10-Q

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

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

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.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes. ☐ No. ☑

As of May 2, 2023, the registrant had 23,260,606 shares of common stock, par value $0.01 per share outstanding.

In September 2018, AM Capital Funding, LLC (“AMCF”), a wholly owned subsidiary of Collateral Finance Corporation (CFC”), completed an issuance of Secured Senior Term 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 (collectively, the "AMCF 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 AMCF Notes have a maturity date of December 15, 2023.

The Company consolidates a variable interest entity ("VIE") if the Company is considered to be the primary beneficiary. AMCF is a VIE because its equity may be insufficient to maintain its on-going collateral requirements without additional financial support from the Company. The securitization is primarily secured by cash, bullion loans, and precious metals, and the Company is required to continuously hedge the value of certain collateral and make future contributions as necessary. The Company is the primary beneficiary of this VIE because the Company has the right to determine the type of collateral (i.e., cash, secured loans, or precious metals) placed into the entity, has the right to receive (and has received) the proceeds from the securitization transaction, earns on-going interest income from the secured loans (subject to collateral requirements), and has the obligation to absorb losses should AMCF's interest expense and other costs exceed its interest income.

The following table presents the assets and liabilities of this VIE, which are included in the condensed consolidated balance sheets above. The holders of the AMCF Notes have a first priority security interest in the assets as shown in the table below, which are in excess of the AMCF Notes' aggregate principal amount. Additionally, the liabilities of the VIE include intercompany balances, which are eliminated in consolidation. (See Note 15.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements reflect the financial condition, results of operations, statements of stockholders’ equity, and cash flows of the Company, and were prepared using accounting principles generally accepted in the United States (“U.S. GAAP”). The Company consolidates its subsidiaries that are wholly-owned, and majority owned, and entities that are variable interest entities where the Company is determined to be the primary beneficiary. The Company’s condensed consolidated financial statements include the accounts of: A-Mark, AMTAG, TDS, AMGL, AMST, JMB, Goldline, and CFC. Intercompany accounts and transactions are eliminated.

Comprehensive Income

Our other comprehensive income and losses are comprised of unrealized gains and losses associated with the translation of foreign-based equity method investments which are shown in our condensed consolidated statements of stockholders' equity.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. These estimates include, among others, determination of fair value (primarily, with respect to precious metal inventory, derivatives, certain financial instruments, and certain investments), impairment assessments of property, plant and equipment and intangible assets, valuation allowance determination on deferred tax assets, determining the incremental borrowing rate for calculating right of use assets and lease liabilities, and revenue recognition judgments. Actual results could materially differ from these estimates.

Reclassification

In our condensed consolidated statements of stockholders' equity, we present (i) exercise of share-based awards and (ii) net settlement of share-based awards and in our condensed consolidated statements of cash flows, we present (i) proceeds from the exercise of share-based awards and (ii) payments for tax withholding related to net settlement of share-based awards as separate line-items. In prior fiscal years the aggregate amounts were presented in a single line-item, as net settlement on issuance of common shares on exercise of shared-based awards.

Prior periods have been reclassified to conform to the current period presentation. This reclassification has no impact on previously reported net income, financial position, or cash flows.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the condensed consolidated balance sheets, condensed consolidated statements of income, condensed consolidated statements of stockholders’ equity, and condensed consolidated statements of cash flows for the periods presented in accordance with U.S. GAAP. Operating results for the three and nine months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2023 or for any other interim period during such fiscal year. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022 (the “2022 Annual Report”), as filed with the SEC. Amounts related to disclosure of June 30, 2022 balances within these interim condensed consolidated financial statements were derived from the audited consolidated financial statements and notes thereto included in the 2022 Annual Report.

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, which was distributed on June 6, 2022. All share and per share amounts (except par value) have been retroactively adjusted to reflect the stock split in the form of a stock dividend for all periods presented.

Dividends are recorded if and when they are declared by the board of directors (see Note 17).

Fair Value Measurement

The Fair Value Measurements and Disclosures Topic 820 of the ASC ("ASC 820") creates a single definition of fair value for financial reporting. The rules associated with ASC 820 state that valuation techniques consistent with the market approach, income approach, and/or cost approach should be used to estimate fair value. Selection of a valuation technique, or multiple valuation techniques, depends on the nature of the asset or liability being valued, as well as the availability of data. (See Note 3.)

Concentration of Credit Risk

Cash is maintained at financial institutions, and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances.

Assets that potentially subject the Company to concentrations of credit risk consist principally of receivables, loans of inventory to customers, and inventory hedging transactions. Based on an assessment of credit risk, the Company typically grants collateralized credit to its customers. Credit risk with respect to loans of inventory to customers is minimal. The Company enters into inventory hedging transactions, principally utilizing metals commodity futures contracts traded on national futures exchanges or forward contracts with credit worthy financial institutions. All of our commodity derivative contracts are under master netting arrangements and include both asset and liability positions. Substantially all of these transactions are secured by the underlying metals positions.

Foreign Currency

The functional currency of the Company is the United States dollar ("USD"). All transactions in foreign currencies are recorded in US dollars at the then-current exchange rate(s). Upon settlement of the underlying transaction, all amounts are remeasured to US dollars at the current exchange rate on date of settlement. All unsettled foreign currency transactions that remain in accounts receivable and trade account payables are remeasured to US dollars at the period end exchange rates. All remeasurement gains and losses are recorded in the current period net income.

The Company's wholly-owned foreign subsidiary, AMTAG, also generates remeasurement gains and losses. AMTAG functions as the Company’s international sales and marketing support and has a functional currency of USD, but maintains its books of record in the European Union Euro.

For the Company’s foreign-based equity method investments, the proportionate share of the investee’s income is translated into U.S. dollars at the average exchange rate for the period and the investment is translated using the exchange rate as of the end of the reporting period. The unrealized gains and losses associated with the translation of the investment are deferred in accumulated other comprehensive income on the Company’s condensed consolidated balance sheets.

To manage the effect of foreign currency exchange fluctuations, the Company utilizes foreign currency forward contracts. These derivatives generate gains and losses when settled and/or marked-to-market.

Business Combination

The Company accounts for business combinations by applying the acquisition method in accordance with Business Combinations Topic 805 of the ASC (“ASC 805”). The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition of a business. Transaction costs related to the acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed and noncontrolling interests, if any, in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed and noncontrolling interests, if any, in an acquired entity is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets and liabilities. Net cash paid to acquire a business is classified as investing activities on the accompanying condensed consolidated statements of cash flows.

Variable Interest Entity

A variable interest entity ("VIE") is a legal entity that has either (i) a total equity investment that is insufficient to finance its activities without additional subordinated financial support or (ii) whose equity investors as a group lack the ability to control the entity’s activities or lack the ability to receive expected benefits or absorb obligations in a manner that is consistent with their investment in the entity.

A VIE is consolidated for accounting purposes by its primary beneficiary, which is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. The Company consolidates VIEs when it is deemed to be the primary beneficiary. Management regularly reviews and re-evaluates its previous determinations regarding whether it holds a variable interest in potential VIEs, the status of an entity as a VIE, and whether the Company is required to consolidate such VIEs in its condensed consolidated financial statements.

AMCF, a wholly owned subsidiary of CFC, is a special purpose entity ("SPE") formed as part of a securitization transaction in order to isolate certain assets and distribute the cash flows from those assets to investors. AMCF was structured to insulate investors from claims on AMCF’s assets by creditors of other entities. The Company has various forms of on-going involvement with AMCF, which may include (i) holding senior or subordinated interests in AMCF; (ii) acting as loan servicer for a portfolio of loans held by AMCF; and (iii) providing administrative services to AMCF. AMCF is required to maintain separate books and records. The assets and liabilities of this VIE, as of March 31, 2023 and June 30, 2022, are indicated on the table that follows the condensed consolidated balance sheets.

AMCF is considered a VIE because its initial equity investment may be insufficient to maintain its on-going collateral requirements without additional financial support from the Company. The securitization is primarily secured by bullion loans and precious metals, and the Company is required to continuously hedge the value of certain collateral and make future contributions as necessary. The Company is the primary beneficiary of this VIE because the Company has the right to determine the type of collateral (i.e., cash, secured loans, or precious metals), has the right to receive (and has received) the proceeds from the securitization transaction, earns on-going interest income from the secured loans (subject to collateral requirements), and has the obligation to absorb losses should AMCF's interest expense and other costs exceed its interest income. (See Note 15.)

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2023 and June 30, 2022.

Allowance for Credit Losses

On July 1, 2022, the Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses Topic 326: Measurement of Credit Losses on Financial Instruments, as amended by ASC 326, which introduces a new credit reserving methodology known as the Current Expected Credit Loss ("CECL") model. The CECL model applies to financial assets measured at amortized cost, including accounts receivable, contract assets and held-to-maturity loan receivables. Under the CECL model, we identify allowances for credit losses based on future expected losses when accounts receivable, contract assets or held-to-maturity loan receivables are created rather than when losses are probable. We expect trends and business practices to continue in a manner consistent with historical activity.

The Company sets credit and position risk limits based on management's judgements of the customer's creditworthiness and regularly monitors its credit arrangements. These limits include gross position limits for counterparties engaged in sales and purchase transactions with the Company. They also include collateral limits for different types of sale and purchase transactions that counterparties may engage in from time to time.

ASC 326 provides a practical expedient for assets secured by collateral when repayment is expected to be provided substantially through the sale of the collateral in the event of the borrower's financial difficulty. In these arrangements, a reporting entity may estimate the expected credit losses by comparing the fair value of the collateral as of the balance sheet date to the asset’s amortized cost basis. In situations when the fair value of the collateral is equal to or greater than the amortized cost, a reporting entity may determine that there are no expected credit losses. The Company applies the practical expedient based on collateral maintenance provisions in estimating an allowance for credit losses for its secured loan receivables activity. The Company has not historically experienced credit losses related to its lending activity, and since it does not expect any future losses, no allowance has been recorded for this asset class.

The Company has not historically experienced credit losses related to its other receivables activity; including (i) customer trade receivables, (ii) wholesale trade advances, and (iii) due from brokers, and, accordingly, no allowance has been recorded for these asset classes.

Precious Metals held under Financing Arrangements

The Company enters into arrangements with certain customers under which A-Mark purchases precious metals from the customers which are subject to repurchase by the customer at the spot value of the product on the repurchase date. The precious metals purchased under these arrangements consist of rare and unique items, and therefore the Company accounts for these transactions as precious metals held under financing arrangements, which generate financing income rather than revenue earned from precious metals inventory sales. In these repurchase arrangements, the Company holds legal title to the metals and earns financing income for the duration of the agreement.

These arrangements are typically terminable by either party upon 14 days' notice. Upon termination, the customer’s right to repurchase any remaining precious metal is forfeited, and the related precious metals are reclassified as inventory held for sale. As of March 31, 2023 and June 30, 2022, precious metals held under financing arrangements totaled $24.0 million and $79.8 million respectively.

