partnership with A-Mark and independently, including through its dedicated website www.tdsvaults.com.

Logistics. Our A-M Global Logistics, LLC ("Logistics") subsidiary, located in Las Vegas, Nevada, supports our Wholesale Sales business by providing a significant amount of the secured storage and shipping and delivery services that had historically been outsourced to third-party depositories in their various locations. By consolidating those operations into one central location under our control, we have reduced our dependence on third-party service providers while enhancing quality control and reducing operating costs. Logistics also provides turn-key logistics services to our customers engaged in the retail business. We provide these customers inventory handling, packaging, storage, and drop-shipping services.

6


 

AMTAG. Our A-Mark Trading AG ("AMTAG") subsidiary promotes the Company's products and services to international markets.

Mint. Through its AMST subsidiary, the Company now owns the entire minting operations of the SilverTowne Mint (or the "Mint"), providing greater product selection to our customers and greater pricing stability within the supply chain, as well as increased access to fabricated silver products during volatile market environments. A-Mark has leveraged SilverTowne Mint’s fabrication capabilities as well as to introduce new custom products for individual customers.

Although the Company and JMB are the Mint’s primary customers, the Mint also markets its products at www.silvertowne.com.

Direct-to-Consumer

The Company operates its Direct-to-Consumer segment through its wholly-owned subsidiaries JM Bullion, Inc. (“JMB”) and Goldline, Inc. (“Goldline”). The Company’s Direct-to-Consumer segment expands the Company’s distribution capabilities with a retail distribution channel and diversifies the products and services offered to the Company’s retail customers by providing them access to the Company’s wider assortment of precious metal coins and bars, as well as TDS’s storage and asset protection services.

JM Bullion

JMB, which became a wholly-owned subsidiary of the Company in March 2021, is a leading internet retailer of precious metal products that it sells through its proprietary websites.

Products. JMB’s products consist primarily of coins, rounds, and bars. Coins are minted by a sovereign government, are legal currency and have a face value, although the face value is typically less than the value of their precious metal content. Rounds are coin-like objects with thematic designs minted by private mints, have no face value and are not legal currency, and their value is solely based upon their precious metal content. Bars are ingot-shaped precious metal objects that are usually produced by private mints. Like rounds, bars have no face value, are not legal currency and are valued based on their precious metal content. Coins, rounds, and bars are made from silver, gold, platinum, or palladium and in some cases copper. JMB occasionally sells jewelry products fashioned around coins or rounds as well.

Typically, JMB offers approximately 4,000 different products, measured by stock keeping units or SKUs, on its websites during a fiscal year. This number can vary over time, particularly when demand is high. As a service to its customers, JMB makes available for sale on its websites protective accessories for precious metal products, including acrylic coin holders and capsules, coin tubes and silver bar tubes.

JMB owns and operates four separately branded websites targeting specific segments within the precious metals market: JMBullion.com, ProvidentMetals.com, Silver.com, and Cybermetals.com, JMB also owns two websites, GoldPrice.org and SilverPrice.org, which publish data on precious metal and cryptocurrency pricing and generate leads for its other websites.

Through the CyberMetals online platform, customers can purchase and sell fractional shares of digital gold, silver, platinum, and palladium bars in a range of denominations. CyberMetals’ customers have the option to convert their digital holdings to fabricated precious metals products via an integrated redemption flow with JMB. These products may be designated for storage by the Company or shipped directly to the customer.

Customers may order product on each of the JMBullion.com, ProvidentMetals.com and Silver.com websites. While each of these sites appeals to a different customer clientele and may from time to time have slightly different product offerings, all orders are processed in the same manner. Customers may place their orders online, or they may use the toll-free telephone number available on the websites to order through a customer representative. The SilverPrice.org and GoldPrice.org websites provide real time price information on silver, gold, and cryptocurrencies. Although customers cannot order product on these websites, the websites direct visitors to JMBullion.com for placing orders.

JMB utilizes an internally developed search engine optimization, or SEO, strategy to drive traffic to its websites, particularly to JMBullion.com. JMB also pays for placement on the major search engines, including Google, Bing, Apple, and Yahoo!, employing internally developed strategies to reach a targeted audience and to optimize the cost effectiveness of paid for searches.

Buyback Program. JMB also offers to repurchase precious metal products through its websites. With its buyback program, JMB provides collectors of precious metal products with a means to dispose of their holdings at transparent and competitive prices. Generally, JMB will indicate on its websites the products that it is interested in repurchasing, and a collector seeking to sell such products may arrange the sale online. Alternatively, the collector may call a customer representative using the toll-free number on the website and arrange a sale by telephone.

The buyback program is a source of inventory for JMB, which is able to acquire product for resale at a discount to dealer prices.

7


 

Logistics. Historically, the Company has provided logistics services to JMB. As of June 30, 2022, JMB's distribution facility in Dallas, Texas, handles the backend logistics for the Company's buyback program and the secured storage for CyberMetals' precious metals.

Goldline

Goldline, acquired by the Company in August 2017, is a direct retailer of precious metals to the investor community. Goldline markets its precious metal products on television, radio, and the internet, as well as through customer service outreach, particularly to Goldline’s repeat customers. Online orders are taken on an electronic trading platform that can be accessed by qualified retail customers at www.goldline.com.

Goldline customers are required to open an account with Goldline and enter into an account agreement. The agreement specifies the terms and conditions of purchase and explains the availability of certain programs and services offered by Goldline to its customers.

Products. Goldline offers a variety of products from gold, silver, and platinum bullion in the form of bars and coins, as well as rare coins. Many of Goldline’s coins and bars are also IRA eligible.

Buyback Purchases. Precious Metals Purchasing Partners, LLC ("PMPP") is a joint venture with one of the Company's related parties, in which Goldline owns a 50% interest. Through PMPP, Goldline acquires precious metals from retail customers in order to diversify its supply chain of product offerings and prices for its affiliates.

Intellectual Property. AM IP Assets, LLC ("AMIP"), a wholly owned subsidiary of Goldline, manages certain intellectual property of Goldline, including customer lists and a sales lead data base.

Secured Lending

The Company operates its Secured Lending segment through its wholly-owned subsidiary, CFC, which in turn owns AMCF. CFC and AMCF have been operating since fiscal years 2005 and 2019, respectively. CFC Alternative Investments, LLC (“CAI”), a newly-formed subsidiary of CFC, is a party to a joint venture known as Collectible Card Partners, LLC (“CCP”), which was formed for the purpose of making commercial loans collateralized by graded sports cards and sports memorabilia.

CFC is a California licensed finance lender that originates and acquires commercial loans secured by bullion and numismatic coins. CFC's customers include coin and precious metal dealers, investors, and collectors. As of June 30, 2022, the aggregate balance of CFC's secured loans was approximately $126.2 million. The balance is comprised of approximately 64.7% of loans acquired from third-parties and approximately 35.3% of loans originated by CFC.

AMCF is a special purpose entity whose sole activity consists of operating, owning, and financing precious metal inventory through the issuance of notes (the “AMCF Notes”). AMCF Notes are primarily payable from, and secured by, (i) precious metals obtained by AMCF, (ii) a portfolio of loans collateralized by precious metals, which loans were originated by either CFC or acquired by CFC from third parties and conveyed by CFC to AMCF, and (iii) cash. The indenture governing the AMCF Notes requires AMCF to maintain a specified level of collateral. The indenture also provides that AMCF’s assets are not to be commingled with those of CFC or A-Mark (or any affiliate) and that AMCF is to maintain separate books and records.

General. The secured loans that CFC issues consist of on-demand loans and loans with a term of three months to 364 days, with a typical term of approximately six months. Repayment of the loans can be made at any time without penalty. Because the loans are of relatively short duration, CFC does not have significant exposure to interest rate fluctuations, even in a rising interest rate environment. Loans carried by CFC range in size from $15,000 to $10.0 million.

All loans are fully secured by bullion, numismatic coins or graded sports memorabilia (or in rare cases, by other acceptable collateral). TDS, on behalf of CFC, takes physical custody of the coins or bullion collateralizing the loans. CFC requires loan-to-value ("LTV") ratios of between 50% and 85%. LTV ratio refers to the principal amount of the loan divided by the liquidation value of the collateral, as conservatively estimated by CFC for numismatic loans and based on daily spot market prices for bullion loans. The LTV ratio varies with the nature of the collateral, with CFC requiring, for example, a higher LTV ratio for bullion than for rare coins. If, because of fluctuations in the market price of the pledged collateral, the LTV ratio on a loan increases above a prescribed maximum ratio, typically 85%, CFC can make a margin call on the loan. If the borrower does not meet the margin call, either by wiring payment or supplying additional collateral, CFC is authorized to sell the collateral, which it does through its A-Mark affiliates. CFC has never experienced losses of principal on its loans.

Origination Activity. CFC's origination activities are complementary to the Company’s coin and bullion businesses, and afford our customers a convenient means of financing their inventory or collections. CFC also attempts to leverage the worldwide storage capabilities of its TDS affiliate by offering clients TDS’s asset protection services in connection with the loans. CFC’s marketing efforts for its origination activity are conducted both in partnership with A-Mark, particularly with respect to dealers, and independently, including though its dedicated website www.cfcgoldloans.com. Interest rates on loans originated by CFC are determined based on current market conditions, borrower profile and type or mix of collateral. CFC also offers a variety of custom loan services to its

8


 

origination clients, including renewal options, options to increase loan size, financing arrangements tailored to facilitate participation in numismatic auctions, and revolving loan arrangements. CFC services the loans that it originates.

Acquisition Activity. CFC also acquires portfolios of loans secured by bullion and numismatics coins from third party originators. The loans acquired by CFC are sold subject to customary representations and warranties for loan portfolios of this type, and must comply with CFC’s criteria for quality of collateral, LTV ratio, term and interest rate. Upon acquisition of a loan portfolio, CFC takes physical possession of the collateral securing the loans. In the event that a loan is non-performing, the collateral will typically be liquidated by A-Mark on behalf of the originator in order to retire the loan. Typically, loan portfolios acquired by CFC are serviced by the originator for a fee.

Financing Activity. CFC has historically financed its loan origination and acquisition activity primarily through A-Mark's demand line of credit with a syndicate of several financial institutions. The AMCF Notes, which were issued by AMCF in September 2018, have provided an additional source of funding for CFC's loan originations and acquisitions of loan portfolios from third parties.

Liquidity

Our business depends substantially on our ability to obtain financing for our operations. Sources of cash generated from operating activities include receipts upon the sales of precious metals, and cash collected from interest payments on secured loans.

Sources of cash provided by financing activities are our uncommitted line of credit, fixed interest rate notes, and other structured financing products. The Company’s line of credit provides it with the liquidity to buy and sell billions of dollars of precious metals annually, and is used to fund a substantial portion of the operations of the Company. As of June 30, 2022, A-Mark's uncommitted line of credit provided access up to $350.0 million, featuring a $300.0 million base with a $50.0 million accordion option. The maturity date of the credit facility is December 21, 2024.

The Company issued fixed rate notes in September 2018 with an aggregate principal amount of $100.0 million, having a maturity of December 15, 2023. The proceeds upon issuance of the notes were used to fund the acquisition of CFC's secured loans and other operating activities. The Company also generates funds from other finance products that include product financing arrangements with customers, whereby the Company sells its inventory with an option to repurchase, and through precious metal borrowing and leasing arrangements with its suppliers.

Market Making Activity

We act as a principal market maker, maintaining a two-way market for buying and selling precious metals. This means we both sell product to and purchase product from our customers.

Material Resources

We maintain a substantial inventory of bullion and coins in order to provide our customers with selection and prompt delivery. We acquire product for our inventory in the course of our trading activities with our customers, directly from government and private mints, mines, and refiners, and from commodities brokers and dealers, privately and in transactions on established commodity exchanges.

A-Mark’s precious metals inventories are subject to market value changes created by change in the underlying commodity price, as well as supply and demand of the individual products the Company trades. Our inventory is marked-to-market daily for accounting and financial reporting purposes, except for a relatively insignificant amount of inventory that is accounted for at lower of cost or net realizable value. A-Mark’s policy is to remain substantially hedged as to its inventory position and its individual sale and purchase commitments. A-Mark seeks to minimize the effect of price changes of the underlying commodity through the use of financial derivative instruments, such as forward and futures contracts.

Sales and Marketing

We market our products and services to our wholesale customers primarily through our offices in El Segundo, California, and Vienna, Austria, our websites, and our dealer network, which we believe is the largest of its kind in North America. The dealer network consists of over 900 independent precious metal and coin companies, with whom we transact on a non-exclusive basis. The arrangements with the dealers vary, but generally the dealers acquire product from us for resale to their customers. In some instances, we deliver bullion to the dealers on a consignment basis. We also participate from time to time in trade shows and conventions, at which we promote our products and services. As a vertically integrated precious metals company, a key element of our marketing strategy is being able to cross-sell our products and services to customers within our various business units.

JMB markets its products over the internet through its proprietary websites, using an internally developed search optimization strategy and paid placements with major search engines. Goldline reaches its retail customer base on television, radio, and the internet, as well as through customer service outreach.

9


 

Consistent with the marketing strategy for our wholesale customers, we market our secured loan products and services to customers primarily through our dealer network and by participating in trade shows and conventions.

Operational Support

The Wholesale Sales & Ancillary Services segment maintains administrative and operational support related to its trading, hedging, and finance product operations at its headquarters in El Segundo, California. We believe that our existing administrative and operational support infrastructure has the capacity to scale up with our business activities. We store our inventories of bullion and numismatics at third party depositories in major financial centers around the world and at our secured facility in Las Vegas, Nevada.

The Direct-to-Consumer segment maintains administrative and operational support at its office in Dallas, Texas and Los Angeles, California, for originating and processing its retail orders. The Company's Trading, Finance, and Logistics business units provide supporting services such as hedging and order fulfillment.

The Secured Lending segment maintains administrative support at its headquarters in El Segundo, California for the processing of its originated loans, including billing, managing margin calls, and tracking of precious metal collateral. For the processing and administration of loans that are acquired from a third party (which may be a customer of A-Mark), customer invoices are typically processed by the originating dealer of the loan portfolio through a fee-based servicing arrangement. Collateral custody and security is managed by our Logistics business unit. Additionally, A-Mark provides funds to CFC to purchase additional bullion and numismatic secured loans.

Customer Concentrations

For the year ended June 30, 2022, the Company did not have any single customer that comprised more than 10% of our revenues. (See Note 18 to the Company’s consolidated financial statements.) The Company's largest customers generally have significant forward contract sales activity (as opposed to those customers with whom we principally have physical trading activity), which are entered into in order to hedge the Company's commodity holding risks, and not for speculative purposes.

Competition

A-Mark's activities cover a broad spectrum of the precious metals industry, with a concentration on the physical market. We service public, industrial, and private sector consumers of precious metals which include industrial manufacturers, refiners, minting facilities, banks, brokerage houses, and private investors. We frequently face different competitors in each area, and it is not uncommon for a customer and/or a supplier in one market segment to be a competitor in another.

Our Direct-to-Consumer segment competes with numerous online and other retailers of direct-to-consumer precious metal products. The principal competitors of JMB include APMEX, SD Bullion and Bullion Exchanges. Competition is based primarily on price and customer service, including the ability to offer same day shipping. To a lesser extent, competition is also based on product availability, although all major ecommerce retailers will typically stock the products that are most in demand.

Our Secured Lending segment's market is believed to have limited direct competition. We believe factors, including access to capital, secure storage facilities, bullion and numismatic expertise, and other related services and offerings, provide us a competitive advantage in that marketplace.

Seasonality and Other Factors Influencing Demand

Our business is generally not seasonal, although demand in the retail market tends to be lower in the summer months. On the other hand, we believe our business is directly impacted by the perception of market trends and global economic activity. Historically, higher levels of demand for precious metals are brought on during periods of macroeconomic uncertainty. Typically, factors that impact such uncertainty and correlate with a higher level of demand for precious metals include volatility in the equity markets, increases in rates of inflation, and devaluation of the U.S. dollar. The COVID pandemic has spurred an unprecedented demand for precious metal products, in both our wholesale and retail operations, which may not continue.

Compliance with Government Regulations

We are subject to a variety of domestic and foreign laws that relate particularly to our business. Because of the nature and value of the precious metal products in which deal, we must be careful to assure compliance with the Foreign Corrupt Practices Act and a variety of anti-money laundering and know-your-customer rules in response to the USA Patriot Act, and similar foreign statutory regimes.

By reason of our direct-to-consumer business in particular, we collect personal data and are subject to European General Data Protection Regulation, the California Consumer Privacy Act of 2018, and similar domestic and foreign statutes that address the collection, use and monitoring of such data. We continue to devote substantial resources to comply with these laws and regulations.

10


 

Our CFC financing subsidiary operates under a California Finance Lenders License issued by the California Department of Financial Protection and Innovation. CFC is required to submit a finance lender law annual report to the state which summarizes certain loan portfolio and financial information regarding CFC, which are subject to audit.

We have been in discussions with the Commodity Futures Trading Commission regarding its investigation relating to certain activities by Goldline. While we do not expect the outcome of this investigation to materially adversely affect our business or operations, this agency, and possibly other federal and state agencies, may seek to assert oversight over aspects of our operations.

Human Capital

The efforts and expertise of our team members are critical to our success. We are devoted to the attraction, development, and retention of our employees, which enable us to deliver a high level of service to our customers. Because we have a small number of employees, and certain of our subsidiaries are geographically dispersed as a result of various acquisitions as well as from internal growth, our focus is on maintaining a relationship-based and collaborative work environment within each of our geographical locations. For the most part, these operating businesses are authorized to establish specific policies and practices concerning the attraction and retention of person in their organizations, addressing, among other things: maintaining a safe work environment for employees, customers and other business partners, offering competitive compensation and benefits to employees, and hiring practices intended to identify qualified candidates and promote diversity and inclusion in the workforce.

At the same time, we recognize the importance of “Tone at the Top”, and we have adopted company-wide corporate governance policies and procedures which emphasize accountability, transparency, fairness, and responsibility. A-Mark’s senior management is responsible for establishing and monitoring A-Mark’s corporate governance practices, including monitoring governance efforts at each location, and participating in the resolution of governance-related issues as needed. A-Mark’s Code of Business Conduct and Ethics emphasizes, among other things, the commitment to ethics and compliance with the law and provides basic standards for ethical and legal behavior of all its employees.

As of June 30, 2022, the Company had 384 employees, with 382 located in North America, and 2 located in Europe; all except 7 of these employees were considered full-time employees. Our overall full-time employee retention rate (excluding temporary workers hired for less than 90 days) for the year ended June 30, 2022 was 46.7%; excluding the Mint and Logistics operations, which hire largely in response to fluctuating business demands, our retention rate was 74.3%. For the companies we have owned for more than five years, the percentage of employees who have more than five years of service was 25.2%. For the companies we have owned and operated for less than five years, the percentage of employees who have continued their employment since the respective acquisition dates was 37.1%.

A-Mark is committed to supporting our employees’ financial, mental, and physical well-being. Across our various companies, we offer competitive pay and benefits, including annual short-term incentive awards and long-term equity awards, an employee savings 401(k) plan and company matching contributions, health insurance, disability insurance, life insurance, health savings and flexible spending accounts, wellness incentives, paid time off, family leave, parental leave, and employee assistance programs.

The Company has taken steps to support and protect its employees during the COVID-19 pandemic, including by implementing health and safety protocols and providing additional benefits. As of June 30, 2022, many of our employees continue to work remotely under a hybrid work-from-home/work-at-the-office model. For those employees who continue to work at our facilities, we follow state and local guidelines regarding masks and have configured our various working environments to allow for social distancing to the extent feasible.

A-Mark provides equal employment opportunities to all qualified individuals without regard to race, color, religion, sex, gender identity, sexual orientation, pregnancy, age, national origin, physical or mental disability, military or veteran status, genetic information, or any other protected classification. Equal employment opportunity includes, but is not limited to, hiring, training, promotion, demotion, transfer, leaves of absence, and termination. The diversity of our workforce is essential, and we are committed to diversity and inclusion throughout the Company to ensure a wide range of experiences, perspectives, and skills to provide better solutions, drive innovation and creativity, and enhance decision making. As of June 30, 2022, approximately 35.9% of our employees identified as female, and 44.3% of our employees were made up of underrepresented minorities.

Corporate Information

Our executive offices are located at 2121 Rosecrans Avenue, Suite 6300, El Segundo CA 90245. Our telephone number is (310) 587-1477, and our website is www.amark.com. Through this website, we make available, free of charge, all of our filings with the Securities and Exchange Commission ("SEC"), including those under the Exchange Act of 1934, as amended ("Exchange Act"). Such reports are made available on the same day that they are electronically filed with, or furnished to, the SEC. In addition, copies of our Code of Business Conduct and Ethics for Employees, Code of Business Conduct and Ethics for Senior Financial and Other Officers, and Code of Business Conduct and Ethics for Directors are available through our website, along with other information regarding our corporate governance policies.

11


 

Geographic Information

See Note 19 to the Company’s consolidated financial statements for information about Company's geographic operations.

ITEM 1A. RISK FACTORS

Risks Relating to Market Trends and Global Events

The demand for our products and our profitability ultimately depends on preferences and perceptions regarding the desirability of owning precious metals, but those preferences and perceptions are subject to change.

While the Company operates at both the wholesale and direct-to-consumer levels, the demand for our products is dependent upon the perceptions and preferences in the global market regarding the ownership of precious metals and numismatics. These perceptions and preferences depend on a variety of factors, including world events (as discussed more fully below), business and economic conditions, inflationary and other currency related trends and alternative investment opportunities. All such factors may change over time and as a consequence the results of our operations, profitability and stock price may vary over both the short and the long term.

In recent times, our profitability and stock price have risen to historically unprecedented levels, but may in the future revert to more normalized levels.

The consequences of the COVID-19 pandemic and other global and macroeconomic events have had an overall positive effect on the demand for our products and ancillary services, the margins that we are able to realize on our products and services and our overall profitability. Our stock price has responded favorably to these unprecedented circumstances as well. While it is not possible to predict with any accuracy future market trends, our business may revert at some point to levels more closely in line with industry activity prior to the COVID-19 outbreak, particularly in the direct-to-consumer business of the Company and its recently acquired JMB subsidiary. If that were to occur our profitability and the price of our stock could return to more normalized levels as well.

We regularly seek to innovate and to anticipate market changes, but there is no assurance that we will be successful in doing so.

We are alert to the special sensitivity of our business to economic, social and political trends and events, and we attempt to project their effects on our business over the long term. So, for example, we have been placing increasing emphasis on our direct-to-consumer business, in anticipation that the economic uncertainties, market volatilities and global challenges that we face will continue to make investment in precious metals and numismatics more attractive to individual consumers. There can be no assurance, however, that we will be correct in our assessments of market trends or evolving business and consumer preferences, or that, even if our judgments are correct, our response to projected trends and preferences will be timely or effective. Moreover, because of the sensitivity of our business to macro-economic, social and political circumstances, there may be no effective strategy to insulate us from the adverse effects that these circumstances could have on our business.

Risks Relating to our Operations

Our business is heavily dependent on our credit facility.

Our business depends substantially on our ability to obtain financing for our operations. On December 21, 2021, we entered into a new committed facility provided by a syndicate of financial institutions (the “Trading Credit Facility”), with a total current revolving commitment of up to $350.0 million and with a termination date of December 21, 2024. The Trading Credit Facility provides the Company with the liquidity to buy and sell billions of dollars of precious metals annually. A-Mark routinely uses funds drawn under the Trading Credit Facility to purchase metals from its suppliers and for operating cash flow purposes. Our CFC subsidiary also uses the funds drawn under the Trading Credit Facility to finance certain of its lending activities.

The Trading Credit Facility requires us to comply with customary affirmative and negative covenants, and with a variety of financial covenants, including a minimum working capital requirement; a fixed charge coverage ratio; a ratio of total recourse debt to consolidated tangible net worth; and limitations on the amount of ownership-based financings (as defined). Upon the occurrence of an event of default under the Trading Credit Facility that was not cured or waived pursuant to the terms of the Trading Credit Facility, the lenders under the Trading Credit Facility could elect to declare all amounts outstanding under the Trading Credit Facility to be due and payable immediately. Further, lenders holding at least 66.67% of the revolving commitments under the Trading Credit Facility may require us to repay all outstanding indebtedness under the Trading Credit Facility at any time, even if we are in compliance with the financial and other covenants under the Trading Credit Facility. After such demand, each lender with a revolving loan commitment may, but is not obligated to, make revolving loans until the termination date of the Trading Credit Facility.

If we are unable to access funds under the Trading Credit Facility, we may be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.

12


 

We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments, including the Trading Credit Facility, upon demand or acceleration, or at maturity, or that we would be able to refinance or restructure the payments under the Trading Credit Facility. The failure of A-Mark to renew or replace the Trading Credit Facility under such circumstances would reduce the financing available to us and could limit our ability to conduct our business, including certain lending activity of our CFC subsidiary. There can be no assurance that we could procure replacement financing on commercially acceptable terms on a timely basis, or at all. We have pledged a significant portion of our assets as collateral under the Trading Credit Facility, and if we were unable to repay the amounts outstanding thereunder, the administrative agent under the Trading Credit Facility could proceed against the collateral granted to secure such indebtedness.

We are subject to fluctuations in interest rates based on the variable interest terms of the Trading Credit Facility, and we may not be able to pass along to our customers and borrowers some or any part of an increase in the interest that we are required to pay under the Trading Credit Facility.

Loans under our credit facility may bear interest based on SOFR, but experience with SOFR based loans is limited.