The Company’s precious metals held under financing arrangements are marked-to-market.

Inventories

The Company's inventory, which consists primarily of bullion and bullion coins, is acquired and initially recorded at cost and then marked to fair market value. The fair market value of the bullion and bullion coins comprises two components: (i) published market values attributable to the cost of the raw precious metal, and (ii) the premium paid at acquisition of the metal, which is attributable to the incremental value of the product in its finished goods form. The market value attributable solely to such premium is readily determinable by reference to multiple reputable published sources.

The Company’s inventory, except for certain lower of cost or net realizable value basis products (as discussed below), are subsequently recorded at their fair market values, that is, "marked-to-market." The daily changes in the fair market value of our inventory are offset by daily changes in the fair market value of hedging derivatives that are taken with respect to our inventory positions; both the change in the fair market value of the inventory and the change in the fair market value of these derivative instruments are recorded in cost of sales in the condensed consolidated statements of income.

While the premium component included in inventory is marked-to-market, our commemorative coin inventory, including its premium component, is held at the lower of cost or net realizable value, because the value of commemorative coins is influenced more by supply and demand determinants than on the underlying spot price of the precious metal content of the commemorative coins. Unlike our bullion coins, the value of commemorative coins is not subject to the same level of volatility as bullion coins because our commemorative coins typically carry a substantially higher premium over the spot metal price than bullion coins. Neither the commemorative coin inventory nor the premium component of our inventory is hedged. (See Note 6.)

Leased Right of Use Assets

We lease warehouse space, office facilities, and equipment. Our operating leases with terms longer than twelve months are recorded at the sum of the present value of the lease's fixed minimum payments as operating lease right of use assets ("ROU assets") in the Company’s condensed consolidated balance sheets. Lease terms include all periods covered by renewal and termination options where the Company is reasonably certain to exercise the renewal options or not to exercise the termination options. Our lease agreements do not contain any significant residual value guarantees or material restrictive covenants. Our finance leases are another type of ROU asset, but are classified in the Company’s condensed consolidated balance sheets as a component of property, plant, and equipment at the present value of the lease payments. The Company has insignificant finance lease activity at this time.

The ROU asset amounts include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by lease incentives. We use our incremental borrowing rate as the discount rate to determine the present value of the lease payments for leases, as our leases do not have readily determinable implicit discount rates. Our incremental borrowing rate is the rate of interest that we would incur to borrow on a collateralized basis over a similar term and amount in a similar economic environment.

Operating lease cost is recognized on a straight-line basis over the lease term. The depreciable life of ROU assets is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. (See Note 7.)

For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease. Any amounts related to a modified lease are reflected as an operating lease ROU asset or related operating lease liability in our condensed consolidated balance sheet.

Property, Plant, and Equipment

Property, plant, and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using a straight-line method based on the estimated useful lives of the related assets, ranging from three years to twenty-five years. Depreciation and amortization commence when the related assets are placed into service. Internal-use software development costs are capitalized during the application development stage. Internal-use software costs incurred during the preliminary project stage are expensed as incurred. Land is recorded at historical cost and is not depreciated. Repair and maintenance costs are expensed as incurred. We have no major planned maintenance activities related to our plant assets associated with our minting operations.

The Company reviews the carrying value of these assets for impairment whenever events and circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating for impairment, the carrying value of each asset or group of assets is compared to the undiscounted estimated future cash flows expected to result from its use and eventual disposition. An impairment loss is recognized for the difference when the carrying value exceeds the discounted estimated future cash flows. The factors considered by the Company in performing this assessment include current and projected operating results, trends and prospects, the manner in which these assets are used, and the effects of obsolescence, demand and competition, as well as other economic factors.

Finite-lived Intangible Assets

Finite-lived intangible assets consist primarily of customer relationships, non-compete agreements, and employment contracts. Existing customer relationships intangible assets are amortized in a manner reflecting the pattern in which the economic benefits of the assets are consumed. All other intangible assets subject to amortization are amortized using the straight-line method over their useful lives, which are estimated to be one year to fifteen years. We review our finite-lived intangible assets for impairment under the same policy described above for property, plant, and equipment; that is, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Goodwill and Indefinite-lived Intangible Assets

Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Goodwill and other indefinite-lived intangibles (such as trade names and trademarks) are not subject to amortization, but are evaluated for impairment at least annually. However, for tax purposes, goodwill acquired in connection with a taxable asset acquisition is generally deductible.

The Company evaluates its goodwill and other indefinite-lived intangibles for impairment in the fourth quarter of the fiscal year (or more frequently if indicators of potential impairment exist) in accordance with ASC 350. Goodwill is reviewed for impairment at a reporting unit level, which for the Company, corresponds to the Company’s reportable operating segments.

Evaluation of goodwill for impairment

The Company has the option to first qualitatively assess whether relevant events and circumstances make it more likely than not that the fair value of the reporting unit's goodwill is less than its carrying value. A qualitative assessment includes analyzing current economic indicators associated with a particular reporting unit such as changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there would be a significant decline to the fair value of a particular reporting unit. If the qualitative assessment indicates it is not more likely than not that goodwill is impaired, no further testing is required.

If, based on this qualitative assessment, management concludes that goodwill is more likely than not to be impaired, or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine the fair value of the business, and compare the calculated fair value of the reporting unit with its carrying amount, including goodwill. If through this quantitative analysis the Company determines the fair value of a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is considered not to be impaired. If the Company concludes that the fair value of the reporting unit is less than its carrying value, a goodwill impairment loss will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. (See Note 9.)

Evaluation of indefinite-lived intangible assets for impairment

The Company evaluates its indefinite-lived intangible assets (i.e., trade names and trademarks) for impairment. In assessing its indefinite-lived intangible assets for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is unlikely that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is unlikely that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company is not required to perform any additional tests in assessing the asset for impairment. However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine if the fair value of an indefinite-lived intangible asset is less than its carrying value. If through this quantitative analysis the Company determines the fair value of an indefinite-lived intangible asset exceeds its carrying amount, the indefinite-lived intangible asset is considered not to be impaired. If the Company concludes that the fair value of an indefinite-lived intangible asset is less than its carrying value, an impairment loss will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value.

The methods used to estimate the fair value measurements of the Company’s reporting units and indefinite-lived intangible assets include those based on the income approach (including the discounted cash flow and relief-from-royalty methods) and those based on the market approach (primarily the guideline transaction and guideline public company methods). (See Note 9.)

Long-Term Investments

Investments in privately-held entities are accounted for using the equity method when the Company has significant influence, but not control over the investee. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors are considered in determining whether the equity method of accounting is appropriate. Under the equity method, the carrying values of these investments are adjusted to reflect our proportionate share of the investee's net income or loss, any unrealized gain or loss resulting from the translation of foreign-denominated financial statements into U.S. dollars, and dividends received. We use the cumulative earnings approach for classifying dividends received in the statements of cash flows. Under the cumulative earnings approach, we compare the distributions received to cumulative equity method earnings since inception. Any distributions received up to the amount of cumulative equity earnings are considered a return on investment and classified in operating activities. Any excess distributions are considered a return of capital and classified in investing activities. The basis difference between the carrying value and our proportionate share of the equity method investment's book value is primarily related to consideration paid in excess of the stepped-up basis of assets and liabilities on the date of purchase.

Investments in privately-held entities for which the Company has little or no influence over the investee are initially recorded at cost. Because the investments do not have a readily determinable fair value, the Company has elected to measure the investments at cost minus impairments, if any, with changes recognized in net income. If the Company identifies observable price changes in orderly transactions for an identical or a similar investment, the Company’s investment will be measured at fair value as of the date the observable transaction occurs.

We evaluate our long-term investments for impairment quarterly or whenever events or changes in circumstances indicate that a decline in the fair value of these assets is determined to be other-than-temporary. Additionally, the Company performs an on-going evaluation of the investments with which the Company has variable interests to determine if any of these entities are VIEs that are required to be consolidated. None of the Company’s long-term investments were VIEs as of March 31, 2023 and June 30, 2022.

Other Long-Term Assets

Digital Assets

The Company has purchased certain digital assets (crypto currencies) that are held for investment purposes. The Company accounts for digital assets in accordance with Intangibles - Goodwill and Other Topic 350 of the ASC ("ASC 350"). Digital assets are shown in the other long-term assets line-item on the condensed consolidated balance sheets. Digital assets are a type of intangible asset with indefinite useful lives, which are recorded at cost less impairment. Accordingly, if the fair market value at any point during the reporting period is lower than the carrying value, an impairment loss is recorded. If the fair market value at any point during the reporting period is higher than the carrying value, the basis of the digital assets will not be adjusted to account for this increase. Gains on digital assets, if any, are recognized upon sale or disposal of the digital assets. Write downs and gains are shown in the condensed consolidated statement of income, as component of the line-item other income, net.

As of March 31, 2023 and June 30, 2022, the carrying balance of our digital assets was $0.2 million and $0.2 million respectively, which is shown net of cumulative write-downs of $0.2 million and $0.2 million, respectively. As of March 31, 2023 and June 30, 2022, the fair market value of such digital assets held was $0.2 million and $0.2 million, respectively. For the three and nine months ended March 31, 2023, the Company had insignificant write-downs on such digital assets and had no realized gains or losses related to the sale of digital assets.

Option to Acquire Additional Interest in a Long-Term Investment

On June 27, 2022, the Company acquired an additional 40% interest in Silver Gold Bull, Inc. (See Note 10.) Also included in this acquisition was an option, which is exercisable between December 2023 and September 2024, to purchase an additional 27.6% of the outstanding equity of Silver Gold Bull, Inc. to bring the Company's ownership interest up to 75.0%. As of March 31, 2023 and June 30, 2022, the fair value of the option was $5.3 million and $5.3 million, respectively.

Accumulated other comprehensive income

For the Company’s foreign-based equity method investments, the proportionate share of the investee’s income is translated into U.S. dollars at the average exchange rate for the period and the investment is translated using the exchange rate as of the end of the reporting period. Foreign currency translation gains and losses associated with this activity are deferred and included as a component of accumulated other comprehensive income in the accompanying condensed consolidated balance sheets.

Treasury Stock

The Company periodically purchases its own common stock that is traded on public markets as part of announced stock repurchase programs. The repurchased common stock is classified as treasury stock on the consolidated balance sheets and held at cost. The direct costs incurred to acquire treasury stock are treated like stock issue costs and added to the cost of the treasury stock, which includes applicable fees and taxes. There have been no reissuances of treasury stock.

Noncontrolling interest

The Company’s condensed consolidated financial statements include entities in which the Company has a controlling financial interest. Noncontrolling interest is the portion of equity (net assets) in an entity in which the Company has a controlling financial interest that is not attributable, directly or indirectly, to the Company. Such noncontrolling interest is reported on the condensed consolidated balance sheets within equity, separately from the Company’s equity. On the condensed consolidated statements of income, revenues, expenses and net income or loss from the less-than-wholly owned subsidiary are reported at their consolidated amounts, including both the amounts attributable to the Company and the noncontrolling interest. Income or loss is allocated to the noncontrolling interest based on its weighted average ownership percentage for the applicable period. The condensed consolidated statements of equity include beginning balances, activity for the period and ending balances for each component of stockholders’ equity, noncontrolling interest and total equity.