Revolving loans under the Trading Credit Facility are at our option either Based Rate Loans that bear interest at a base rate plus a prescribed margin, or SOFR Loans that bear interest at rates selected by us based on the Secured Overnight Financing Rate published by the Federal Reserve Bank of New York (SOFR) plus prescribed margins. The use of SOFR based rates is intended to replace rates based on the London interbank offered rate ("LIBOR"), and reflects the cessation of the publication of LIBOR rates previously announced by regulators in the United Kingdom and the discontinuation of the use of LIBOR in the financial markets. The use of SOFR based rates may result in interest rates and/or payments that are higher or lower than the rates and payments that we experienced under our prior Trading Credit Facility, where interest rates were based on LIBOR. Also, the use of SOFR based rates is relatively new, and there could be unanticipated difficulties or disruptions with the calculation and publication of SOFR based rates. In particular, if the agent under the Trading Credit Facility determines that SOFR Rates cannot be determined or the agent or the lenders determine that SOFR based rates do not adequately reflect the cost of funding the SOFR Loans, outstanding SOFR Loans will be converted into Base Rate Loans. This could result in increased borrowing costs for the Company.

We could suffer losses with our financing operations.

We engage in a variety of financing activities with our customers:

Receivables from our customers with whom we trade in precious metal products are effectively short-term, non-interest bearing extensions of credit that are, in certain cases, secured by the related products maintained in the Company’s possession or by a letter of credit issued on behalf of the customer. On average, these receivables are outstanding for periods of between 8 and 9 days.
The Company operates a financing business through CFC which makes secured loans at loan-to-value ratios—principal loan amount divided by the liquidation value, as conservatively estimated by management, of the collateral—of, in most cases, 50% to 85%. These loans are both variable and fixed interest rate loans, with some maturities on-demand and others from three to twelve months.
We make advances to our customers on unrefined metals secured by materials received from the customer. These advances are limited to a portion of the materials received.
The Company makes unsecured, short-term, non-interest bearing advances to wholesale metals dealers and government mints.
The Company periodically extends short-term credit through the issuance of notes receivable to approved customers at interest rates determined on a customer-by-customer basis.

Our ability to minimize losses on the credit that we extend to our customers depends on a variety of factors, including:

our loan underwriting and other credit policies and controls designed to assure repayment, which may prove inadequate to prevent losses;
our ability to sell collateral upon customer defaults for amounts sufficient to offset credit losses, which can be affected by a number of factors outside of our control, including (i) changes in economic conditions, including as a consequence of the COVID-19 pandemic, (ii) increases in market rates of interest and (iii) changes in the condition or value of the collateral; and
the reserves we establish for loan losses, which may prove insufficient.

Liquidity constraints may limit our ability to grow our business.

We will require adequate sources of liquidity to fund both our existing business and our strategy for expansion, evidenced most recently by our acquisition of JMB. Currently, our main sources of liquidity are the cash that we generate from operations, our borrowing availability under the Trading Credit Facility, and the proceeds from our securitization transaction through our subsidiary AM Capital

13


 

Funding LLC ("AMCF"). There can be no assurance that these sources will be adequate to support the growth that we are hoping to achieve or that additional sources of financing for this purpose, in the form of additional debt or equity financing, will be available to us, on satisfactory terms or at all. Also, the Trading Credit Facility contains, and any future debt financing is likely to contain, various financial and other restrictive covenants. The need to comply with these covenants may limit our ability to implement our growth initiatives.

We are dependent on our key management personnel and our trading experts.

Our strategic vision and performance are dependent on Greg Roberts, our Chief Executive Officer, other members of our senior management and certain other key employees. We have employment agreements with Mr. Roberts and Brian Aquilino, our Chief Operating Officer, which both expire on June 30, 2023, and with Thor Gjerdrum, our President, which expires on June 30, 2025. The continuing integration of JMB with our other businesses relies in part on the knowledge and experience of Michael Wittmeyer, the Chief Executive Officer of JMB. We have an employment agreement with Mr. Wittmeyer which terminates on June 30, 2024.

These and other employees have expertise in the trading markets, e-commerce operations and digital marketing; have industry-wide reputations; and perform critical functions for our business. We cannot offer assurance that we will be able to negotiate acceptable terms for the renewal of the employment agreements or otherwise retain our key employees. Also, there is significant competition for skilled precious metals traders and other industry professionals. The loss of our current key officers and employees, without the ability to replace them, would have a materially adverse effect on our business.

We rely extensively on computer systems to execute trades and process transactions, and we could suffer substantial damages if the operation of these systems were interrupted.

We rely on our computer and communications hardware and software systems to execute a large volume of trading transactions each year. With the acquisition of JMB, whose sales are conducted exclusively through the internet, our dependence on computer and communications technology has further increased. It is therefore critical that we maintain uninterrupted operation of these systems, and we have invested considerable resources to protect our systems from physical compromise and security breaches and to maintain backup and redundancy. Nevertheless, our systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, including breaches of our transaction processing or other systems, catastrophic events such as fires, tornadoes and hurricanes, and usage errors by our employees. If our systems are breached, damaged or cease to function properly, we may have to make a significant investment to fix or replace them, we may suffer interruptions in our ability to provide quotations or trading services in the interim, and we may face costly litigation.

Risks Related to World Events

Our business is influenced by political conditions and world events.

The precious metals business is especially subject to global political conditions and world events. Precious metals are viewed by some as a secure financial investment in times of political upheaval or unrest, particularly in developing economies, which may drive up pricing. The volatility of the commodity prices for precious metals is also likely to increase in politically uncertain times. Conversely, during periods of relative international calm precious metal volatility is likely to decrease, along with demand, and the prices of precious metals may retreat. Because our business is dependent on the volatility and pricing of precious metals, we are likely to be influenced by world events more than businesses in other economic sectors.

Currently, Russia is engaging in significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls, and could impose further sanctions and controls, against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations. It is not possible to predict the broader consequences of this conflict, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy, and its impact on us. We could benefit from the resulting uncertainty and instability, as it may encourage investors to seek perceived safety in the ownership of precious metals. On the other hand, we have a marketing support operation in Austria and have significant business in Germany and other parts of Europe that could be materially and adversely affected by prolonged or expanded military activity in that region. More generally, a depressing effect on the global economy as a consequence of the military action in Ukraine could similarly dampen our business activity and reduce the demand for our products and services.

The Company has experienced outsized growth in its revenues and operating profits since the onset of the COVID-19 pandemic, but there can be no assurance that this level of performance will continue, and its performance may drop as the pandemic and its related effects subside.

The recent growth of the business of the Company generally, and the business of its recently acquired JMB subsidiary in particular, may be attributed to the unprecedented uncertainties and volatility in the financial markets resulting from the COVID-19 pandemic, its effects on the economy and the related government responses. Other contemporary events and circumstances, including political polarization and global instability, may also have been contributing factors to the recent growth of the business of the Company. In this environment, consumers may have sought perceived financial safety in precious coins and metals.

14


 


There can be no assurance that the recent growth in the precious metals business will continue in future periods or will not decline as the pandemic and its effects on the economy, the business environment and the responsive actions of government subside, or as the current political environment becomes less charged. Even if the effects of the COVID-19 pandemic on the domestic and world markets, or the perceived political instability, continue for an extended period of time, consumer perceptions with respect to precious coins and metals could shift, these commodities may no longer be viewed as secure investments and the demand for the Company’s products could substantially decline. We cannot predict the performance of our business and operations if and when business conditions revert to more normalized levels. A decline in our future revenues and earnings would have adverse effects on our overall results of operations and could cause our stock price to decline. Moreover, because of the nature of the current business and financial environment, particularly in regards to the precious metal industry, it is not possible to create with any acceptable measure of precision customary financial projections and forecasts for our business over the next several years. This could adversely affect our ability to engage in financial and operational planning for the future.

Our business could also be adversely affected by the continuing COVID-19 pandemic.

The COVID-19 outbreak has caused significant disruption in the financial markets both globally and in the United States. While there have been positive effects of the market reaction to the outbreak on our business, the continuing pandemic could have adverse effects on our businesses in the future, including with respect to the following:

We maintain facilities for our clients’ and our own precious metal and numismatic inventories, where we receive and store these products and from which we make shipments for physical settlement in our trading activity. We have implemented procedures at these facilities to ensure social distancing and minimize the risk of infected personnel. Nonetheless, there can be no assurance that we will not experience an outbreak of infection at these facilities, which could necessitate their closure or the curtailment of their activity.
We engage in transactions with numerous financial counterparties. If these parties were to experience significant financial reversals as a result of the COVID-19 pandemic, these parties may be unable to comply with their financial obligations to us, may cease transacting business with us or could curtail or terminate the credit that they extend to us. While we deal with a significant number of counterparties, we nonetheless have concentration in our customer base. To the extent that the COVID-19 pandemic were to materially and adversely affect the financial condition of customers responsible for a material portion of our revenues, our business could be correspondingly impaired.
We require a regular supply of newly minted coins and other numismatics in the conduct of our coin and bar and retail businesses. Our AM&ST Associates, LLC ("AMST") subsidiary supplies a portion of our requirements for silver products. We are also dependent on the production of gold and silver mints around the world for the supply of the majority of our product requirements. Many mints, and refineries that supply gold and silver for the mints, reduced the capacity of their operations during the COVID-19 crisis, and most major mints continue to operate at reduced capacity due to COVID-19 protocols and related workforce shortages. As a result we have experienced periods when precious metals products were unavailable to us. Any uncertainty regarding the availability of coin and other products could make it difficult for us to commit to future delivery, could make it more difficult for us to forecast and plan for our coin and bar operations and could otherwise adversely impact this aspect of our business.
Mints and refineries, including our AMST subsidiary, rely on specialized, armored vehicles provided by third party commercial services to transport precious metals and numismatics. We also rely on these transportation services to transport our products to and from our customers and from the mints and our other suppliers. During the COVID-19 pandemic, mints, refineries, and we faced transportation challenges and increased transportation costs. Constraints on transportation capacity could impact product availability and higher transportation costs may in the future adversely affect our sales and profitability.

We have significant operations outside the United States.

We derive a significant portion of our revenues from business outside the United States, including from customers in developing countries. Business operations outside the U.S. are subject to political, economic and other risks inherent in operating in foreign countries. These include risks of general applicability, such as the need to comply with multiple regulatory regimes; trade protection measures and import or export licensing requirements; and fluctuations in equity, revenues and profits due to changes in foreign currency exchange rates. Currently, we do not conduct substantial business with customers in developing countries. However, if our business in these areas of the world were to increase, we would also face risks that are particular to developing countries, including the difficulty of enforcing agreements, collecting receivables, protecting inventory and other assets through foreign legal systems, limitations on the repatriation of earnings, currency devaluation and manipulation of exchange rates, and high levels of inflation.

We try to manage these risks by monitoring current and anticipated political, economic, legal and regulatory developments in the countries outside the United States in which we operate or have customers and adjusting operations as appropriate, but there can be no assurance that the measures we adopt will be successful in protecting the Company’s business interests.

15


 

The current inflationary environment could adversely affect our business.

The United States and other major world economies have recently been experiencing rates of inflation that are at the highest levels in several decades. The effects that inflationary pressure may have on our business are difficult to predict. It could create increased demand for our coin and bullion products, if our customers were to believe that currency devaluation, particularly a devaluation of the U.S. dollar, will be a likely result of inflation. On the other hand, a rise in interest rates resulting from governmental efforts to control inflation could result in a flight to government debt instruments and away from investments in precious metals. If that were to occur, our business could suffer.

Risks Related to our Wholesale Sales & Ancillary Services Segment

Our business is dependent on a concentrated customer base.

One of A-Mark's key assets is the customer base of its Wholesale Sales & Ancillary Services segment. This customer base provides deep distribution of product and makes A-Mark a desirable trading partner for precious metals product manufacturers, including sovereign mints seeking to distribute precious metals coinage or large refiners seeking to sell large volumes of physical precious metals. In any given quarter, our sales in this segment may be derived from a small number of significant customers. If our relationships with these customers deteriorated, or if we were to lose these customers, our business could be materially adversely affected.

The loss of a government purchaser/distributorship arrangement could materially adversely affect our business.

A-Mark’s business is heavily dependent on its purchaser/distributorship arrangements with various governmental mints. Our ability to offer numismatic coins and bars to our customers on a competitive basis is based on the ability to purchase products directly from a government source. The arrangements with the governmental mints may be discontinued by them at any time. The loss of an authorized purchaser/distributor relationship, including with the U.S. Mint, could have a material adverse effect on our business.

We operate in a highly competitive industry.

The business of buying and selling precious metals is global and highly competitive. The Company competes with precious metals firms and banks throughout North America, Europe and elsewhere in the world, some of whom have greater financial and other resources, and greater name recognition, than the Company. We believe that, as a full-service firm devoted exclusively to precious metals trading, we offer pricing, product availability, execution, financing alternatives and storage options that are attractive to our customers and allow us to compete effectively. We also believe that our purchaser/distributorship arrangements with various governmental mints give us a competitive advantage in our coin distribution business. However, given the global reach of the precious metals business, the absence of intellectual property protections and the availability of numerous, evolving platforms for trading in precious metals, we cannot assure you that A-Mark will be able to continue to compete successfully or that future developments in the industry will not create additional competitive challenges.

The Company is subject to risks relating to its AMST operations.

Our AMST subsidiary, which operates our SilverTowne, Mint depends on critical pieces of equipment which may be out of service occasionally for scheduled upgrades or maintenance or as a result of unanticipated failures or business interruptions. AMST’s facilities are subject to equipment failures and the risk of catastrophic loss due to unanticipated events such as fires, earthquakes, accidents or violent weather conditions. AMST has insurance to cover certain of the risks associated with equipment damage and resulting business interruption, but there are certain events that would not be covered by insurance, and there can be no assurance that insurance will continue to be available on acceptable terms.