Revenue Recognition

Settlement Date Accounting

Substantially all of the Company’s sales of precious metals are conducted using sales contracts that meet the definition of derivative instruments in accordance with Derivatives and Hedging Topic 815 of the ASC ("ASC 815"). The contract underlying A-Mark’s commitment to deliver precious metals is referred to as a “fixed-price forward commodity contract” because the price of the commodity is fixed at the time the order is placed. Revenue is recognized on the settlement date, which is defined as the date on which: (i) the quantity, price, and specific items being purchased have been established, (ii) metals have been delivered to the customer, and (iii) payment has been received or is covered by the customer’s established credit limit with the Company.

All derivative instruments are marked-to-market during the interval between the order date and the settlement date, with the changes in the fair value charged to cost of sales. The Company’s hedging strategy to mitigate the market risk associated with its sales commitments is described separately below under the caption “Hedging Activities.”

Types of Orders that are Physically Delivered

The Company’s contracts to sell precious metals to customers are usually settled with the physical delivery of metals to the customer, although net settlement (i.e., settlement at an amount equal to the difference between the contract value and the market price of the metal on the settlement date) is permitted. Below is a summary of the Company’s major order types and the key factors that determine when settlement occurs and when revenue is recognized for each type:

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Traditional physical orders — The quantity, specific product, and price are determined on the order date. Payment or sufficient credit is verified prior to delivery of the metals on the settlement date.

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Consignment orders — The Company delivers the items requested by the customer prior to establishing a firm order with a price. Settlement occurs and revenue is recognized once the customer confirms its order (quantity, specific product, and price) and remits full payment for the sale.

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Provisional orders — The quantity and type of metal is established at the order date, but the price is not set. The customer commits to purchasing the metals within a specified time period, usually within one year, at the then-current market price. The Company delivers the metal to the customer after receiving the customer’s deposit, which is typically based on 110% of the prevailing current spot price. The unpriced metal is subject to a margin call if the deposit falls below 105% of the value of the unpriced metal. The purchase price is established, and revenue is recognized at the time the customer notifies the Company that it desires to purchase the metal.

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Margin orders — The quantity, specific product, and price are determined at the order date; however, the customer is allowed to finance the transaction through the Company and to defer delivery by committing to remit a partial payment (approximately 20%) of the total order price. With the remittance of the partial payment, the customer locks in the purchase price for a specified time period (usually up to two years from the order date). Revenue on margin orders is recognized when the order is paid in full and delivered to the customer.

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Borrowed precious metals orders for unallocated positions — Customers may purchase unallocated metal positions in the Company's inventory, which includes precious metals held for CyberMetals' customers. The quantity and type of metal is established at the order date, but the specific product is not yet determined. Revenue is not recognized until the customer selects the specific precious metal product it wishes to purchase, full payment is received, and the product is delivered to the customer.

In general, unshipped orders for which a customer advance has been received by the Company are classified as advances from customers. Orders that have been paid for and shipped, but not yet delivered to the customer are classified as deferred revenue. Both customer advances and deferred revenue are shown, in the aggregate, as deferred revenue and other advances in the condensed consolidated financial statements. (See Note 11.)

Hedging Activities

The value of our inventory and our purchase and sale commitments are linked to the prevailing price of the underlying precious metal commodity. The Company seeks to minimize the effect of price changes of the underlying commodity and enters into inventory hedging transactions, principally utilizing metals commodity forward contracts with credit worthy financial institutions or futures contracts traded on national futures exchanges. The Company hedges by each commodity type (gold, silver, platinum, and palladium). All of our commodity derivative contracts are under master netting arrangements and include both asset and liability positions.

Commodity forward and futures contracts entered into for hedging purposes are recorded at fair value on the trade date and are marked-to-market each period. The difference between the original contract values and the market values of these contracts are reflected as derivative assets or derivative liabilities in the condensed consolidated balance sheets at fair value, with the corresponding unrealized gains or losses included as a component of cost of sales. When these contracts are net settled, the unrealized gains and losses are reversed and the realized gains and losses for forward contracts are recorded in revenue and cost of sales, and the net realized gains and losses for futures are recorded in cost of sales.

The Company enters into forward and futures contracts solely for the purpose of hedging our inventory holding risk and our liability on price protection programs, and not for speculative market purposes. The Company’s gains and losses on derivative instruments are substantially offset by the changes in the fair market value of the underlying precious metals inventory, which is also recorded in cost of sales in the condensed consolidated statements of income. (See Note 12.)

Other Sources of Revenue

The Company recognizes its storage, logistics, licensing, and other services revenues in accordance with the FASB's release ASU 2014-09 Revenue From Contracts With Customers Topic 606 of the ASC and subsequent related amendments ("ASC 606"), which follows five basic steps to determine whether revenue can be recognized: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue when (or as) it satisfies its obligation by transferring control of the good or service to the customer. This is either satisfied over time or at a point in time. A performance obligation is satisfied over time if one of the following criteria are met: (i) the customer simultaneously receives and consumes the benefits as the Company performs, (ii) the Company's performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the Company's performance does not create an asset with an alternative use to the Company, and the Company has an enforceable right for payment of performance completed-to-date. When none of those is met, a performance obligation is satisfied at a point-in-time.

The Company recognizes storage revenue as the customer simultaneously receives and consumes the storage services (e.g., fixed storage fees based on the passage of time). The Company recognizes logistics (i.e., fulfillment) revenue when the customer receives the benefit of the services. The Company recognizes advertising and consulting revenues when the service is performed, and the benefit of the service is received by the customer. In aggregate, these types of service revenues account for less than 1% of the Company's consolidated revenues.

Interest Income

In accordance with Interest Topic 835 of the ASC ("ASC 835"), the following are interest income generating activities of the Company:

•

Secured Loans — The Company uses the effective interest method to recognize interest income on its secured loans transactions. The Company maintains a security interest in the precious metals and records interest income over the terms of the secured loan receivable. Recognition of interest income is suspended, and the loan is placed on non-accrual status when management determines that collection of future interest income is not probable. The interest income accrual is resumed, and previously suspended interest income is recognized, when the loan becomes contractually current and/or collection doubts are resolved. Cash receipts on impaired loans are recorded first against the principal and then to any unrecognized interest income. (See Note 5.)

•

Margin accounts — The Company earns a fee (interest income) under financing arrangements related to margin orders over the period during which customers have opted to defer making full payment on the purchase of metals.

•

Repurchase agreements — Repurchase agreements represent a form of secured financing whereby the Company sets aside specific metals for a customer and charges a fee on the outstanding value of these metals. The customer is granted the option (but not the obligation) to repurchase these metals at any time during the open reacquisition period. This fee is earned over the duration of the open reacquisition period and is classified as interest income.

•

Spot deferred orders — Spot deferred orders are a special type of forward delivery order that enable customers to purchase or sell certain precious metals from/to the Company at an agreed upon price but, are allowed to delay remitting or taking delivery up to a maximum of two years from the date of order. Even though the contract allows for physical delivery, it rarely occurs for this type of order. As a result, revenue is not recorded from these transactions. Spot deferred orders are considered a type of financing transaction, where the Company earns a fee (interest income) under spot deferred arrangements over the period in which the order is open.

Interest Expense

The Company accounts for interest expense on the following arrangements in accordance with Interest Topic 835 of the ASC ("ASC 835"):

•

Borrowings — The Company incurs interest expense from its lines of credit, its debt obligations, and notes payable using the effective interest method. (See Note 15.) Additionally, the Company amortizes capitalized loan costs to interest expense over the period of the loan agreement.

•

Loan servicing fees — When the Company purchases loan portfolios, the Company may have the seller service the loans that were purchased. The Company incurs a fee based on total interest charged to borrowers over the period the loans are outstanding. The servicing fee incurred by the Company is charged to interest expense.

•

Product financing arrangements — The Company incurs financing fees (classified as interest expense) from its product financing arrangements (also referred to as reverse-repurchase arrangements) with third-party finance companies for the transfer and subsequent option to reacquire its precious metal inventory at a later date. These arrangements are accounted for as secured borrowings. During the term of this type of agreement, the third-party charges a monthly fee as a percentage of the market value of the designated inventory, which the Company intends to reacquire in the future. No revenue is generated from these arrangements. The Company enters this type of transaction for additional liquidity.

•

Borrowed and leased metals fees — The Company may incur financing costs from its borrowed metal arrangements. The Company borrows precious metals (usually in the form of pool metals) from its suppliers and customers under short-term arrangements using other precious metals as collateral. Typically, during the term of these arrangements, the third-party charges a monthly fee as a percentage of the market value of the metals borrowed (determined at the spot price) plus certain processing and other fees.

Leased metal transactions are a similar type of transaction, except the Company is not required to pledge other precious metal as collateral for the precious metal received. The fees charged by the third-party are based on the spot value of the pool metal received.

Both borrowed and leased metal transactions provide an additional source of liquidity, as the Company usually monetizes the metals received under such arrangements. Repayment is usually in the same form as the metals advanced, but may be settled in cash.

Amortization of Debt Issuance Costs

Debt issuance costs incurred in connection with the issuance of the AMCF Notes have been included as a component of the carrying amount of the debt, and Trading Credit Facility debt issuance costs are included in prepaid expenses and other assets in the Company's condensed consolidated balance sheets. Debt issuance costs are amortized to interest expense over the contractual term of the debt. Debt issuance costs of the Trading Credit Facility are amortized on a straight-line basis, while all other debt issuance costs are amortized using the effective interest method. Amortization of debt issuance costs included in interest expense was $0.5 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively. Amortization of debt issuance costs included in interest expense was $1.6 million and $2.1 million for the nine months ended March 31, 2023 and 2022, respectively.

Earnings (Losses) from Equity Method Investments

The Company's proportional interest in the reported earnings and losses from equity method investments is shown on the condensed consolidated statements of income as earnings (losses) from equity method investments.

Other Income, Net

The Company's other income and expense is comprised of royalty and consulting income, which is recognized when earned.

Advertising

Advertising and marketing costs consist primarily of internet advertising, online marketing, direct mail, print media, and television commercials and are expensed when incurred. Advertising costs totaled $3.9 million and $3.3 million, respectively, for the three months ended March 31, 2023 and 2022. Advertising costs totaled $11.6 million and $9.1 million, respectively, for the nine months ended March 31, 2023 and 2022. Costs associated with the marketing and promotion of the Company's products are included within selling, general, and administrative expenses. Advertising costs associated with the operation of our SilverPrice.org and GoldPrice.org websites, which provide price information on silver, gold, and cryptocurrencies, are not included within selling, general, and administrative expenses, but are included in cost of sales in the condensed consolidated statements of income.