AMST's ability to continue to expand the scope of its services and customer base depends in part on its ability to increase the size of its skilled labor force. The inability to employ or retain skilled technical personnel could adversely affect AMST’s operating results. In the past, the demand for skilled personnel has been high and the supply limited.

Interruptions in AMST's processing and production capabilities and shutdowns resulting from unanticipated events, or its inability to adequately staff its operations, could adversely affect our business.

16


 

We have in the past engaged, and continue to engage, in transactions with Stack’s Bowers, an affiliate of the Company, which could be perceived as not being made at arms-length.

Stack’s-Bowers Numismatics, LLC ("Stack's Bowers"), which is primarily engaged in the business of auctions of high-value and rare coins and in coin retailing, is a wholly-owned subsidiary of Spectrum Group International, Inc. ("SGI"), our former parent and a related party. We have engaged in the past, and continue to engage, in transactions with Stack’s Bowers. These transactions include secured lending transactions in which Stack’s Bowers is the borrower, and other transactions involving the purchase and sale of rare coins, including with JMB. SGI and the Company have a common chief executive officer, and the chief executive officer and the general counsel of the Company are board members of SGI. In addition, a majority of the board of directors of the Company has retained an ownership interest in SGI that in the aggregate represents a controlling interest in SGI. All transactions between the Company and Stack’s Bowers are approved by our Audit Committee, and we believe that all such transactions are on terms no less favorable to the Company than would be obtained from an unaffiliated third party. Nonetheless, these transactions could be perceived as being conflicted.

The materials held by A-Mark are subject to loss, damage, theft or restriction on access.

A-Mark has significant quantities of high-value precious metals at its Logistics facility, at third-party depositories and in transit. There is a risk that part or all of the gold and other precious metals held by A-Mark, whether on its own behalf or on behalf of its customers, could be lost, damaged or stolen. In addition, access to A-Mark’s precious metals could be restricted by natural events (such as an earthquake) or human actions (such as a terrorist attack). Although we maintain insurance on terms and conditions that we consider appropriate, we may not have adequate sources of recovery if our precious metals inventory is lost, damaged, stolen or destroyed, and recovery may be limited. Among other things, our insurance policies exclude coverage in the event of loss as a result of terrorist attacks or civil unrest.

Our Logistics depository is subject to authorization by our lenders.

Our lenders under our Trading Credit Facility have approved our Logistics facility as an authorized depository. If that approval were to be withdrawn for any reason, we would no longer be able to keep inventory at that location, which would substantially limit our ability to conduct business from that facility.

Risks Related to our Direct-to Consumer Segment

Our Direct-to-Consumer businesses could be subject to accusations of improper sales practices.

Through our JMB and Goldline subsidiaries, the Company sells precious metals and numismatics directly to the retail investor community. JMB markets its products over the internet. Goldline markets its precious metal products on television, radio, and over the internet, and through customer service outreach. Prior to its acquisition by the Company, Goldline had been accused of improper sales practices, and was the subject of a state enforcement action that was subsequently settled. Other retailers of precious metal products have similarly been the subject of accusations regarding their sales practices, including claims of misrepresentation, excessive product markups, pressured sales tactics and product switching. The Company believes that the sales practices of its Goldline subsidiary conform to applicable legal and ethical standards, and that there is no material basis for claims against Goldline in this regard. Nevertheless, given the nature of the retail precious metals business, the possibility that investors in precious metals may lose a substantial portion of their investment as a result of adverse market trends and the vulnerability of certain retail precious metal investors to economic loss, there can be no assurance that claims will not be made regarding business practices of Goldline or JMB or that, if made, such claims will not attract the attention of governmental and private sector consumer advocates. Were this to occur, the Company could suffer adverse publicity, be subject to governmental enforcements actions or be forced to modify the sales and marketing practices of its direct-to-consumer business.

Our Direct-to-Consumer businesses operates in a highly competitive environment.

JMB and Goldline face competition from other specialty online precious metal and coin sites, as well as from traditional precious metal retail brokers and coin stores. In addition, certain general online merchandisers such as eBay also offer collectible coins and bullion for sale, and other major online retailers, with financial and marketing resources, name recognition and a customer base that are far greater than those that are available to JMB and Goldline, may in the future enter this market. Competition is based upon the availability of coin and bullion product, price, delivery times, convenience and customer service. There can be no assurance that JMB and Goldline will be able to compete effectively with other retail sources and channels for precious coin and bullion, especially if the demand for these products were to contract from its current record high levels.

JMB’s search engine optimization strategies have provided it with an important competitive advantage, but this may not continue.

We believe that the internally developed search engine optimization (SEO) strategies of JMB provide its business with a competitive advantage in driving traffic to its sites over other e-commerce precious metal retailers and have been a significant factor in the growth of JMB. The challenges of efficient SEO programming are continually evolving, and other e-commerce retailers in the

17


 

precious metal space are constantly working to improve their own SEO capabilities. If JMB does not continue to maintain its competitive edge in SEO technology, it could lose customers and market share to its competitors.

JMB relies upon paid and unpaid internet search engines to rank its product offerings and drive traffic to its website, and its website traffic may suffer if its rankings decline or its relationship with these services deteriorates.

JMB relies on paid and unpaid internet search engines to attract consumer interest in its product offerings. Search engine companies change their natural search engine algorithms periodically, and these changes may adversely affect JMB’s product offerings in paid and/or unpaid searches. JMB may also at times be subject to ranking penalties if the operators of search engines believe it is not in compliance with their guidelines. If JMB’s search engine rankings decline, and JMB is unable to timely regain its prior rankings, it may have to use more expensive marketing channels to sustain and grow its revenues, resulting in reduced profitability.

If JMB and Goldline do not respond effectively to technological and market changes, they will cease to be competitive with other channels that consumers may have for the purchase of precious coins and bullion.

To remain competitive, JMB and Goldline must continue to enhance and improve the responsiveness, functionality and features of its online operations. The internet and the electronic commerce industry are characterized by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies, and the emergence of new industry standards and practices.

The evolving nature of the internet could render JMB’s existing technology and systems obsolete. Its continuing success will depend, in part, on its ability to:

develop, license or acquire leading technologies useful in its business;
develop new features and technology that address the increasingly sophisticated preferences of its customers; and
respond to technological advances and emerging industry and regulatory standards and practices in a cost-effective and timely manner.

With the growth of e-commerce, the pace of change in product offerings and consumer tastes in the shipping and logistics industries is faster now than in years past. This accelerated pace of change increases uncertainty and places a greater burden on management to anticipate and respond to such changes. The increased pace of change also means that the window in which a technologically advanced or sophisticated product or service can achieve and maintain partner and consumer interest is shrinking and, to the extent JMB and Goldline fail to timely anticipate or respond to changes in its industry, the effects of such missteps may be amplified.

Future advances in technology may not be beneficial to, or compatible with, JMB’s or Goldline’s businesses. Furthermore, JMB and Goldline may be unsuccessful in using new technologies effectively or adapting their technology and systems to user requirements or emerging industry standards on a timely basis. Their ability to remain technologically competitive may require substantial expenditures and lead time. If JMB or Goldline is unable to adapt in a timely manner and at reasonable cost to changing market conditions or user requirements, it will cease to be competitive with other channels for the purchase of precious coins and bullion.

If JMB fails to continuously improve its websites (on all relevant platforms, including mobile), it may not attract or retain customers.

JMB owns and operates four separately branded websites targeting specific segments within the precious metals market: JMBullion.com, ProvidentMetals.com, Silver.com, and Cybermetals.com. JMB also owns two websites, GoldPrice.org and SilverPrice.org, which publish data on precious metal and cryptocurrency pricing and generate leads for its other websites. JMB must continually update its website (on all relevant platforms, including mobile) to improve and enhance its content, accessibility, convenience and ease of use. Failure to do so may create a perception that the websites of JMB’s competitors are easier to use and navigate or that they are better able to service customer needs for precious metal coins and bullion. If such a perception were to gain currency, traffic to JMB’s website and its revenues would suffer.

Certain of JMB’s websites publish data concerning the precious metal and cryptocurrency markets obtained from third parties, which could be inaccurate.

JMB’s silverprice.org and goldprice.org publish data on precious metal and cryptocurrency pricing which is obtained from third parties. While we believe that the sources of the published data are reliable, the data is not independently verified by JMB or us. If the data that JMB receives and publishes were inaccurate, and were relied upon by consumers visiting these websites, JMB could be exposed to liability and may suffer damage to its reputation.

JMB expects to profit on precious metals acquired from its customers, but that might not be the case.

One of the services that JMB provides to its customers is its program of offering to repurchase precious coins and bullion owned by its customers. We believe that this program encourages the purchase of coins and bullion as an investment because it assures JMB’s customers that their investment in the products offered by JMB will be liquid and can be monetized if the customers have a need for cash. JMB offers to repurchase coins and bullion from its customers at prices designed to reflect current market valuations, but also

18


 

allows JMB to profit on the resale of the products. There can be no assurance, however, that JMB will in fact be able to resell product that it repurchases at a price that will justify the cost of repurchase. In a declining market for precious metal products, JMB could be burdened with substantial amounts of repurchased inventory that it is unable to resell at an economic price, or at all. If JMB were to suspend or discontinue its offer to repurchase coin and bullion from its customers because of adverse market conditions, it could antagonize its customers and impair the perception among its customers that precious coin and bullion is a safe and attractive investment.

The Company’s joint venture, Precious Metals Purchasing Partners, LLC, is subject to risks which may affect our ability to successfully profit from the joint venture.

The Company owns 50% of Precious Metals Purchasing Partners, LLC, ("PMPP"), a joint venture which commenced operations in the first quarter of fiscal year 2020. PMPP purchases products primarily from end-user retail customers, which are then sold to the Company, related parties of the Company or third parties.

The Company’s interest in PMPP is subject to the risks customarily associated with the conduct of joint ventures, including the risk of (i) failure to agree on strategic decisions requiring the approval of both parties, (ii) failure of the joint venture partner to meet its obligations, and (iii) disputes between the joint venturers or litigation regarding joint venture matters. Each of these risks could have a material adverse impact on the viability of PMPP, and its potential contributions to the Company’s future cash flows and earnings.

In addition, PMPP is subject to the risks that it will be unable to sell the product that it acquires at economic prices or at all, similar to the risks described above with respect to JMB’s repurchase program.

Risks Related to our Secured Lending Segment

CFC may in certain circumstances be required to repurchase loans that it has securitized.

CFC has entered into a securitization financing whereby it has transferred, and may continue from time to time to transfer, to its AMCF subsidiary loans secured by precious metal coins or bullion. AMCF has issued 4.98% Class A Notes due 2023 and 5.98% Class B Notes due 2023 which are secured by these loans and related assets. While the notes are non-recourse to the Company or CFC, CFC is required to provide certain warranties concerning the loans and the security interest in the metals collateral securing the loans. In the event the warranties made with respect to any loan are breached and the breach materially and adversely affects the interests of the noteholders, CFC is required to either cure the breach or repurchase the loan within specified a timeframe. If CFC were to default on its repurchase obligations, this could materially adversely affect the business of CFC, and could adversely affect the Company’s future ability to access the credit markets.

CFC and the Company have exposure to the performance of AMCF.

Regulation RR of the SEC requires the sponsor of an asset-backed securitization transaction, or certain of its affiliates, to retain an economic interest in the transaction. In compliance with this rule, CFC retained the equity interest in AMCF, and the Company currently holds $5.0 million of Class B Notes, which are subordinated to the Class A Notes. In addition, CFC and the Company may, from time to time, also contribute cash or sell precious metals to AMCF in exchange for subordinated, deferred payment obligations from AMCF. If the performance of AMCF were to suffer such that AMCF were unable to service its notes, CFC and the Company could lose part or all of their investments in AMCF.

Under the terms of the servicing arrangements for the precious metals loan securitization, CFC may be required to liquidate the collateral securing securitized loans, even if this would impair relationships with its customers.

CFC is the servicer for the loans transferred to AMCF in the securitization transaction. If, under certain circumstances, the equity levels of the obligors on particular loans falls below a specified level and those obligors fail to pay in additional equity, CFC is required to liquidate the metals collateral securing those loans within a specified time period. CFC does not have the flexibility to defer or refrain from the liquidation, even if CFC were to determine that it would be in its best interests to do so. This requirement could impair valuable relationships that the Company may otherwise have with its customers whose loans have been securitized.

Risks Relating to Commodities

A-Mark’s business is heavily influenced by volatility in commodities prices.

A primary driver of A-Mark’s profitability is volatility in commodities prices, which leads to wider bid and ask spreads. Among the factors that can impact the price of precious metals are supply and demand of precious metals; political, economic, and global financial events; movement of the U.S. dollar versus other currencies; and the activity of large speculators such as hedge funds. If commodity prices were to stagnate, there would likely be a reduction in trading activity, resulting in less demand for the services A-Mark provides, and spreads would likely decrease, which could materially adversely affect our profitability.

The period to period changes in volatility may cause our revenues to fluctuate, as a consequence of which our results for any one period may not be indicative of the results to be expected for any future period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.