Shipping and Handling Costs

Shipping and handling costs represent costs associated with shipping product to customers and receiving product from vendors and are included in cost of sales in the condensed consolidated statements of income. Shipping and handling costs incurred totaled $6.8 million and $6.8 million, respectively, for the three months ended March 31, 2023 and 2022. Shipping and handling costs incurred totaled $20.6 million and $18.9 million, respectively, for the nine months ended March 31, 2023 and 2022.

Share-Based Compensation

The Company accounts for equity awards under the provisions of Compensation - Stock Compensation Topic 718 of the ASC ("ASC 718"), which establishes fair value-based accounting requirements for share-based compensation to employees. ASC 718 requires the Company to recognize the grant-date fair value of stock options and other equity-based compensation issued to employees as expense over the service period in the Company's condensed consolidated financial statements. The expense is adjusted for actual forfeitures of unvested awards as they occur. (See Note 17.)

Income Taxes

As part of the process of preparing its condensed consolidated financial statements, the Company is required to estimate its provision for income taxes in each of the tax jurisdictions in which it conducts business, in accordance with Income Taxes Topic 740 of the ASC ("ASC 740"). The Company computes its annual tax rate based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which it earns income. Significant judgment is required in determining the Company's annual tax rate and in evaluating uncertainty in its tax positions. The Company has adopted the provisions of ASC 740-10, which clarifies the accounting for uncertain tax positions. ASC 740-10 requires that the Company recognizes the impact of a tax position in the financial statements if the position is not more likely than not to be sustained upon examination based on the technical merits of the position. The Company recognizes interest and penalties related to certain uncertain tax positions as a component of income tax expense and the accrued interest and penalties are included in deferred and income taxes payable in the Company’s condensed consolidated balance sheets. See Note 13 for more information on the Company’s accounting for income taxes.

Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of the net deferred tax assets will not be realized. The factors used to assess the likelihood of realization include the Company's forecast of the reversal of temporary differences, future taxable income, and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company's effective tax rate on future earnings. Based on our assessment, it appears more likely than not that all of the net deferred tax assets will be realized through future taxable income.

Earnings per Share ("EPS")

The Company computes and reports both basic EPS and diluted EPS using the two-class method. Basic EPS is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding for the period, excluding any participating securities. Diluted EPS is computed by dividing net income allocated to common shares adjusted for reallocation of undistributed earnings of unvested restricted shares by the weighted average number of common shares determined for the basic EPS plus the dilutive effect of common stock equivalents using the treasury stock method based on the average market price for the period.

All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings. The Company’s vested restricted stock units are considered participating securities. The Company’s unvested restricted stock units are considered nonparticipating securities since they are forfeitable.

A reconciliation of shares used in calculating basic and diluted earnings per common share for the three and nine months ended March 31, 2023 and 2022 is presented below.


in thousands
	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Basic weighted-average shares of common stock outstanding		23,421		22,860		23,436		22,713
Effect of common stock equivalents		1,234		1,566		1,255		1,562
Diluted weighted-average shares outstanding		24,655		24,426		24,691		24,275

Actual common shares outstanding totaled 23,260,606 and 23,028,020 as of March 31, 2023 and 2022, respectively.

Recently Adopted Accounting Pronouncements and Auditing Standards

From time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC”) are communicated through issuance of an Accounting Standards Update (“ASU”).

In June 2016, the FASB issued ASU No. 2016-13, (“ASU 2016-13”), Financial Instruments - Credit Loss (Topic 326), which updates the guidance on recognition and measurement of credit losses for financial assets. The new guidance, known as the current expected credit loss model ("CECL"), requires entities to adopt an impairment model based on expected losses rather than incurred losses. This update was effective for the Company on July 1, 2022 (for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years). The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU’s 2018-19, 2019-05, 2019-10, 2019-11, 2020-02, and 2022-02. These ASU’s have provided for various minor technical corrections and improvements to the codification as well as other transition matters. The Company does not have a history of credit losses. The adoption of this guidance did not have a material impact on the Company’s financial statements.

Recent Accounting Pronouncements Not Yet Adopted

Management does not believe that any other recently issued, but not yet effective, accounting pronouncement if currently adopted would have a material effect on the Company's condensed consolidated financial statements.

3. ASSETS AND LIABILITIES, AT FAIR VALUE

Fair Value of Financial Instruments

A financial instrument is defined as cash, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from a second entity. The fair value of financial instruments represents amounts that would be received upon the sale of those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. Those judgments are developed by the Company based on the best information available in the circumstances, including expected cash flows and appropriately risk adjusted discount rates, and available observable and unobservable inputs.

For most of the Company's financial instruments, the carrying amount approximates fair value. The carrying amounts of cash, receivables, secured loans receivable, accounts payable and other current liabilities, accrued liabilities, and income taxes payable approximate fair value due to their short-term nature. The carrying amounts of derivative assets and derivative liabilities, liabilities on borrowed metals and product financing arrangements are marked-to-market on a daily basis to fair value. The carrying amounts of lines of credit approximate fair value based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities.

The Company’s AMCF Notes are reported at their aggregate principal amount less unamortized original issue discount and deferred financing costs on the accompanying condensed consolidated balance sheets. The fair value of the AMCF Notes is based on the present value of the expected coupon and principal payments using an estimated discount rate based on current market rates for debt with similar credit risk. The following table presents the carrying amounts and estimated fair values of the Company’s AMCF Notes as of March 31, 2023 and June 30, 2022:


in thousands
	March 31, 2023				June 30, 2022
	Carrying Amount		Fair value		Carrying Amount		Fair value
AMCF Notes	$	94,644	$	91,441	$	94,073	$	92,398

Valuation Hierarchy

In determining the fair value of its financial instruments, the Company employs a fair value hierarchy that prioritizes the inputs for the valuation techniques used to measure fair value. ASC 820 established a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•

Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

•

Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•

Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The significant assumptions used to determine the carrying value and the related fair value of the assets and liabilities measured at fair value on a recurring basis are described below:

Inventories. The Company's inventory, which consists primarily of bullion and bullion coins, is acquired and initially recorded at cost and then marked to fair market value. The fair market value of the bullion and bullion coins comprises two components: i) published market values attributable to the cost of the raw precious metal, and ii) the published market values attributable to the premium, which is attributable to the incremental value of the product in its finished goods form. The market value attributable solely to such premium is readily determinable by reference to multiple reputable published sources. Except for commemorative coin inventory, which are included in inventory at the lower of cost or net realizable value, the Company’s inventory is subsequently recorded at their fair market values on a daily basis. The fair value for commodities inventory (i.e., inventory excluding commemorative coins) is determined using pricing data derived from the markets on which the underlying commodities are traded. Precious metals commodities inventory is classified in Level 1 of the valuation hierarchy.

Precious Metals held under Financing Arrangements. The Company enters into arrangements with certain customers under which A-Mark purchases precious metals from the customers which are subject to repurchase by the customer at the spot value of the product on the repurchase date. The precious metals purchased under these arrangements consist of rare and unique items, and therefore the Company accounts for these transactions as precious metals held under financing arrangements, which generate financing income rather than revenue earned from precious metals inventory sales. In these repurchase arrangements, the Company holds legal title to the metals and earns financing income for the duration of the agreement. The fair value for precious metals held under financing arrangements, (a commodity, like inventory above) is determined using pricing data derived from the markets on which the underlying commodities are traded. Precious metals held under financing arrangements are classified in Level 1 of the valuation hierarchy.

Derivatives. Futures contracts, forward contracts, and open sale and purchase commitments are valued at their fair values, based on the difference between the quoted market price and the contractual price (i.e., intrinsic value,) and are included within Level 1 of the valuation hierarchy.

Margin and Borrowed Metals Liabilities. Margin and borrowed metals liabilities consist of the Company's commodity obligations to margin customers and suppliers, respectively. Margin liabilities and borrowed metals liabilities are carried at fair value, which is determined using quoted market pricing and data derived from the markets on which the underlying commodities are traded. Margin and borrowed metals liabilities are classified in Level 1 of the valuation hierarchy.

Product Financing Arrangements. Product financing arrangements consist of financing agreements for the transfer and subsequent re-acquisition of the sale of gold and silver at an agreed-upon price based on the spot price with a third-party. Such transactions allow the Company to repurchase this inventory on the termination (repurchase) date. The third-party charges monthly interest as a percentage of the market value of the outstanding obligation, which is carried at fair value. The obligation is stated at the amount required to repurchase the outstanding inventory. Fair value is determined using quoted market pricing and data derived from the markets on which the underlying commodities are traded. Product financing arrangements are classified in Level 1 of the valuation hierarchy.

Option to Purchase Interests in a Long-term Investment. The fair value of the option to purchase additional ownership interest in Silver Gold Bull, Inc, which is exercisable between December 2023 and September 2024, was determined by an independent third-party valuation firm and was recorded as a component of other long-term assets on the condensed consolidated balance sheets. This option is classified in Level 3 of the valuation hierarchy.

The value of the option was determined using a Monte Carlo Simulation model ("MCS model"). The MCS model includes inputs based on significant assumptions related to management’s forecasts of the investee’s earnings-before-interest-taxes-depreciation-amortization ("EBITDA") and corresponding future total equity simulations, where an early exercise multiple is calibrated to maximize the fair value of the option during the exercise period. For each simulation path, option payoffs are calculated based on the contractual terms, and then discounted at the term-matched risk-free rate, where the value of the option is calculated as the average present value over all simulated paths. Refer to the 2022 Annual Report for information about the certain assumptions in the MCS model that was used to determine that valuation of the option to purchase interest in a long-term investment.

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and June 30, 2022, aggregated by each fair value hierarchy level:


in thousands
	March 31, 2023
	Quoted Price in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Inventories(1)	$	966,564	$	—	$	—	$	966,564
Precious metals held under financing arrangements		24,014		—		—		24,014
Derivative assets — open sale and purchase commitments, net		56,624		—		—		56,624
Derivative assets — forward contracts		1,832		—		—		1,832
Option to purchase interest in a long-term investment		—		—		5,300		5,300
Total assets, valued at fair value	$	1,049,034	$	—	$	5,300	$	1,054,334
Liabilities:
Liabilities on borrowed metals	$	25,730	$	—	$	—	$	25,730
Product financing arrangements		292,104		—		—		292,104
Derivative liabilities — open sale and purchase commitments, net		10,599		—		—		10,599
Derivative liabilities — margin accounts		5,564		—		—		5,564
Derivative liabilities — futures contracts		10,071		—		—		10,071
Derivative liabilities — forward contracts		57,096		—		—		57,096
Total liabilities, valued at fair value	$	401,164	$	—	$	—	$	401,164

(1)

Commemorative coin inventory totaling $1.0 million is held at lower of cost or realizable value, and thus is excluded from the inventories balance shown in this table.


in thousands
	June 30, 2022
	Quoted Price in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Inventories(1)	$	739,584	$	—	$	—	$	739,584
Precious metals held under financing arrangements		79,766		—		—		79,766
Derivative assets — open sale and purchase commitments, net		27,423		—		—		27,423
Derivative assets — futures contracts		20,245		—		—		20,245
Derivative assets — forward contracts		44,075		—		—		44,075
Option to purchase interest in a long-term investment		—		—		5,300		5,300
Total assets, valued at fair value	$	911,093	$	—	$	5,300	$	916,393
Liabilities:
Liabilities on borrowed metals	$	59,417	$	—	$	—	$	59,417
Product financing arrangements		282,671		—		—		282,671
Derivative liabilities — open sale and purchase commitments, net		70,564		—		—		70,564
Derivative liabilities — margin accounts		4,686		—		—		4,686
Derivative liabilities — forward contracts		530		—		—		530
Total liabilities, valued at fair value	$	417,868	$	—	$	—	$	417,868

(1)

Commemorative coin inventory totaling $1.4 million is held at lower of cost or net realizable value, and thus is excluded from the inventories balance shown in this table.

There were no transfers in or out of Level 2 or 3 from other levels within the fair value hierarchy during the reported periods.

Assets Measured at Fair Value on a Non-Recurring Basis

Certain assets are measured at fair value on a nonrecurring basis. These assets are not measured at fair value on an on-going basis, but are subject to fair value adjustments only under certain circumstances. These include (i) investments in private companies when there are identifiable events or changes in circumstances that may have a significant adverse impact on the fair value of these assets, (ii) equity method investments that are remeasured to the acquisition-date fair value upon the Company obtaining a controlling interest in the investee during a step acquisition, (iii) property, plant, and equipment and definite-lived intangibles, (iv) digital assets, (v) goodwill, or (vi) indefinite-lived intangibles, all of which are written down to fair value when they are held for sale or determined to be impaired.

With the exception of digital assets, our non-recurring valuations use significant unobservable inputs and significant judgments and therefore fall under Level 3 of the fair value hierarchy. The valuation inputs include assumptions on the appropriate discount rates, long-term growth rates, relevant comparable company earnings multiples, and the amount and timing of expected future cash flows. The cash flows employed in the analyses are based on the Company’s estimated outlook and various growth rates. Discount rate assumptions are based on an assessment of the risk inherent in the future cash flows of the respective equity method investment, asset group, or reporting unit. In assessing the reasonableness of its determined fair values, the Company evaluates its results against other value indicators, such as comparable transactions and comparable public company trading values. The Company used a third-party independent valuation specialist to assist us to determine the fair value of the net assets acquired in connection with Company’s step acquisition of JMB.

The fair value of the Company's digital assets is determined quarterly in accordance with ASC 820 and is based on quoted prices on the active exchange(s) that we have determined is the principal market for such assets (Level 1 inputs). When the quoted prices on active exchanges decrease and indicate that it is more likely than not that our digital assets are impaired, we consider the lowest market price of one unit of digital asset quoted on the active exchange since acquiring the digital asset. If the then current carrying value of a digital asset exceeds the fair value so determined, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined. As of March 31, 2023, the carrying amounts and estimated fair values of the Company’s digital assets totaled $0.2 million and $0.2 million, respectively. As of June 30, 2022, the carrying amounts and estimated fair values of the Company’s digital assets totaled $0.2 million and $0.2 million, respectively.

5. SECURED LOANS RECEIVABLE

Below is a summary of the carrying value of our secured loans as of March 31, 2023 and June 30, 2022:


in thousands
	March 31, 2023		June 30, 2022
Secured loans originated	$	61,617	$	44,498
Secured loans acquired		35,239		81,719
	$	96,856	$	126,217

Secured Loans - Originated: Secured loans include short-term loans, which include a combination of on-demand lines and short-term facilities. These loans are fully secured by the customers' assets, which predominantly include bullion and numismatic and semi-numismatic material, and which are typically held in safekeeping by the Company.

Secured Loans - Acquired: Secured loans also include short-term loans, which include a combination of on-demand lines and short-term facilities that are purchased from our customers. The Company acquires a portfolio of their loan receivables at a price that approximates the outstanding balance of each loan in the portfolio, as determined on the effective transaction date. Each loan in the portfolio is fully secured by the borrowers' assets, which include bullion and numismatic and semi-numismatic material, and which are typically held in safekeeping by the Company. The seller of the loan portfolio generally retains the responsibility for the servicing and administration of the loans.

As of March 31, 2023 and June 30, 2022, our secured loans carried weighted-average effective interest rates of 10.2% and 9.4%, respectively, and mature in periods ranging typically from on-demand to one year.

The secured loans that the Company generates with active customers of A-Mark are reflected as an operating activity on the condensed consolidated statements of cash flows. The secured loans that the Company generates with borrowers that are not active customers of A-Mark are reflected as an investing activity on the condensed consolidated statements of cash flows as secured loans receivables, net. For the secured loans that (i) are reflected as an investing activity and have terms that allow the borrowers to increase their loan balance (at the discretion of the Company) based on the excess value of their collateral compared to their aggregate principal balance of loan, and (ii) are repayable on demand or in the short-term, the borrowings and repayments are netted on the condensed consolidated statements of cash flows.

Credit Quality of Secured Loans Receivables and Allowance for Credit Losses

General

The Company's secured loan receivables portfolio comprises loans with similar credit risk profiles, which enables the Company to apply a standard methodology to determine the credit quality for each loan and the allowance for credit losses, if any.

The credit quality of each loan is generally determined by the collateral value assessment, loan-to-value (“LTV”) ratio (that is, the principal amount of the loan divided by the estimated value of the collateral) and the type (or class) of secured material. All loans are fully secured by precious metal bullion, numismatic and semi-numismatic collateral, or graded sports cards and sports memorabilia, which remains in the physical custody of the Company for the duration of the loan. The term of the loans is generally 180 days, however loans are typically renewed prior to maturity and therefore remain outstanding for a longer period of time. Interest earned on a loan is billed monthly and is typically due and payable within 20 days and, if not paid after all applicable grace periods, is added to the outstanding principal balance, and late fees and default interest rates are assessed.

When an account is in default or if a margin call has not been met on a timely basis, the Company has the right to liquidate the borrower's collateral in order to satisfy the unpaid balance of the outstanding loans, including accrued and unpaid interest.

Class and Credit Quality of Loans

The three classes of secured loan receivables are defined by collateral type: (i) bullion, (ii) numismatic and semi-numismatic and (iii) graded sports cards and sports memorabilia. The Company required LTV ratios vary with the class of loans. Typically, the Company requires an LTV ratio of approximately 75% for bullion, 65% for numismatic and semi-numismatic collateral, and 50% for graded sports cards and sports memorabilia. The LTV ratio for loans collateralized by numismatic and semi-numismatic collateral is typically lower on a percentage basis than bullion collateralized loans because a higher value of the numismatic and semi-numismatic collateral relates to its premium value, rather than its underlying commodity value. The LTV ratio for loans collateralized by graded sports cards and sports memorabilia is lower because the underlying collateral is not as liquid as bullion and numismatic and semi-numismatic collateral.

The Company's secured loans by portfolio class, which align with internal management reporting, were as follows:


in thousands
	March 31, 2023				June 30, 2022
Bullion	$	53,445	55.2	%	$	95,691	75.8	%
Numismatic and semi-numismatic		41,627	43.0	%		30,231	24.0	%
Graded sports cards and sports memorabilia		1,784	1.8	%		295	0.2	%
	$	96,856	100.0	%	$	126,217	100.0	%

Due to the nature of market fluctuations of precious metal commodity prices, the Company monitors the bullion collateral value of each loan on a daily basis, based on spot price of precious metals. Numismatic and graded sports cards and sports memorabilia collateral values are updated by numismatic and graded sports cards and sports memorabilia specialists typically within every 90 days and when loan terms are renewed.

Generally, we initiate the margin call process when the outstanding loan balance is in excess of 85% of the current value of the underlying collateral. In the event that a borrower fails to meet a margin call to reestablish the required LTV ratio, the loan is considered in default. The collateral material (either bullion, numismatic or graded sports cards and sports memorabilia) underlying such loans is then sold by the Company to satisfy all amounts due under the loan.

Loans with LTV ratios of less than 75% are generally considered to be higher quality loans. Below is summary of aggregate outstanding secured loan balances bifurcated into (i) loans with an LTV ratio of less than 75% and (ii) loans with an LTV ratio of 75% or more:


in thousands
	March 31, 2023				June 30, 2022
Loan-to-value of less than 75%	$	90,025	92.9	%	$	49,503	39.2	%
Loan-to-value of 75% or more		6,831	7.1	%		76,714	60.8	%
	$	96,856	100.0	%	$	126,217	100.0	%

The Company had no loans with an LTV ratio in excess of 100% as of March 31, 2023 and June 30, 2022.

Non-Performing Loans/Impaired Loans

Historically, the Company has not established an allowance for any credit losses because the Company has liquidated the collateral to satisfy the amount due before any loan becomes non-performing or impaired.

Non-performing loans have the highest probability for credit loss. The allowance for secured loan credit losses attributable to non-performing loans is based on the most probable source of repayment, which is normally the liquidation of collateral. Due to the accelerated liquidation terms of the Company's loan portfolio, past due loans are generally liquidated within 90 days of default before a loan becomes non-performing. In the event a loan was to become non-performing, the Company would determine a reserve to reduce the carrying balance to its estimated net realizable value. As of March 31, 2023 and June 30, 2022, the Company had no allowance for secured loan losses or loans classified as non-performing.

A loan is considered impaired if it is probable, based on current information and events, that the Company will be unable to collect all amounts due according to the contractual terms of the loan. Customer loans are reviewed for impairment and include loans that are past due or non-performing, or if the customer is in bankruptcy. In the event of an impairment, recognition of interest income would be suspended, and the loan would be placed on non-accrual status at the time. Accrual would be resumed, and previously suspended interest income would be recognized, when the loan becomes contractually current and/or collection doubts are removed. Cash receipts on impaired loans are recorded first against the receivable and then to any unrecognized interest income. For the three and nine months ended March 31, 2023 and 2022, the Company incurred no loan impairment costs and no loans were placed on a non-accrual status.

9. GOODWILL AND INTANGIBLE ASSETS

Goodwill is an intangible asset that arises when a company acquires an existing business or assets (net of assumed liabilities) which comprise a business. In general, the amount of goodwill recorded in an acquisition is calculated as the purchase price of the business minus the fair market value of the tangible assets and the identifiable intangible assets, net of the assumed liabilities. Goodwill and intangibles can also be established by push-down accounting. Below is a summary of the significant transactions that generated goodwill and intangible assets of the Company:

•

In connection with the Company's formation of AMST in August 2016, the Company recorded an additional $2.5 million and $4.3 million of identifiable intangible assets and goodwill, respectively; these values were based upon an independent appraisal and represent their fair values at the acquisition date. The Company’s investment in AMST has resulted in synergies between the acquired minting operation and the Company’s established distribution network by providing a steadier and more reliable fabricated source of silver during times of market volatility. The Company considers that much of the acquired goodwill relates to the “ready state” of AMST's established minting operation with existing quality processes, procedures, and ability to scale production to meet market needs.