19


 

Our business is exposed to commodity price risks, and our hedging activity to protect our inventory is subject to risks of default by our counterparties.

A-Mark’s precious metals inventory is subject to market value changes created by changes in the underlying commodity price, as well as supply and demand of the individual products the Company trades. In addition, open sale and purchase commitments are subject to changes in value between the date the purchase or sale is fixed (the trade date) and the date metal is delivered or received (the settlement date). A-Mark seeks to minimize the effect of price changes of the underlying commodity through the use of financial derivative instruments, such as forward and futures contracts. A-Mark’s policy is to remain substantially hedged as to its inventory position and its individual sale and purchase commitments. A-Mark’s management monitors its hedged exposure daily. However, there can be no assurance that these hedging activities will be adequate to protect the Company against commodity price risks associated with A-Mark’s business activities.

Furthermore, even if we are fully hedged as to any given position, there is the risk of default by our counterparties to the hedge. A default by a counterparty on a substantial hedge could have a material adverse effect on our business.

Increased commodity pricing could limit the inventory that we are able to carry.

We maintain a large and varied inventory of precious metal products, including bullion and coins, in order to support our trading activities and provide our customers with superior service. The amount of inventory that we are able to carry is constrained by the borrowing limitations and working capital covenants under the Trading Credit Facility. If commodity prices were to rise substantially, and we were unable to modify the terms of the Trading Credit Facility to compensate for the increase, the quantity of product that we could finance, and hence maintain in our inventory, would fall. This would likely have a material adverse effect on our operations.

We rely on the efficient functioning of commodity exchanges around the world, and disruptions on these exchanges could adversely affect our business.

The Company buys and sells precious metals contracts on commodity exchanges around the world, both in support of its customer operations and to hedge its inventory and transactional exposure against fluctuations in commodity prices. The Company’s ability to engage in these activities would be compromised if the exchanges on which the Company trades or any of their clearinghouses were to discontinue operations or to experience disruptions in trading, due to computer problems, unsettled markets, sanctions against commodity exporting countries or other factors. For example, if there were to be disruptions in the supply chain for gold, silver, platinum or palladium, similar to what the market for nickel is currently experiencing as a consequence of the war in Ukraine and the Russian sanctions, our ability to buy and sell these metals on the commodity exchanges would be materially and adversely affected.

The Company may also experience disruption and risk of loss if futures commission merchants or commodity brokers with whom the Company deals were to become insolvent or bankrupt.

 

We may be exposed to other risks in the supply chain for precious metals.

As a result of various macro-economic factors, businesses in a variety of industries have experienced difficulty in obtaining the source materials required for their operations. We require coin and other bullion products, particularly products manufactured by government mints, for resale to our customers, and silver for the productions of bullion bars and rounds by our SilverTowne mint. We have multiple sources for obtaining the bullion products which we resell to our customers, and our relationships with major refiners have to date provided us with an adequate source of material for our minting operations. We also maintain a supply of metal in case we experience a shortage of raw materials for our SilverTowne mint. However, while we currently do not anticipate that our business will suffer as a consequence of the current problems in the national and global supply chains, we cannot assure you that this will continue to be the case.

Our business is subject to the risk of fraud and counterfeiting.

The precious metals (particularly bullion) business is exposed to the risk of loss as a result of “materials fraud” in its various forms. We seek to minimize our exposure to this type of fraud through a number of means, including third-party authentication and verification, reliance on our internal experts and the establishment of procedures designed to detect fraud. However, there can be no assurance that we will be successful in preventing or identifying this type of fraud, or in obtaining redress in the event such fraud is detected.

Risk Related to our Regulatory Environment

We are subject to laws and regulations.

There are various federal, state, local and foreign laws, ordinances and regulations that affect our trading business. For example, because of the nature and value of the products in which deal, we are required to comply with the Foreign Corrupt Practices Act and a variety of anti-money laundering and know-your-customer rules in response to the USA Patriot Act.

20


 

The SEC has promulgated rules mandated by the Dodd-Frank Act regarding disclosure, on an annual basis, of the use of tin, tantalum, tungsten and gold, known as conflict minerals, in products manufactured by public companies. These rules require due diligence to determine whether such minerals originated from the Democratic Republic of Congo ("DRC") or an adjoining country and whether such minerals helped finance the armed conflict in the DRC.

The Company has concluded that it is not currently subject to the conflict minerals rules because it is not a manufacturer of conflict minerals under the definitions set forth in the rules. Depending on developments in the Company’s business, it could become subject to the rules at some point in the future. In that event, there will be costs associated with complying with these disclosure requirements, including costs to determine the origin of gold used in our products. In addition, the implementation of these rules could adversely affect the sourcing, supply and pricing of gold used in our products. Also, we may face disqualification as a supplier for customers and reputational challenges if the due diligence procedures we implement do not enable us to verify the origins for the gold used in our products or to determine that the gold is conflict free.

CFC operates under a California Finance Lenders License issued by the California Department of Financial Protection and Innovation. CFC is required to submit a finance lender law annual report to the state which summarizes certain loan portfolio and financial information regarding CFC. The Department of Financial Protection and Innovation may audit the books and records of CFC to determine whether CFC is in compliance with the terms of its lending license.

We have been subject to an ongoing investigation by the Commodity Futures Trading Commission relating to certain activities of Goldline. While we do not expect the outcome of this investigation to materially adversely affect our business or operations, this agency, and possibly other federal and state agencies, may seek to assert oversight over aspects of our operations which could adversely affect us.

There can be no assurance that the regulation of our trading and lending businesses will not increase or that compliance with the applicable regulations will not become more costly or require us to modify our business practices.

For other risks related to government regulation, see “Risk Factors of General Applicability — We are subject to other laws and regulations,” below.

Compliance with new data protection/privacy statutes could increase our costs and expose the Company to possible sanctions for violation.

By reason of our Direct-to-Consumer business in particular, we collect personal data.

In 2016, the European Union ("EU") adopted a comprehensive overhaul of its data protection regime from the current national legislative approach to a single European Economic Area Privacy Regulation, the General Data Protection Regulation (“GDPR”), which went into effect in May 2018. The EU data protection regime expands the scope of the EU data protection law to all foreign companies processing personal data of EU residents, imposes a strict data protection compliance regime with severe penalties of up to the greater of 4% of worldwide turnover or €20 million, and includes new rights such as the “portability” of personal data. Although the GDPR applies across the EU without a need for local implementing legislation, EU member states have the ability to interpret the GDPR opening clauses, which permit region-specific data protection legislation and have the potential to create inconsistencies on a country-by-country basis.

Our Direct-to-Consumer business currently has limited international operations which would subject it to the GDPR. Our Wholesale Sales and Ancillary Services segment maintains an office in Vienna, Austria that provides marketing support services for its international (including EU) customers. We have evaluated the new regulation and its requirements, and believe we are currently in compliance with the GDPR in all material respects. Going forward, however, the expansion of our international operations could require us to change our business practices and may increase the costs and complexity of compliance. Also, a violation by the Company of this regulation could expose us to penalties and sanctions under the regulation.

In 2018, California passed the California Consumer Privacy Act of 2018 (“CCPA”), effective on January 1, 2020. This law provides California consumers with a greater level of transparency and broader rights and choices with respect to their personal information than those contained in any existing state and federal laws in the U.S. The “personal information” regulated by CCPA is broadly defined to include identification or association with a California consumer or household, including demographics, usage, transactions and inquiries, preferences, inferences drawn to create a profile about a consumer, and education information. Compliance with CCPA requires the implementation of a series of operational measures such as preparing data maps, inventory, or other records of all personal information pertaining to California residents, households and devices, as well as information sources, usage, storage, and sharing, maintaining and updating detailed disclosures in privacy policies, establishing mechanisms (including, at a minimum, a toll-free telephone number and an online channel) to respond to consumers’ data access, deletion, portability, and opt-out requests, providing a clear and conspicuous “Do Not Sell My Personal Information” link on the home page of the business’ website, etc. CCPA prohibits businesses from discriminating against consumers who have opted out of the sale of their personal information, subject to a narrow exception. Violations of CCPA will result in civil penalties up to $7,500 per violation. CCPA further allows consumers to file lawsuits against a business if a data breach has occurred and the California Attorney General does not prosecute the business.

21


 

Colorado, Virginia, Utah, and Connecticut recently passed comprehensive privacy laws that will take effect in 2023. California also passed an update to the CCPA, called the California Privacy Rights Act, which takes effect January 1, 2023. These five new privacy laws have provisions and requirements similar to the CCPA.

In addition, effective on October 1, 2019, existing Nevada law was amended by a bill that requires operators of websites and online services to post a notice on their websites regarding their privacy practices. The bill requires operators of internet websites or online services to establish a designated request address through which a consumer may submit a verified request directing such operators not to make any sale of covered information collected about the consumer. The “covered information” regulated by the bill is defined to include an enumerated list of items of personally identifiable information (including names, addresses, email addresses, phone numbers, social security numbers and identifiers that allow a specific person to be contacted).

The changes introduced by these statutes, and other similar regulations enacted by other jurisdictions, will subject the Company to additional costs and complexity of compliance, by requiring, among other things, changes to the Company’s security systems, policies, procedures and practices. In addition, a violation by the Company of the new regulations could expose us to penalties and sanctions.

One or more states or municipalities could assert that the Company is liable for sales and use, commerce, or similar type of taxes, which could adversely affect our business.

We ship product to retail customers throughout the United States. In South Dakota v. Wayfair, Inc. et al ("Wayfair"), the U.S. Supreme Court ruled that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state. The effect of Wayfair was to uphold economic nexus principles in determining sales and use tax nexus. As a result of the decision, most states have adopted laws that require an out-of-state retailer to register and collect sales and use or other non-income type taxes upon meeting certain economic nexus standards regardless of whether the company has physical presence in the state. Although the Company believes it is complying with these requirements, our interpretation and application of the newly enacted legislation may differ from the states, which could result in the states' attempt to impose additional tax liabilities, including potential penalties and interest. Furthermore, the requirements by state or local governments on out-of-state sellers to collect sales and use taxes could deter futures sales, which could have an adverse impact on our business.

For other risks related to taxation, see “Risk Factors of General Applicability — Changes in U.S. tax law could adversely affect our business— Changes in U.S. tax law could adversely affect our business,” below.

We use lead providers and marketing affiliates to assist us in obtaining new customers and, and if lead providers or marketing affiliates do not comply with an increasing number of applicable laws and regulations, or if our ability to use such lead providers or marketing affiliates is otherwise impaired, it could adversely affect our business.

We are dependent on third parties, referred to as lead providers (or lead generators) and marketing affiliates, as a source of new customers for our Direct-to-Consumer segment and new borrowers for our Secured Lending segment. Our marketing affiliates place our advertisements on their websites that direct potential customers to our websites. Generally, lead providers operate, and also work with their own marketing affiliates who operate, separate websites to attract prospective customers and then sell those “leads” to online traders and lenders. As a result, the success of our Direct-to-Consumer and Secured Lending businesses depends substantially on the willingness and ability of lead providers or marketing affiliates to provide us customer leads at acceptable prices.

If regulatory oversight of lead providers or marketing affiliates is increased, through the implementation of new laws or regulations or the interpretation of existing laws or regulations, our ability to use lead providers or marketing affiliates could be restricted or eliminated. For example, the Consumer Financial Protection Bureau (“CFPB”) has indicated its intention to examine compliance with federal laws and regulations by lead providers and to scrutinize the flow of non-public, private borrower information between lead providers and lead buyers, such as us. Over the past few years, several states have taken actions that have caused us to discontinue the use of lead providers in those states. While these discontinuations did not have a material adverse effect on us, other states may propose or enact similar restrictions on lead providers and potentially on marketing affiliates in the future, and if other states adopt similar restrictions, our ability to use lead providers or marketing affiliates in those states would also be interrupted.

The failure by lead providers or marketing affiliates to comply with applicable laws or regulations, or any changes in laws or regulations applicable to lead providers or marketing affiliates or changes in the interpretation or implementation of such laws or regulations, could have an adverse effect on our business and could increase negative perceptions of our business and industry. Additionally, the use of lead providers and marketing affiliates could subject us to additional regulatory cost and expense. If our ability to use lead providers or marketing affiliates were to be impaired, our business could be materially adversely affected.

Judicial decisions, CFPB rulemaking or amendments to the Federal Arbitration Act could render the arbitration agreements we use illegal or unenforceable.

We include arbitration provisions in our loan and financing agreements. These provisions are designed to allow us to resolve any customer disputes through individual arbitration rather than in court and explicitly provide that all arbitrations will be conducted on an individual and not on a class basis. Thus, our arbitration agreements, if enforced, have the effect of shielding us from class action

22


 

liability. Our arbitration agreements do not generally have any impact on regulatory enforcement proceedings. We take the position that the arbitration provisions in loan and financing agreements, including class action waivers, are valid and enforceable; however, the enforceability of arbitration provisions is often challenged in court. If those challenges are successful, our arbitration and class action waiver provisions could be unenforceable, which could subject us to additional litigation, including additional class action litigation.