•

In connection with the Company's acquisition of Goldline in August 2017, the Company recorded $5.0 million and $1.4 million of additional identifiable intangible assets and goodwill, respectively; these values were based upon an independent appraisal and represent their fair values at the acquisition date. The Company’s investment in Goldline created synergies between Goldline's direct marketing operation and the Company’s established distribution network, secured storage and lending operations that has led to increased product margin spreads, and lower distribution and storage costs for Goldline.

•

In March 2021, the Company acquired 100% ownership of JMB, in which we previously held a 20.5% equity interest. At the acquisition date we measured the value of identifiable intangible assets and goodwill at $98.0 million and $92.1 million, respectively.

•

In October 2022, JMB acquired $4.5 million of intangible assets that included: BGASC’s website, domain name, trademarks, logos, customer list, and all intellectual property.

Carrying Value

The carrying value of goodwill and other purchased intangibles as of March 31, 2023 and June 30, 2022 was as described below:


dollar amounts in thousands
			March 31, 2023										June 30, 2022
	Estimated Useful Lives (Years)	Remaining Weighted Average Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Accumulated Impairment			Net Book Value
Identifiable intangible assets:
Existing customer relationships	5 - 15	2.5	$	55,541	$	(45,001	)	$	—		$	10,540	$	53,498	$	(38,831	)	$	—		$	14,667
Developed technology	4	2.1		10,982		(5,390	)		—			5,592		10,500		(3,366	)		—			7,134
Non-compete and other	3 - 5	4.5		2,310		(2,300	)		—			10		2,300		(2,300	)		—			—
Employment agreement	1 - 3	0		295		(295	)		—			—		295		(295	)		—			—
Intangibles subject to amortization				69,128		(52,986	)		—			16,142		66,593		(44,792	)		—			21,801
Tradenames and trademarks	Indefinite	Indefinite		49,429		—			(1,290	)		48,139		47,454		—			(1,290	)		46,164
Identifiable intangible assets			$	118,557	$	(52,986	)	$	(1,290	)	$	64,281	$	114,047	$	(44,792	)	$	(1,290	)	$	67,965

Goodwill	Indefinite	Indefinite	$	102,307	$	—		$	(1,364	)	$	100,943	$	102,307	$	—		$	(1,364	)	$	100,943

The Company's intangible assets are subject to amortization except for trade names and trademarks, which have an indefinite life. Existing customer relationships intangible assets are amortized in a manner reflecting the pattern in which the economic benefits of the assets are consumed. All other intangible assets subject to amortization are amortized using the straight-line method over their useful lives, which are estimated to be one to fifteen years. Amortization expense related to the Company's intangible assets for the three months ended March 31, 2023 and 2022 was $2.7 million and $7.2 million, respectively. Amortization expense related to the Company's intangible assets for the nine months ended March 31, 2023 and 2022 was $8.2 million and $22.9 million, respectively. For the presented periods, amortization expense allocable to cost of sales was not significant.

Impairment

We recorded a non-recurring impairment charge of $2.7 million (goodwill and indefinite-lived intangible assets) in fiscal 2018 related to Goldline. Other than the impairment charge related to Goldline, we have not recorded any impairment of goodwill or indefinite-lived intangible assets.

Estimated Amortization

Estimated annual amortization expense related to definite-lived intangible assets for the succeeding five years is as follows (in thousands):


Fiscal Year Ending June 30,	Amount
2023 (remainder of year)	$	2,147
2024		8,015
2025		4,874
2026		681
2027		233
Thereafter		192
	$	16,142

12. DERIVATIVE INSTRUMENTS AND HEDGING TRANSACTIONS

The Company is exposed to market risk, such as changes in commodity prices and foreign exchange rates. To manage the volatility related to these exposures, the Company enters into various derivative products, such as forwards and futures contracts. By policy, the Company historically has entered into derivative financial instruments for the purpose of hedging substantially all of Company's market exposure to precious metals prices, and not for speculative purposes. The Company’s gains (losses) on derivative instruments are substantially offset by the changes in the fair market value of the underlying precious metals inventory, both of which are recorded in cost of sales in the condensed consolidated statements of income.

Commodity Price Management

The Company manages the value of certain assets and liabilities of its trading business, including trading inventory, by employing a variety of hedging strategies. These strategies include the management of exposure to changes in the market values of the Company's trading inventory through the purchase and sale of a variety of derivative instruments, such as forwards and futures contracts.

The Company enters into derivative transactions solely for the purpose of hedging its inventory subject to price risk, and not for speculative market purposes. Due to the nature of the Company's global hedging strategy, the Company is not using hedge accounting as defined under ASC 815, whereby the gains or losses would be deferred and included as a component of other comprehensive income. Instead, gains or losses resulting from the Company's futures and forward contracts and open sale and purchase commitments are reported in the condensed consolidated statements of income as unrealized gains or losses on commodity contracts (a component of cost of sales) with the related unrealized amounts due from or to counterparties reflected as derivative assets or liabilities on the condensed consolidated balance sheets.

The Company's trading inventory and purchase and sale transactions consist primarily of precious metal products. The value of these assets and liabilities are marked-to-market daily to the prevailing closing price of the underlying precious metals. The Company's precious metals inventory is subject to fluctuations in market value, resulting from changes in the underlying commodity prices. Inventory purchased or borrowed by the Company is subject to price changes. Inventory borrowed is considered a natural hedge, since changes in value of the metal held are offset by the obligation to return the metal to the supplier.

Open sale and purchase commitments are subject to changes in value between the date the purchase or sale price is fixed (the trade date) and the date the metal is received or delivered (the settlement date). The Company seeks to minimize the effect of price changes of the underlying commodity through the use of forward and futures contracts. The Company’s open sale and purchase commitments typically settle within 2 business days, and for those commitments that do not have stated settlement dates, the Company has the right to settle the positions upon demand.

The Company's policy is to substantially hedge its inventory position, net of open sale and purchase commitments that are subject to price risk, and regularly enters into precious metals commodity forward and futures contracts with financial institutions to hedge against this risk. The Company uses futures contracts, which typically settle within 30 days, for its shorter-term hedge positions, and forward contracts, which may remain open for up to 6 months, for its longer-term hedge positions. The Company has access to all of the precious metals markets, allowing it to place hedges. The Company also maintains relationships with major market makers in every major precious metal dealing center.

The Company’s management sets credit and position risk limits. These limits include gross position limits for counterparties engaged in sales and purchase transactions with the Company. They also include collateral limits for different types of sale and purchase transactions that counterparties may engage in from time to time.

Derivative Assets and Liabilities

The Company's derivative assets and liabilities represent the net fair value of the difference (or intrinsic value) between market values and trade values at the trade date for open precious metals sale and purchase contracts, as adjusted on a daily basis for changes in market values of the underlying metals, until settled. The Company's derivative assets and liabilities also include the net fair value of open precious metals forwards and futures contracts. The precious metals forwards and futures contracts are settled at the contract settlement date.

All of our commodity derivative contracts are under master netting arrangements and include both asset and liability positions (i.e., offsetting derivative instruments). As such, for the Company's derivative contracts with the same counterparty, the receivables and payables have been netted on the condensed consolidated balance sheets. Such derivative contracts include open sale and purchase commitments, futures, forwards and margin accounts. The aggregate gross and net derivative receivables and payables balances by contract type and type of hedge, as of March 31, 2023 and June 30, 2022 were as follows:


in thousands
	March 31, 2023										June 30, 2022
	Gross Derivative		Amounts Netted			Cash Collateral Pledge			Net Derivative		Gross Derivative		Amounts Netted			Cash Collateral Pledge			Net Derivative
Nettable derivative assets:
Open sale and purchase commitments	$	70,155	$	(13,531	)	$	—		$	56,624	$	34,821	$	(7,398	)	$	—		$	27,423
Future contracts		—		—			—			—		20,245		—			—			20,245
Forward contracts		1,832		—			—			1,832		44,075		—			—			44,075
	$	71,987	$	(13,531	)	$	—		$	58,456	$	99,141	$	(7,398	)	$	—		$	91,743
Nettable derivative liabilities:
Open sale and purchase commitments	$	14,117	$	(3,518	)	$	—		$	10,599	$	72,937	$	(2,373	)	$	—		$	70,564
Margin accounts		21,873		—			(16,309	)		5,564		26,984		—			(22,298	)		4,686
Future contracts		10,071		—			—			10,071		—		—			—			—
Forward contracts		57,096		—			—			57,096		530		—			—			530
	$	103,157	$	(3,518	)	$	(16,309	)	$	83,330	$	100,451	$	(2,373	)	$	(22,298	)	$	75,780

Gains or Losses on Derivative Instruments

The Company records the derivative at the trade date with a corresponding unrealized gains or losses, shown as a component of cost of sales in the condensed consolidated statements of income. The Company adjusts the derivatives to fair value on a daily basis until the transactions are settled. When these contracts are net settled, the unrealized gains and losses are reversed and the realized gains and losses for forward contracts are recorded in revenue and cost of sales, and the net realized gains and losses for futures are recorded in cost of sales.

Below is a summary of the net gains (losses) on derivative instruments for the three and nine months ended March 31, 2023 and 2022:


in thousands
	Three Months Ended March 31,					Nine Months Ended March 31,
	2023		2022			2023			2022
Gains (losses) on derivative instruments:
Unrealized gains (losses) on open future commodity and forward contracts and open sale and purchase commitments, net	$	36,654	$	23,411		$	(39,907	)	$	(34,694	)
Realized gains (losses) on future commodity contracts, net		12,826		(16,457	)		44,007			26,355
	$	49,480	$	6,954		$	4,100		$	(8,339	)

The Company’s net gains (losses) on derivative instruments, as shown in the table above, were substantially offset by the changes in the fair market value of the underlying precious metals inventory, which were also recorded in cost of sales in the condensed consolidated statements of income.

Summary of Hedging Positions

In a hedging relationship, the change in the value of the derivative financial instrument is offset to a great extent by the change in the value of the underlying hedged item. The following table summarizes the results of our hedging activities, which shows the precious metal commodity inventory position, net of open sale and purchase commitments, that was subject to price risk as of March 31, 2023 and June 30, 2022:


in thousands
	March 31, 2023			June 30, 2022
Inventories	$	967,518		$	741,018
Precious metals held under financing arrangements		24,014			79,766
		991,532			820,784
Less unhedgeable inventories:
Commemorative coin inventory, held at lower of cost or net realizable value		(954	)		(1,434	)
Premium on metals position		(30,865	)		(27,059	)
Precious metal value not hedged		(31,819	)		(28,493	)

Commitments at market:
Open inventory purchase commitments		1,075,916			681,835
Open inventory sales commitments		(753,815	)		(497,949	)
Margin sale commitments		(21,873	)		(26,984	)
In-transit inventory no longer subject to market risk		(26,449	)		(13,164	)
Unhedgeable premiums on open commitment positions		20,568			12,933
Borrowed precious metals		(25,730	)		(59,417	)
Product financing arrangements		(292,104	)		(282,671	)
Advances on industrial metals		1,234			768
		(22,253	)		(184,649	)

Precious metal subject to price risk		937,460			607,642

Precious metal subject to derivative financial instruments:
Precious metals forward contracts at market values		741,100			278,326
Precious metals futures contracts at market values		176,493			326,713
Total market value of derivative financial instruments		917,593			605,039

Net precious metals subject to commodity price risk	$	19,867		$	2,603

Net precious metals subject to commodity price risk at March 31, 2023 includes the impact of projected sales activity between market close on March 31, 2023 and market opening on the next business day.

Notional Balances of Derivatives

The notional balances of the Company's derivative instruments, consisting of contractual metal quantities, are expressed at current spot prices of the underlying precious metal commodity. As of March 31, 2023 and June 30, 2022, the Company had the following outstanding commitments and open forward and future contracts:


in thousands
	March 31, 2023			June 30, 2022
Purchase commitments	$	1,075,916		$	681,835
Sales commitments	$	(753,815	)	$	(497,949	)
Margin sales commitments	$	(21,873	)	$	(26,984	)
Open forward contracts	$	741,100		$	278,326
Open futures contracts	$	176,493		$	326,713

The contract amounts (i.e., notional balances) of the Company's forward and futures contracts and the open sales and purchase commitments are not reflected in the accompanying condensed consolidated balance sheet. The Company records the difference between the market price of the underlying metal or contract and the trade amount at fair value.

The Company is exposed to the risk of failure of the counterparties to its derivative contracts. Significant judgment is applied by the Company when evaluating the fair value implications. The Company regularly reviews the creditworthiness of its major counterparties and monitors its exposure to concentrations. On March 31, 2023, the Company believes its risk of counterparty default is mitigated as a result of such evaluation and the short-term duration of these arrangements.

Foreign Currency Exchange Rate Management

The Company utilizes foreign currency forward contracts to manage the effect of foreign currency exchange fluctuations on its sale and purchase transactions. These contracts generally have maturities of less than one week.

The market values (fair values) of the Company’s foreign exchange forward contracts and the net open sale and purchase commitment transactions, denominated in foreign currencies, outstanding were as follows:


in thousands
	March 31, 2023		June 30, 2022
Foreign exchange forward contracts	$	9,596	$	9,738
Open sale and purchase commitment transactions, net	$	8,963	$	10,371

13. INCOME TAXES

Net income from operations before provision for income taxes for the three and nine months ended March 31, 2023 and 2022 is shown below:


in thousands
	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
U.S.	$	45,766	$	45,919	$	146,895	$	119,380
Foreign		7		2		33		26
	$	45,773	$	45,921	$	146,928	$	119,406

The Company files a consolidated federal income tax return based on a June 30 tax year end. The provision for income tax expense by jurisdiction and the effective tax rate for the three and nine months ended March 31, 2023 and 2022 are shown below:


in thousands
	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
Current:
Federal	$	9,171		$	7,579		$	29,074		$	21,066
State and local		606			790			3,000			2,714
Foreign		(2	)		6			22			17
Income tax expense	$	9,775		$	8,375		$	32,096		$	23,797

Effective income tax rate		21.4	%		18.2	%		21.8	%		19.9	%

For the three and nine months ended March 31, 2023, our effective tax rate differs from the federal statutory rate primarily due to the foreign derived intangible income special deduction, the excess tax benefit from share-based compensation, partially offset by

Section 162(m) executive compensation disallowance and state taxes (net of federal tax benefit). For the three and nine months ended March 31, 2022, our effective tax rate differs from the federal statutory rate primarily due to foreign derived intangible income special deduction, the excess tax benefit from share-based compensation, partially offset by state taxes (net of federal tax benefit), and other normal course non-deductible expenditures.

Income Taxes Receivable and Payable

As of March 31, 2023 and June 30, 2022, income tax receivable totaled $0.9 million and $0.0 million, respectively. As of March 31, 2023 and June 30, 2022, income tax payable totaled $0.0 million and $0.4 million, respectively.

Deferred Tax Assets and Liabilities

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized by evaluating both positive and negative evidence. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As of March 31, 2023 and June 30, 2022, management concluded that it was more likely than not that the Company would be able to realize the benefit of the U.S. federal and state deferred tax assets. We based this conclusion on historical and projected operating performance, as well as our expectation that our operations will generate sufficient taxable income in future periods to realize the tax benefits associated with the deferred tax assets. A tax valuation allowance was considered unnecessary, as management concluded that it was more likely than not that the Company would be able to realize the benefit of the U.S. federal and state deferred tax assets.

As of March 31, 2023, the condensed consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax liability of $0.8 million and a federal deferred tax liability of $14.0 million. As of June 30, 2022, the condensed consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax liability of $0.9 million and a federal deferred tax liability of $14.5 million.

Net Operating Loss Carryforwards

As of March 31, 2023 and June 30, 2022, the Company has approximately $12.2 million and $12.2 million of state net operating loss carryforwards, respectively. The Company's state tax-effected net operating loss carryforwards totaled $0.9 million and $0.9 million, as of March 31, 2023 and June 30, 2022, respectively. These state net operating loss carryforwards start to expire in the year ending June 30, 2030.

Unrecognized Tax Benefits

The Company has taken or expects to take certain tax benefits on its income tax return filings that it has not recognized as a tax benefit (i.e., an unrecognized tax benefit) on its condensed consolidated statements of income. The Company's measurement of its uncertain tax positions is based on management's assessment of all relevant information, including, but not limited to prior audit experience, audit settlement, or lapse of the applicable statute of limitations. As of March 31, 2023, there have been no material changes to our unrecognized tax benefits or any related interest or penalties since June 30, 2022.

14. RELATED PARTY TRANSACTIONS

Related parties include entities which the Company controls or has the ability to significantly influence, and entities which are under common control with the Company. Related parties also include persons who are affiliated with related entities or the Company who are in a position to influence corporate decisions (such as owners, executives, board members and their families). In the normal course of business, we enter into transactions with our related parties. Below is a list of related parties with whom we have had significant transactions during the presented periods:

Stack’s Bowers Numismatics, LLC ("Stack's Bowers Galleries"). Stack's Bowers Galleries is a wholly-owned subsidiary of Spectrum Group International, Inc. ("SGI"). 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.

Equity method investees. As of March 31, 2023, the Company has five investments in privately-held entities which have been determined to be equity method investees and related parties.

Our related party transactions include (i) sales and purchases of precious metals, (ii) financing activities, (iii) repurchase arrangements, and (iv) hedging transactions. Below is a summary of our related party transactions. The amounts presented for each period were based on each entity’s related party status for that period.

Balances with Related Parties

Receivables and Payables, Net

As of March 31, 2023 and June 30, 2022, the Company had related party receivables and payables balances as set forth below:


in thousands
	March 31, 2023						June 30, 2022
	Receivables			Payables			Receivables			Payables
Stack's Bowers Galleries	$	164	(1)	$	—		$	—		$	1,802	(3)
Equity method investees		1,456	(1)		4,074	(2)		3,060	(1)		173	(3)
	$	1,620		$	4,074		$	3,060		$	1,975

(1)

Balance includes trade receivables and other receivables, net

(2)

Balance includes note payables, trade payables, and other payables, net

(3)

Balance primarily represents trade payables and other payables, net

Long-term Investments

As of March 31, 2023 and June 30, 2022, the aggregate carrying balance of the equity method investments was $80.8 million and $70.6 million respectively. (See Note 10.)

Long-term Other Assets

As of March 31, 2023 and June 30, 2022, the fair value of the option to purchase an additional 27.6% ownership interest in Silver Gold Bull, Inc. was $5.3 million and $5.3 million, respectively. This option was acquired in June 2022, in conjunction with the Company’s acquisition of an additional 40% ownership interest in Silver Gold Bull, Inc., and is exercisable between December 2023 and September 2024. (See Note 10.)

Notes Payable

On April 1, 2021, CCP entered into a loan agreement ("CCP Note") with CFC, which provides CFC with up to $4.0 million to fund commercial loans secured by graded sports cards and sports memorabilia to its borrowers. All loans to be funded using the proceeds from the CCP Note are subject to CCP’s prior written approval. The term of the CCP Note expires on April 1, 2024 and may be extended by mutual agreement. As of March 31, 2023 and June 30, 2022 the outstanding principal balance of the CCP Note was $1.8 million and $0.0 million.

Activity with Related Parties

Sales and Purchases

During the three and nine months ended March 31, 2023 and 2022, the Company made sales and purchases to various companies, which have been deemed to be related parties, as follows:


in thousands
	Three Months Ended March 31,								Nine Months Ended March 31,
	2023				2022				2023				2022
	Sales		Purchases		Sales		Purchases		Sales		Purchases		Sales		Purchases
Stack's Bowers Galleries	$	33,723	$	6,337	$	55,519	$	12,569	$	97,978	$	22,441	$	69,170	$	41,879
Equity method investees		282,833		13,915		244,147		8,170		703,548		29,023		531,130		30,438
	$	316,556	$	20,252	$	299,666	$	20,739	$	801,526	$	51,464	$	600,300	$	72,317

Interest Income

During the three and nine months ended March 31, 2023 and 2022, the Company earned interest income related to loans made to Stack's Bower Galleries and from financing arrangements (including repurchase agreements) with affiliated companies, as set forth below:


in thousands
	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Interest income from secured loans receivables	$	—	$	44	$	—	$	143
Interest income from finance products and repurchase arrangements		2,275		1,576		5,708		5,537
	$	2,275	$	1,620	$	5,708	$	5,680

Selling, General, and Administrative

During the three months ended March 31, 2023 and 2022, the Company incurred selling general, and administrative expense related to its subleasing agreement with Stack's Bower Galleries that totaled $12,000 and $0, respectively.

During the nine months ended March 31, 2023 and 2022, the Company incurred selling, general, and administrative expense related to its subleasing agreement with Stack's Bower Galleries that that totaled $22,000 and $0, respectively.

Interest Expense

During the three months ended March 31, 2023 and 2022, the Company incurred interest expense related to its note with CCP that totaled $9,000 and $0, respectively. During the nine months ended March 31, 2023 and 2022, the Company incurred interest expense related to its note with CCP that totaled $32,000 and $0, respectively.

Equity Method Investments — Earnings and Dividends Received

During the three months ended March 31, 2023 and 2022, the Company's proportional share of our equity method investee's earnings were net losses of $0.1 million and net income of $1.6 million, respectively. During the nine months ended March 31, 2023 and 2022, the Company's proportional share of our equity method investee's net income totaled $7.3 million and $4.3 million, respectively.

During the three months ended March 31, 2023 and 2022, the Company received no dividend payments from our equity method investees. During the nine months ended March 31, 2023 and 2022, the Company received dividend payments that totaled, in the aggregate, $0.6 million and $0.0 million, respectively, from our equity method investees.