In addition, the U.S. Congress has considered legislation that would generally limit or prohibit mandatory arbitration agreements in consumer contracts and has enacted legislation with such a prohibition with respect to certain mortgage loan agreements and also certain consumer loan agreements to members of the military on active duty and their dependents. Further, the Dodd-Frank Act directed the CFPB to study consumer arbitration and authorized the CFPB to adopt rules limiting or prohibiting consumer arbitration, consistent with the results of its study. In July 2017, the CFPB issued a new rule on arbitration, which would have prohibited class action waivers in certain consumer financial services contracts. However, in November 2017, a joint resolution passed by Congress was signed disapproving the rule under the Congressional Review Act. Because the rule was disapproved, it cannot be reissued in substantially the same form, and the CFPB cannot issue a substantially similar rule unless the new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.

Any judicial decisions, legislation or other rules or regulations that impair our ability to enter into and enforce consumer arbitration agreements and class action waivers could increase our exposure to class action litigation as well as litigation in plaintiff-friendly jurisdictions, which would be costly and could have a material adverse effect on our business.

Our advertising and marketing materials and disclosures related to our Direct-to-Consumer and Secured Lending segments have been and continue to be subject to regulatory scrutiny.

In the jurisdictions where our Direct-to-Consumer business operates, our advertising and marketing activities and disclosures are subject to regulation under various industry standards, borrower protection laws, and other applicable laws and regulations. Consistent with the lending industry as a whole, our advertising and marketing materials have come under increased scrutiny.

There can be no guarantee that we will be able to continue advertising and marketing our business units in a manner we consider effective. Any inability to do so could have a material adverse effect on our business.

Risks Relating to Our Common Stock

We have suspended regular dividends in the past and may not continue to pay any dividends in the future.

The Company had suspended its regular dividend policy in the third quarter of fiscal 2019 but has recently announced an intention to resume payment of regular cash dividends of $0.20 per quarter. The initial quarterly cash dividend under the policy will be paid on October 24, 2022 to stockholders of record as of October 10, 2022. The declaration of regular cash dividends in the future is subject to the determination each quarter by the board of directors, based on a number of factors, including the Company’s financial performance, available cash resources, cash requirements and alternative uses of cash and applicable bank covenants.

Notwithstanding the recently announced intention to resume payment of regular quarterly cash dividends, there can be be no assurance that the Company will pay dividends in the future on a regular basis or otherwise. If the board of directors were to determine not to pay dividends in the future, stockholders would not receive any further return on an investment in our capital stock in the form of dividends and may obtain an economic benefit from the common stock only after an increase in its trading price and only by selling the common stock.

In August 2021, the Company paid a non-recurring special cash dividend to our stockholders, as a consequence in part of the Company's favorable performance during the preceding periods. The Company has also announced that it will pay a similar non-recurring special cash dividend on September 26, 2022 to holders of record on September 12, 2022. There is no assurance that any such non-recurring special dividend will be paid in the future, and if made, the timing or amount of any such dividend.

Your percentage ownership in the Company could be diluted in the future.

Your percentage ownership in A-Mark potentially could be diluted in the future because of additional common stock-based equity awards that we expect will be granted to our directors, officers and employees, including through our current equity incentive plan. In addition, we may issue equity in order to raise capital or in connection with future acquisitions and strategic investments, which could dilute your percentage ownership. For example, in the acquisition of JMB and our increased investments in Pinehurst Coin Exchange, Inc. and Silver Gold Bull, Inc., we issued stock to the selling shareholders in partial consideration for their interests.

Provisions in our Certificate of Incorporation and Bylaws and of Delaware law may prevent or delay an acquisition of the Company, which could decrease the trading price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law contain certain anti-takeover provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company without negotiating with our board of directors. Such provisions could limit the price that certain investors might be willing to pay in the future for the Company’s securities. Certain of such provisions allow the

23


 

Company to issue preferred stock with rights senior to those of the common stock, impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions and set forth rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings.

We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. However, these provisions apply even if an acquisition offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of our Company and our stockholders. Accordingly, in the event that our board determines that a potential business combination transaction is not in the best interests of our Company and our stockholders, but certain stockholders believe that such a transaction would be beneficial to the Company and its stockholders, such stockholders may elect to sell their shares in the Company and the trading price of our common stock could decrease.

Our board and management beneficially own a sizeable percentage of our common stock and therefore have the ability to exert substantial influence as stockholders.

Members of our board and management beneficially own approximately 25% of our outstanding common stock. Acting together in their capacity as stockholders, the board members and management could exert substantial influence over matters on which a stockholder vote is required, such as the approval of business combination transactions. Also because of the size of their beneficial ownership, the board members and management may be in a position effectively to determine the outcome of the election of directors and the vote on stockholder proposals. The concentration of beneficial ownership in the hands of our board and management may therefore limit the ability of our public stockholders to influence the affairs of the Company.

Risk Factors of General Applicability

If our customer data were breached, we could suffer damages and loss of reputation.

We maintain significant amounts of customer data on our systems, and certain third party providers have access to confidential data concerning the Company. A breach of customer data maintained by the Company or third party providers could damage our reputation and result in costs, fines and lawsuits. Our procedures to protect against unauthorized access to secured data may be inadequate to safeguard against all data security breaches.

The Company’s failure or inability to protect its intellectual property could harm its competitive position.

The Company relies on a combination of patent, trade secret, copyright and trademark laws and contractual restrictions, such as confidentiality agreements and licenses, to protect its business, services, know-how and information. The Company’s patent, trademarks or service marks may be challenged or found to be unenforceable, and contractual arrangements to protect our intellectual property may be insufficient to prevent its misappropriation. If that were the case, the Company’s competitive position would suffer.

Third parties may assert violations of their intellectual property rights against the Company.

Third parties may currently have, or may be issued, patents upon which the technologies used by the Company infringe. The Company could incur significant costs to defend infringements claims, regardless of their validity, or could be required to develop non-infringing technology at considerable expense or be compelled to enter into expensive royalty or license agreements. For example, JMB was compelled to expend significant resources as a consequence of litigation in which it was accused of infringement prior to its acquisition by the Company.

We are subject to other laws and regulations.

In addition to matters discussed above, we are subject to various laws, and regulations, both domestic and foreign, as well as responsible business, social and environmental practices, which may change from time to time. Failure to comply with applicable laws and regulations or implement responsible business practices could subject us to damage to our reputation, lawsuits, criminal exposure, or increased cost of regulatory compliance.

Changes in U.S. tax law could adversely affect our business.

Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. It cannot be predicted whether, when, in what form, or with what effective dates, new tax laws or regulations may be enacted under existing or new tax laws. This could result in an increase in our tax liability or require changes in our business in order to mitigate any adverse effects of changes in tax laws.

Third party expectations relating to Environment, Social and Governance (“ESG”) factors may impose additional costs and expose us to new risks.

In recent years, there has been an increasing focus by stakeholders of public companies—including investors, employees, customers, suppliers, governmental and non-governmental organizations—on ESG matters. A failure, whether real or perceived, to

24


 

address ESG could adversely affect our business, including by heightening other risks that we face, such as those related to consumer behavior and consumer perceptions of us. We may also face pressure from stakeholders to provide disclosure and establish commitments, targets or goals, and take actions to meet them, regarding ESG. If we fail to satisfy the expectations of investors and other stakeholders or our initiatives are not executed as planned, our reputation, results of our operations and ability to grow our business may be negatively impacted. Additionally, new legislative or regulatory initiatives related to ESG could adversely affect our business.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of June 30, 2022, the Company owned or leased properties in El Segundo, California; Los Angeles, California; Dallas, Texas; Irving, Texas; Las Vegas, Nevada; Carson City, Nevada; Winchester, Indiana; and Vienna, Austria as described below:

Location

 

General Use of Facility

 

Square
Footage

 

 

Ownership

 

Lease-term Expiration

Wholesale Sales and Ancillary Services Segment

 

 

 

 

 

 

 

El Segundo, California (1)

 

Corporate headquarters, trading desk, secured lending, marketing, and back-office operations

 

 

9,000

 

 

Leased

 

March-2026

Las Vegas, Nevada

 

Storage and fulfillment logistics operations

 

 

17,600

 

 

Leased

 

April-2025

Winchester, Indiana

 

Minting operations

 

 

11,400

 

 

Owned

 

not applicable

Winchester, Indiana

 

Fabrication facility

 

 

17,000

 

 

Leased

 

May-2023

Carson City, Nevada

 

Die-cutting and engraving facility

 

 

2,000

 

 

Leased

 

June-2025

Vienna, Austria

 

International marketing support operations

 

248

 

 

Leased

 

every three months

 

 

 

 

 

 

 

 

 

 

Direct-to-Consumer Segment

 

 

 

 

 

 

 

 

 

Los Angeles, California

 

Corporate office and support center

 

 

13,500

 

 

Leased

 

August-2027

Dallas, Texas

 

Corporate office and support center

 

 

3,093

 

 

Leased

 

December-2023

Dallas, Texas

 

Corporate office and support center

 

 

10,586

 

 

Leased

 

November-2028

Irving, Texas

 

Distribution hub

 

 

24,640

 

 

Leased

 

April-2031

 

 

 

 

 

 

 

 

 

 

(1) The Secured Lending segment shares office space at this facility.

 

 

We are from time to time involved in legal proceedings, claims, or investigations that are incidental to the conduct of our business.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claim, we do not expect that these legal proceedings or claims will have any material adverse impact on our future consolidated financial position, results of operations, or cash flows.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II — OTHER INFORMATION

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

SGI effected the spinoff of A-Mark on March 14, 2014. On March 17, 2014, A-Mark’s shares of common stock commenced trading on the NASDAQ Global Select Market under the symbol "AMRK."

As of August 23, 2022, there were 113 registered stockholders of record of our common stock.

The following table sets forth the range of high and low closing prices for our common stock for each full quarterly period during fiscal years 2022 and 2021, as reported by the NASDAQ Global Select Market, as adjusted for the effect of the two-for-one stock split in the form of a dividend effective June 6, 2022. These quotations below reflect inter-dealer closing prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

25


 

 

 

Fiscal 2022

 

 

Fiscal 2021

 

Quarter

 

High

 

 

Low

 

 

High

 

 

Low

 

First

 

$

30.55

 

 

$

21.95

 

 

$

17.26

 

 

$

9.50

 

Second

 

$

39.50

 

 

$

29.00

 

 

$

18.70

 

 

$

12.54

 

Third

 

$

41.55

 

 

$

28.15

 

 

$

19.87

 

 

$

13.34

 

Fourth

 

$

44.17

 

 

$

30.37

 

 

$

28.18

 

 

$

17.56

 

Issuer Purchases of Equity Securities

In April 2018, the Company's board of directors approved a share repurchase program which authorized the Company to purchase up to 1,000,000 shares (as adjusted for the two-for-one split of A-Mark’s common stock in the form of a stock dividend in fiscal 2022) of its common stock from time to time, either in the open market or in block purchase transactions. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors. As of August 23, 2022, there have been no repurchases of equity securities under the above-referenced stock repurchase program.

Dividend Policy

The Company suspended its regular dividend policy in the third quarter of fiscal 2019, but has recently announced an intention to resume payment of regular cash dividends of $0.20 per quarter. The initial quarterly cash dividend under the policy will be paid on October 24, 2022 to stockholders of record as of October 10, 2022. The declaration of regular cash dividends in the future is subject to the determination each quarter by the board of directors, based on a number of factors, including the Company’s financial performance, available cash resources, cash requirements and alternative uses of cash and applicable bank covenants.

In fiscal 2022, the Company issued two dividends. On April 28, 2022, the Company’s board of directors declared a two-for-one split of A-Mark’s common stock in the form of a stock dividend. Each stockholder of record at the close of business on May 23, 2022 received a dividend of one additional share of common stock for every share held on the record date that was distributed after the close of trading on June 6, 2022. This was a non cash transaction. On August 30, 2021, the Company's board of directors declared a non-recurring special dividend of $1.00 per common share (as adjusted for the two-for-one split of A-Mark’s common stock in the form of a stock dividend) to stockholders of record at the close of business on September 20, 2021. The dividend was paid on September 24, 2021 and totaled $22.6 million. (See Note 17 of the Notes to Consolidated Financial Statements.)

The Company has also recently announced that it will pay a non-recurring special cash dividend of $1.00 per common share on September 26, 2022 to holders of record on September 12, 2022. (See Note 20 to the consolidated financial statements.)

Equity Compensation Plan Information

The following table provides information as of June 30, 2022, with respect to the shares of our common stock that may be issued under existing equity compensation plans.

 

Plan category

 

(a)
Number of securities
to be issued upon
exercise of
outstanding options,
warrants, and restricted stock units

 

 

(b)
Weighted average
exercise price of
outstanding options,
warrants, and restricted stock units

 

 

 

(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

 

 

1,734,747

 

 

$

6.74

 

 (1)

 

 

286,847

 

 

Equity compensation plans not approved by security holders

 

 

120,000

 

 

$

18.87

 

 

 

 

300,000

 

(2)

 

 

 

1,854,747

 

 

$

7.52

 

 (1)

 

 

586,847

 

 (3)

 

(1)
The weighted average exercise prices are calculated including the restricted stock units (“RSUs”) as rights to acquire shares with an exercise price assumed to be zero. The weighted average exercise price of stock options approved by stockholders, but excluding RSUs was $7.04 and for all outstanding stock options excluding RSUs was $7.84.
(2)
Represents shares that are available for future issuance to only new hires under A-Mark's amended and restated 2014 Stock Award and Incentive Plan ("2014 Plan").
(3)
Represents shares that are available for future issuance under the 2014 Plan. All of the 2014 Plan shares that are available for future issuance include the following award types: stock options, stock appreciation rights, restricted stock units, restricted stock, and other "full-value" awards.

26


 

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report on Form 10-K ("Form 10-K") contains statements that are considered forward-looking statements. Forward-looking statements give the Company's current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this Annual Report, including statements regarding the Company's future financial position, business strategy, budgets, projected costs and plans, and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on the Company's current plans, and the Company's actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Annual Report may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Form 10-K.

In addition to the risks and uncertainties that may ordinarily influence our business, the Company remains exposed to the effects of the COVID-19 pandemic. The pandemic has caused significant disruption in the financial markets both globally and in the United States. The resulting macroeconomic events have contributed to an increase in the business conducted by the Company, but also pose certain risks and uncertainties for the Company. The Company does not know how long the COVID-19 pandemic will continue, the extent to which the effects that the Company has experienced from the pandemic thus far will persist, or whether other effects on the Company and its businesses will materialize in the short or long term.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes contained elsewhere in this Form 10-K. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Annual Report, particularly in “Risk Factors.”

INTRODUCTION

Management's discussion and analysis of financial condition and results of operations is provided as a supplement to the accompanying consolidated financial statements and related notes to aid in the understanding of our results of operations and financial condition. Our discussion is organized as follows:

Executive overview. This section provides a general description of our business, as well as significant transactions and events that we believe are important in understanding the results of operations.
Results of operations. This section provides an analysis of our results of operations presented in the accompanying consolidated statements of income by comparing the results for the respective periods presented. Included in our analysis is a discussion of seven performance metrics:
o
(i) ounces of gold and silver sold,
o
(ii) Wholesale Sales ticket volume,
o
(iii) Direct-to-Consumer ticket volume:
(a) Direct-to-Consumer ticket volume from new customer,
(b) Direct-to-Consumer ticket volume from pre-existing customers,
(c) Direct-to-Consumer total ticket volume,

27


 

o
(iv) Direct-to-Consumer average order value,
o
(v) number of Direct-to-Consumer customers,
o
(vi) inventory turnover ratio, and
o
(vii) number of secured loans at period-end.
Segment results of operations. This section provides an analysis of our results of operations presented for our three segments:
o
Wholesale Sales & Ancillary Services
o
Direct-to-Consumer, and
o
Secured Lending

for the comparable periods.

Non-GAAP Measures. This section provides an analysis of our non-GAAP measures with a reconciliation to the most directly comparable U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) measure reported on the consolidated financial statements. The Company uses the following two non-GAAP measures:
o
“adjusted net income before provision for income taxes”, and
o
“'earnings before interest, taxes, depreciation, and amortization", or "EBITDA”.
Liquidity and financial condition. This section provides an analysis of our cash flows, as well as a discussion of our outstanding debt as of June 30, 2022, sources of liquidity and the amount of financial capacity available to fund our future commitments and other financing arrangements.
Critical accounting policies. This section discusses critical accounting policies that are considered both important to our financial condition and results of operations and require management to make significant judgment and estimates. All of our significant accounting policies, including the critical accounting policies, are also summarized in Note 2 to the Company’s consolidated financial statements.
Recent accounting pronouncements. This section discusses new accounting pronouncements, dates of implementation and their expected impact on our accompanying consolidated financial statements.

EXECUTIVE OVERVIEW

Our Business

We conduct our operations in three reportable segments: (i) Wholesale Sales & Ancillary Services, (ii) Direct-to-Consumer and (iii) Secured Lending.

Wholesale Sales & Ancillary Services Segment

The Company operates its Wholesale Sales & Ancillary Services segment directly and through its wholly-owned subsidiaries, A-Mark Trading AG (“AMTAG”), Transcontinental Depository Services, LLC ("TDS" or “Storage”), A-M Global Logistics, LLC (“AMGL” or "Logistics"), and AM&ST Associates, LLC ("AMST" or the “SilverTowne Mint").

The Wholesale Sales & Ancillary Services segment operates as a full-service precious metals company. We offer gold, silver, platinum, and palladium in the form of bars, plates, powder, wafers, grain, ingots, and coins. Our Industrial unit services manufacturers and fabricators of products utilizing or incorporating precious metals. Our Coin and Bar unit deals in over 1,800 coin and bar products in a variety of weights, shapes, and sizes for distribution to dealers and other qualified purchasers. We have a marketing support office in Vienna, Austria, and a trading center in El Segundo, California. The trading center, for buying and selling precious metals, is available to receive orders 24 hours every day, even when many major world commodity markets are closed. In addition to Wholesale Sales activity, A-Mark offers its customers a variety of ancillary services, including financing, storage, consignment, logistics, and various customized financial programs. As a U.S. Mint-authorized purchaser of gold, silver, platinum, and palladium coins, A-Mark purchases product directly from the U.S. Mint and other sovereign mints for sale to its customers.

Through its wholly-owned subsidiary AMTAG, the Company promotes A-Mark's products and services to the international market. Through our wholly-owned subsidiary TDS, we offer a variety of managed storage options for precious metals products to financial institutions, dealers, investors, and collectors around the world.

28


 

The Company's wholly-owned subsidiary AMGL is based in Las Vegas, Nevada, and provides our customers an array of complementary services, including receiving, handling, inventorying, processing, packing, and shipping of precious metals and custom coins on a secure basis.

Through its wholly-owned subsidiary AMST, the Company designs and produces minted silver products. Our SilverTowne Mint operations allow us to provide greater product selection to our customers and greater pricing stability within the supply chain, as well as to gain increased access to silver during volatile market environments, which have historically created higher demand for precious metals products.

Direct-to-Consumer

The Company operates its Direct-to-Consumer segment through its wholly-owned subsidiaries JM Bullion, Inc. (“JMB”) and Goldline, Inc. (“Goldline”). JMB has five wholly-owned subsidiaries: Gold Price Group, Inc. (“GPG”), Silver.com, Inc. (“Silver.com”), Goldline Metal Buying Corp. (“GMBC”), Provident Metals Corp. (“PMC”), and Cybermetals Corp. ("CyberMetals"). Goldline, Inc. owns 100% of AMIP, LLC ("AMIP"), and has a 50% ownership interest in Precious Metals Purchasing Partners, LLC ("PMPP".) As the context requires, references in this Form 10-K to “JMB” may include GPG, Silver.com, GMBC, PMC, and CyberMetals, and references to “Goldline” may include AMIP and PMPP.

JMB is a leading e-commerce retailer providing access to a broad array of gold, silver, copper, platinum, and palladium products through its websites and marketplaces. JMB operates six separately branded, company-owned websites targeting specific niches within the precious metals retail market, including JMBullion.com, ProvidentMetals.com, Silver.com, Cybermetals.com, GoldPrice.org, and SilverPrice.org.

The Company acquired the 79.5% interest in JMB that it did not previously own in March 2021. With this acquisition, we substantially expanded our e-commerce channel for precious metals product sales and increased the diversification of our business between wholesale and retail distribution.

In April 2022, JMB commercially launched the CyberMetals online platform, where customers can purchase and sell fractional shares of digital gold, silver, platinum, and palladium bars in a range of denominations. CyberMetals’ customers have the option to convert their digital holdings to fabricated precious metals products via an integrated redemption flow with JMB. These products may be designated for storage by the Company or shipped directly to the customer.

The Company acquired Goldline in August 2017 through an asset purchase transaction with Goldline, LLC, which had been in operation since 1960. Goldline is a direct retailer of precious metals to the investor community, and markets its precious metal products on television, radio, and the internet, as well as through customer service outreach. AMIP manages Goldline’s intellectual property.

PMPP was formed in in fiscal 2019 pursuant to terms of a joint venture agreement, for the purpose of purchasing precious metals from the partners' retail customers, and then reselling the acquired products back to affiliates of the partners. PMPP commenced operations in fiscal 2020.

Secured Lending

The Company operates its Secured Lending segment through its wholly-owned subsidiary Collateral Finance Corporation, LLC ("CFC"). CFC has two wholly-owned subsidiaries: AM Capital Funding, LLC (“AMCF”), and CFC Alternative Investments (“CAI”).

CFC is a California licensed finance lender that originates and acquires commercial loans secured by bullion and numismatic coins. CFC's customers include coin and precious metal dealers, investors, and collectors. As of June 30, 2022, CFC and AMCF had, in the aggregate, approximately $126.2 million in secured loans outstanding, of which approximately 64.7% were acquired from third parties (some of which may be customers of A-Mark) and approximately 35.3% were originated by CFC.

AMCF was formed for the purpose of securitizing eligible secured loans of CFC. AMCF issued, administers, and owns Secured Senior Term Notes: Series 2018-1, Class A, with an aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million (collectively referred to as the "Notes"). The Class A Notes bear interest at a rate of 4.98%, and the Class B Notes bear interest at a rate of 5.98%. The Notes have a maturity date of December 15, 2023. (See Note 5 to the Company’s consolidated financial statements for additional information.)

CAI is a holding company that has an equity method interest in Collectible Card Partners, LLC (“CCP”). CCP provides capital to fund commercial loans secured by graded sport cards and sports memorabilia. CCP commenced operations in fiscal 2022.

29


 

Our Strategy

The Company was formed in 1965 and has grown into a significant participant in the bullion and coin markets, with approximately $8.2 billion in revenues for fiscal year 2022. Our strategy continues to focus on growth, including the volume of our business, our geographic presence, and the scope of complementary products, services, and technological tools that we offer to our customers.

We intend to continue to grow by leveraging off the strengths of our existing integrated operations:

our expertise in e-commerce and marketing;
our retail distribution network;
the depth of our customer relationships;
our access to market makers, suppliers, and sovereign and private mints;
our trading systems in the U.S. and Europe;
our network of precious metals dealers;
our depository relationships around the world;
our knowledge of secured lending;
our design and production of minted silver products;
our ability to obtain more favorable pricing and financing terms due to our size;
our distribution, storage and logistics capabilities; and
the quality and experience of our management team.

Our Customers

Our customers include financial institutions, bullion retailers, industrial manufacturers and fabricators, sovereign mints, refiners, coin and metal dealers, investors, collectors, and e-commerce and other retail customers. The Company makes a two-way market in its wholesale operations, which results in many customers also operating as our suppliers in that segment. This diverse base of wholesale customers purchases a variety of products from the Company in a multitude of grades, primarily in the form of coins and bars. Our Direct-to-Consumer segment sells to (and, through JMB and PMPP, buys from) retail customers, with JMB focusing on e-commerce operations and Goldline marketing through various traditional channels to the investor community. The Direct-to-Consumer segment offers these customers a variety of gold, silver, copper, platinum, and palladium products.

Factors Affecting Revenues, Gross Profit, Interest Income, and Interest Expense

Set forth below are the key factors affecting the Company’s revenues, gross profit, interest income, and interest expense. These factors can result from both the Company’s ongoing business activities as well as from Company acquisitions. For the years ended June 30, 2022 and 2021, the Company’s results were significantly impacted by the acquisition of JMB in March 2021.

Revenues. The Company enters into transactions to sell and deliver gold, silver, platinum and palladium to industrial and commercial users, coin and bullion dealers, mints, and financial institutions. The metals are investment or industrial grade and are sold in a variety of shapes and sizes.

The Company also sells and delivers gold, silver, platinum, palladium, and copper products directly to customers and the investor community through its Direct-to Consumer segment. Customers may place orders online at one of the Company's websites or over the phone.

The Company also sells precious metals on forward contracts at a fixed price based on current prevailing precious metal spot prices with a certain delivery date in the future (up to six months from inception date of the forward contract). The Company also uses other derivative products (primarily futures contracts) or combinations thereof to hedge commodity risks. We enter into these forward and future contracts as part of our hedging strategy to mitigate our price risk of holding inventory; they are not entered into for speculative purposes.

30


 

Forward sales contracts by their nature are required to be included in revenues, unlike futures contracts which do not impact the Company’s revenue. The decision to use a forward contract versus another derivative type of product (e.g., a futures contract) for hedging purposes is based on the economics of the transaction. Since the volume of hedging can be significant, the movement in and out of forwards can substantially impact revenues, either positively or negatively, from period to period. For this reason, the Company believes ounces sold (excluding ounces sold on forward sales contracts) is a meaningful metric to assess our top line performance.

In addition, the Company earns revenue by providing storage solutions for precious metals and numismatic coins for financial institutions, dealers, investors, and collectors worldwide and by providing storage and order-fulfillment services to our retail customers. The Company also earns revenue from advertisements placed on our Direct-to-Consumer websites. These revenue streams represent less than 1% of the Company’s consolidated revenues.

The Company operates in a high volume/low margin industry. Revenues are impacted by three primary factors: product volume, market prices, and market volatility. A material changes in any one or more of these factors may result in a significant change in the Company’s revenues. A significant increase or decrease in revenues can occur simply based on changes in the underlying commodity prices and may not be reflective of an increase or decrease in the volume of products sold.

Gross Profit. Gross profit is the difference between our revenues and the cost of our products sold. Since we quote prices based on the current commodity market prices for precious metals, we enter into a combination of forward and futures contracts to effect a hedge position equal to the underlying precious metal commodity value, which substantially represents inventory subject to price risk. We enter into these derivative transactions solely for the purpose of hedging our inventory, and not for speculative purposes. Our gross profit includes the gains and losses resulting from these derivative instruments. However, the gains and losses on the derivative instruments are substantially offset by the gains and losses on the corresponding changes in the market value of our precious metals inventory. As a result, our results of operations generally are not materially impacted by changes in commodity prices.

Volatility also affects our gross profit. Greater volatility typically causes the premium spreads to widen resulting in an increase in the gross profit. Product supply constraints during extended periods of higher volatility have historically resulted in a heightening of wider premium spreads resulting in further improvement in the gross profit.

Interest Income. The Company enters into secured loans and secured financing structures with its customers under which it charges interest. CFC acquires loan portfolios and originates loans that are secured by precious metal bullion and numismatic material owned by the borrowers and held by the Company for the term of the loan. Additionally, AMCF acquires certain loans from CFC that are secured by precious metal bullion to meet the collateral requirements of the Notes. Also, the Company offers a number of secured financing options to its customers to finance their precious metals purchases including consignments and other structured inventory finance products whereby the Company earns a fee based on the underlying value of the precious metal ("repurchase arrangements with customers").

Interest Expense. The Company incurs interest expense associated with its lines of credit, Notes, product financing agreements for the transfer and subsequent re-acquisition of gold, silver, and platinum at a fixed price with a third-party finance company ("product financing arrangements"), and short-term precious metal borrowing arrangements with our suppliers ("liabilities on borrowed metals").

Performance Metrics

In addition to financial statement indicators, management also utilizes key operational metrics to assess the performance of our business.

Gold and Silver Ounces Sold and Delivered to Customers. We look at the number of ounces of gold and silver sold and delivered to our customers (excluding ounces recorded on forward contracts). These metrics reflect our business volume without regard to changes in commodity pricing, which also impacts revenue, but can mask actual business trends.

The primary purpose of entering into forward sales transactions is to hedge commodity price risk. Although the revenues realized from these forward sales transactions are often significant, they generally have negligible impact on gross margins. As a result, the Company excludes the ounces recorded on forward contracts from its performance metrics, as the Company does not enter into forward sales transactions for speculative purposes.

Wholesale Sales Ticket Volume. Another measure of our business that is unaffected by changes in commodity pricing is ticket volume (or number of orders processed). Ticket volume for the Wholesale Sales & Ancillary Services segment measures the total number of wholesale orders processed during the period. In periods of higher volatility, there is generally increased trading in the commodity markets, causing increased demand for our products, resulting in higher business volume. During periods of heightened demand order size per ticket may increase.

Direct-to-Consumer Customers. We are focused on attracting new customers and retaining existing customers to drive revenue growth. We use the following three metrics as revenue growth indicators when assessing our customer base:

New Direct-to-Consumer Customers means the number of customers that have registered or setup a new account or made a purchase for the first time during the period.

31


 

Active Direct-to-Consumer Customers means the number of customers that have made a purchase during the period.
Total Direct-to-Consumer Customers means the aggregate number of customers that have registered or set up an account or have made a purchase in the past.

Direct-to-Consumer Ticket Volume. Ticket volume for the Direct-to-Consumer segment measures the number of third-party product orders processed during the period. In periods of higher volatility, there is generally increased consumer demand for our products, resulting in higher business volume. We use the following three metrics indicators when assessing our ticket volume:

Ticket Volume from new Direct-to-Consumer Customers means the number of third-party product orders from new customers (refer to the definition of new customers above) processed by JMB, Goldline, and PMPP during the period.
Ticket Volume from Pre-existing Direct-to-Consumer Customers means the number of third-party product orders from pre-existing customers, processed by JMB, Goldline, and PMPP during the period.
Total Ticket Volume from Direct-to-Consumer Customers means the aggregate number of third-party product orders processed by JMB, Goldline, and PMPP during the period.

Direct-to-Consumer Average Order Value. Average order value for the Direct-to-Consumer segment measures the average dollar value of third-party product orders (excluding accumulation program orders) delivered to the customer during the period.

Inventory Turnover. Inventory turnover is another performance measure on which we are focused and is calculated as the cost of sales divided by the average inventory during the relevant period. Inventory turnover is a measure of how quickly inventory has moved during the period. A higher inventory turnover ratio, which we typically experience during periods of higher volatility when trading is more robust, typically reflects a more efficient use of our capital.

The period of time that inventory is held by the Company varies depending upon the nature of our inventory commitments with customers and suppliers. (See Note 6 to the Company’s consolidated financial statements for a description of our classifications of inventory by type.) When management analyzes inventory turnover on a period over period basis, consideration is given to each inventory type and its corresponding impact on the inventory turnover calculation. For example:

The Company enters into various structured borrowing arrangements that commit the Company's inventory (such as product financing arrangements or liabilities on borrowed metals) for an unspecified period of time. While the Company is able to obtain access to this inventory on demand, this type of inventory tends not to turn over as quickly as other types of inventory.
The Company enters into repurchase arrangements with customers under which A-Mark holds precious metals which are subject to repurchase for an unspecified period of time. While the Company has legal title to this inventory, the Company is required to hold this inventory (or like-kind inventory) for the customer until the arrangement is terminated or the material is repurchased by the customer. As a result, this type of inventory tends not to turn over as quickly as other types of inventory.

Additionally, our inventory turnover ratio can be affected by hedging activity, as the period over period change of the inventory turnover ratio may be significantly impacted by a period over period change in hedging volume. For example, if trading activity were to remain constant over two periods, but there were significantly higher forward sales in the current period compared to a prior period, the calculated inventory turnover ratio would increase notwithstanding the constancy of the trading volume.

Number of Secured Loans. Finally, as a measure of the size of our Secured Lending segment, we look at the number of outstanding secured loans to customers that are primarily collateralized by precious metals at the end of each quarter. Typically, the number of loans increases during periods of increasing precious metal pricing and decreases during periods of declining precious metal prices.

The Company calculates a loan-to-value ("LTV") ratio for each loan as the principal amount of the loan divided by the liquidation value of the collateral, which is based on daily spot market prices of precious metal bullion. When the market price of the pledged collateral decreases and thereby increases the LTV ratio of a loan above a prescribed maximum ratio, usually 85%, the Company has the option to make a margin call on the loan. As a result, a decline of precious metal market prices may cause a decrease in the number of loans outstanding in a period.

Non-GAAP Financial Measures

 

In addition to key operational metrics that are used to assess the performance of our business, management also uses non-GAAP financial performance and liquidity measures. We believe "adjusted net income before provision for income taxes” and "EBITDA", can provide useful information to evaluate our financial performance and liquidity position. Non-GAAP measures do not have standardized definitions and should not be a substitute for measures that are prepared in accordance with U.S. GAAP. For a reconciliation of these non-GAAP measures to the most directly comparable U.S. GAAP measure reported in our consolidated statements of income and consolidated statements of cash flows for the years ended June 30, 2022 and 2021, and certain limitations inherent in such measures, refer to the “Non-GAAP Measures” section below.

32


 

Fiscal Year

Our fiscal year end is June 30 each year.

Recent Developments

Recent events impacting our business are as follows:

COVID-19

The COVID-19 pandemic has caused significant disruption in the financial markets both globally and in the United States. The resulting macroeconomic events contributed to an increase in the business conducted by the Company, but also pose certain risks and uncertainties for the Company. It is challenging to predict how long the COVID-19 pandemic will continue, the extent to which the effects that the Company has experienced from the pandemic thus far will persist, or whether other effects on the Company and its businesses will materialize in the short or long term.

Macroeconomic events have positively affected the Company’s trading revenues and gross profit as the volatility of the price of precious metals and numismatics resulted in a material increase in the spread between bid and ask prices on these products. We also experienced substantially increased demand for products in each of our coin and bar, industrial and retail businesses. We attribute this to certain customers seeking to assure a supply of precious metals necessary for the operation of their businesses, and other customers, particularly in Goldline and our recently acquired JMB retail units, seeking the safety of investments in precious metals. In response to the heightened demand, in certain cases prices for the products we sell have also risen. We are uncertain of the duration of these conditions.

Increased Investment In Pinehurst Coin Exchange, Inc.

On August 27, 2021, the Company increased its ownership of Pinehurst Coin Exchange, Inc. ("Pinehurst") from 10.0% to 49.0% for a purchase price of $9.8 million, consisting of $6.8 million in cash and 123,180 shares of the Company’s common stock. A-Mark acquired its initial ownership interest of 10.0% in Pinehurst in 2019. Founded in 2005, Pinehurst services the wholesale and retail marketplace and is one of the nation's largest e-commerce retailers of modern and numismatic certified coins on eBay. The Company has appointed two representatives on Pinehurst's board of directors.

New Credit Facility

During the second quarter of fiscal 2022, the Company closed a new three-year, committed $350 million credit facility provided by a syndicate of financial institutions, replacing its existing $280 million credit facility. The new credit facility became effective on December 21, 2021 and matures on December 20, 2024.

Launch of the CyberMetals Online Platform

During the third quarter of fiscal 2022, JMB beta tested the CyberMetals online platform, where customers can purchase and sell fractional shares of digital gold, silver, platinum, and palladium bars in a range of denominations. CyberMetals’ customers have the option to convert their digital holdings to fabricated precious metals products via an integrated redemption flow with JMB. These products may be designated for storage by the Company or shipped directly to the customer. The CyberMetals platform was commercially launched in April 2022.

Stock Split in the Form of a Dividend

On April 28, 2022, the Company’s board of directors declared a two-for-one split of A-Mark’s common stock in the form of a stock dividend. Each stockholder of record at the close of business on May 23, 2022 received a dividend of one additional share of common stock for every share held on the record date that was distributed after the close of trading on June 6, 2022.

Increased Investment In Silver Gold Bull, Inc.

On June 27, 2022, the Company executed an agreement to increase its ownership interest in Silver Gold Bull, Inc. ("Silver Gold Bull") from 7.4% to 47.4% for a purchase price of approximately $42.7 million, consisting of $34.0 million in cash and 253,928 shares of the Company’s common stock. A-Mark acquired its initial 2.5% ownership interest in Silver Gold Bull in 2014, increasing its investment to 7.4% in 2018. Founded in 2009, Silver Gold Bull is a leading e-commerce precious metals retailer in Canada. The Company has appointed two representatives on Silver Gold Bull's board of directors.

Under the terms of the agreement, A-Mark extended its existing exclusive supplier agreement with Silver Gold Bull for an additional four years, to December 2026. The Company also has the option, exercisable between months 18 and 27 following the closing, to purchase an additional 27.6% of the outstanding equity of Silver Gold Bull to bring its ownership interest to 75.0%.

33


 

RESULTS OF OPERATIONS

Overview of Results of Operations for the Years Ended June 30, 2022 and 2021

Consolidated Results of Operations

The operating results of our business for the years ended June 30, 2022 and 2021 are as follows:

 

in thousands, except for share, per share, and performance metrics data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended June 30,

 

2022

 

 

 

2021

 

 

 

$

 

 

 

%

 

 

 

$

 

 

 

% of
revenue

 

 

 

$

 

 

 

% of
revenue

 

 

 

Increase/
(decrease)

 

 

 

Increase/
(decrease)

 

Revenues

 

$

8,159,254

 

 

 

 

100.000

%

 

 

$

7,613,015

 

 

 

 

100.000

%

 

 

$

546,239

 

 

 

 

7.2

%

Gross profit

 

 

261,765

 

 

 

 

3.208

%

 

 

 

210,198

 

 

 

 

2.761

%

 

 

$

51,567

 

 

 

 

24.5

%

Selling, general, and administrative expenses

 

 

(76,618

)

 

 

 

(0.939

%)

 

 

 

(48,020

)

 

 

 

(0.631

%)

 

 

$

28,598

 

 

 

 

59.6

%

Depreciation and amortization expense

 

 

(27,300

)

 

 

 

(0.335

%)

 

 

 

(10,789

)

 

 

 

(0.142

%)

 

 

$

16,511

 

 

 

 

153.0

%

Interest income

 

 

21,800

 

 

 

 

0.267

%

 

 

 

18,474

 

 

 

 

0.243

%

 

 

$

3,326

 

 

 

 

18.0

%

Interest expense

 

 

(21,992

)

 

 

 

(0.270

%)

 

 

 

(19,865

)

 

 

 

(0.261

%)

 

 

$

2,127

 

 

 

 

10.7

%

Earnings from equity method investments

 

 

6,907

 

 

 

 

0.085

%

 

 

 

15,547

 

 

 

 

0.204

%

 

 

$

(8,640

)

 

 

 

(55.6

%)

Other income, net

 

 

1,953

 

 

 

 

0.024

%

 

 

 

1,079

 

 

 

 

0.014

%

 

 

$

874

 

 

 

 

81.0

%

Remeasurement gain on pre-existing equity interest