Other Income

During the three months ended March 31, 2023 and 2022, the Company earned royalty income related to one of CFC's secured lending agreements and information technology consulting services income from Stack's Bower Galleries that totaled $0.6 million and $0.5 million, respectively, and $2.0 million and $1.4 million during the nine months ended March 31, 2023 and 2022, respectively.

17. STOCKHOLDERS’ EQUITY

Shelf Registration Statement

On September 25, 2020, the Company filed a universal shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on March 4, 2021, on which the Company registered for sale up to $150.0 million of any combination of its debt securities, shares of common stock, shares of preferred stock, rights, warrants, units and/or purchase contracts from time to time and at prices and on terms that the Company may determine. After a public offering of common stock in March 2021, approximately $69.5 million of securities remain available for issuance under this shelf registration statement. Securities may be offered or sold under this registration statement until March 2024.

Dividends

On August 18, 2022, the Company's board of directors declared a non-recurring special dividend of $1.00 per common share to stockholders of record at the close of business on September 12, 2022. The dividend was paid on September 26, 2022 and totaled $23.4 million.

On August 18, 2022, the Company's board of directors also declared the initial quarterly regular cash dividend of $0.20 per common share to stockholders of record at the close of business on October 10, 2022. The dividend was paid on October 24, 2022 and totaled $4.7 million.

On January 4, 2023, the Company's board of directors declared a regular dividend of $0.20 per share to stockholders of record at the close of business on January 16, 2023. The dividend was paid on January 27, 2023 and totaled $4.7 million.

Share Repurchase Program

In April 2018, the Company's board of directors approved a share repurchase program which authorizes 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. The share repurchase program was initially announced on May 8, 2018. Pursuant to the share repurchase program, which was re-authorized effective as of December 8, 2022, we may repurchase shares of our common stock from time to time at prevailing market prices, depending on market conditions, through open market or privately negotiated transactions. The authorization of the share repurchase program expires on June 30, 2023. Subject to applicable corporate securities laws, repurchases may be made at such times and in amounts as management deems appropriate. We are not obligated to repurchase any shares under the program, and repurchases under the program may be discontinued if management determines that additional repurchases are not warranted. As of March 31, 2023, we repurchased a total of 335,735 shares under the program for $9.8 million. As of June 30, 2022, no shares had been repurchased under our share repurchase program.

2014 Stock Award and Incentive Plan

The Company's amended and restated 2014 Stock Award and Incentive Plan (the "2014 Plan") was approved most recently on October 27, 2022 by the Company's stockholders. As of March 31, 2023, 1,514,420 stock options and 88,426 restricted stock units were outstanding, and 1,746,728 shares were available for issuance of new awards under the 2014 Plan.

Under the 2014 Plan, the Company may grant options and other equity awards as a means of attracting and retaining officers, employees, non-employee directors and consultants, to provide incentives to such persons, and to align the interests of such persons with the interests of stockholders by providing compensation based on the value of the Company's stock. Awards under the 2014 Plan may be granted in the form of incentive or non-qualified stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), dividend equivalent rights, other stock-based awards (which may include outright grants of shares) and cash incentive awards. The 2014 Plan also authorizes grants of awards with performance-based conditions and market-based conditions. The 2014 Plan is administered by the Compensation Committee of the board of directors, which, in its discretion, may select officers and other employees, directors (including non-employee directors) and consultants to the Company and its subsidiaries to receive grants of awards. The board of directors itself may perform any of the functions of the Compensation Committee under the 2014 Plan.

Under the 2014 Plan, the exercise price of options and base price of SARs, as set by the Compensation Committee, generally may not be less than the fair market value of the shares on the date of grant, and the maximum term of stock options and SARs is 10 years. The 2014 Plan limits the number of share-denominated awards that may be granted to any one eligible person in any fiscal year to 500,000 shares plus the participant's unused annual limit at the close of the previous year. Also, in the case of non-employee directors, the 2014 Plan limits the maximum grant-date fair value at $300,000 of stock-denominated awards granted to a director in a given fiscal year, except for a non-employee Chairman of the Board whose grant-date fair value maximum is $600,000 per fiscal year. The 2014 Plan will terminate when no shares remain available for issuance and no awards remain outstanding; however, the authority to grant new awards will terminate on October 27, 2032.

Stock Options

The Company uses the Black-Scholes option pricing model, which uses various inputs such as the common share price and estimates that include the risk-free interest rate, volatility, expected life and dividend yield. As of March 31, 2023 there were no stock options outstanding with performance conditions or other types of awards with market conditions.

During the three months ended March 31, 2023 and 2022, the Company incurred $0.3 million and $0.3 million of compensation expense related to stock options, respectively. During the nine months ended March 31, 2023 and 2022, the Company incurred $0.9 million and $1.0 million of compensation expense related to stock options, respectively. As of March 31, 2023, there was total remaining compensation expense of $1.1 million related to employee stock options, which will be recorded over a weighted average vesting period of approximately 1.0 years.

A required adjustment to outstanding stock options was triggered as a result of the non-recurring special dividend declared on August 18, 2022. In accordance with the terms of the Company’s equity award plans under which the options were issued, an adjustment was required to protect the holders of such stock options from decreases in the value of the stock options due to payment of the non-recurring special dividends. This event decreased the exercise price of outstanding stock options by $1.00 per option share, effective as of the ex-dividend date (September 9, 2022). The fair value of the options before and after this event was unchanged, and therefore no incremental stock-based compensation expense was recorded.

The following table summarizes the stock option activity for the nine months ended March 31, 2023:


	Options			Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value (in thousands)		Weighted Average Grant Date Fair Value Per Award
Outstanding at June 30, 2022		1,779,460		$	7.84	$	43,433	$	3.51
Granted		10,000		$	39.69
Exercised		(275,040	)	$	6.67
Outstanding at March 31, 2023		1,514,420		$	7.09	$	41,786	$	3.57
Exercisable at March 31, 2023		981,931		$	5.70	$	28,429	$	2.75

The following table summarizes the status of stock options outstanding as of March 31, 2023:


Exercise Price Ranges				Options Outstanding						Options Exercisable
From		To		Number of Shares Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$	—	$	5.00		710,858		6.48	$	1.91		449,038		6.30	$	2.21
$	5.01	$	7.50		84,894		3.66	$	5.98		84,894		3.66	$	5.98
$	7.51	$	12.50		453,334		3.43	$	8.88		426,666		3.18	$	8.86
$	12.51	$	30.00		255,334		7.94	$	17.42		21,333		7.73	$	14.77
$	30.01	$	50.00		10,000		9.85	$	39.69		—		—	$	—
					1,514,420		5.68	$	7.09		981,931		4.75	$	5.70

The following table summarizes the nonvested stock option activity for the nine months ended March 31, 2023.


	Options			Weighted Average Grant Date Fair Value Per Award
Nonvested Outstanding at June 30, 2022		631,488		$	5.06
Granted		10,000		$	16.56
Vested		(108,999	)	$	6.06
Forfeitures		—		$	—
Nonvested Outstanding at March 31, 2023		532,489		$	5.07

Restricted Stock Units

RSUs granted by the Company are not transferable and automatically convert to shares of common stock on a one-for-one basis as the awards vest or at a specified date after vesting.

A required adjustment to certain outstanding RSUs was triggered as a result of the non-recurring special dividend declared on August 18, 2022. In accordance with the terms of the Company’s RSU agreements under which the RSUs were issued, the holders of the RSUs were entitled to credits equivalent to dividends that would have been paid if the RSUs had been outstanding shares as of the applicable record date (such credits being either in cash or additional RSUs). The fair values of these RSUs before and after the dividend payment dates were unchanged, and therefore no incremental stock-based compensation expense was recorded.

During the three months ended March 31, 2023 and 2022, the Company incurred $0.2 million and $0.2 million of compensation expense related to RSUs, respectively. During the nine months ended March 31, 2023 and 2022, the Company incurred $0.7 million and $0.6 million of compensation expense related to RSUs, respectively. As of March 31, 2023, there is $1.2 million remaining compensation expense related to RSUs, which will be recorded over a weighted average vesting period of approximately 1.9 years. RSUs granted to a non-US citizen are referred to as "deferred stock units" or "DSUs".

The following table summarizes the RSU activity for the nine months ended March 31, 2023:


	Awards Outstanding			Weighted Average Fair Value per Unit at Grant Date
Nonvested Outstanding at June 30, 2022		56,093		$	32.58
Granted		16,435		$	29.21
Vested & delivered		(3,296	)	$	36.38
Vested & deferred (1)		(10,147	)	$	35.46
Nonvested Outstanding at March 31, 2023		59,085		$	30.93
Vested but subject to deferred settlement at March 31, 2023 (1)		29,341		$	24.53
Outstanding at March 31, 2023		88,426		$	28.81

(1) Certain RSU holders elected to defer settlement of the RSUs to a specified date. The DSU holder is contractually obligated to defer settlement of the DSUs to a specified date following the holder’s termination of service.

Common Stock

In fiscal 2023, a portion of the fiscal 2022 annual bonuses was paid in the form of common stock to the Chief Executive Officer and President. The Company issued 10,500 shares (in the aggregate) of common stock, after deducting 3,184 shares of common stock to satisfy tax withholding obligations relating to the President's award.

Certain Anti-Takeover Provisions

The Company’s certificate of incorporation and by-laws 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 its 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 Company to issue preferred stock with rights senior to those of the common stock or impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions.

18. CUSTOMER AND SUPPLIER CONCENTRATIONS

Customer Concentration

The following customer provided 10 percent or more of the Company's revenues for the three months ended March 31, 2023 and 2022:


in thousands
	Three Months Ended March 31,										Nine Months Ended March 31,
	2023					2022					2023					2022
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
Total revenue	$	2,317,150		100.0	%	$	2,109,115		100.0	%	$	6,167,206		100.0	%	$	6,069,450		100.0	%
Customer concentrations
HSBC Bank (1)		328,465		14.2	%		130,855		6.2	%		751,828		12.2	%		343,090		5.7	%

(1) Sales with this trading partner include sales on forward contracts that are entered into for hedging purposes rather than sales characterized with the physical delivery of precious metal product. This sales activity has been reported within the Wholesale Sales and Ancillary Services segment.

No single customer provided 10 percent or more of the Company's accounts receivable balances as of March 31, 2023.

The following customers accounted for 10 percent or more of the Company's secured loans receivable as of March 31, 2023:


in thousands
	March 31, 2023					June 30, 2022
	Amount		Percent			Amount		Percent
Total secured loans	$	96,856		100.0	%	$	126,217		100.0	%
Customer concentrations
Customer A	$	11,500		11.9	%	$	—		0.0	%
Customer B		13,500		13.9	%		13,500		10.7	%

Supplier Concentration

The Company buys precious metals from a variety of sources, including through brokers and dealers, from sovereign and private mints, from refiners and directly from customers. The Company believes that no one supplier or small group of suppliers is critical to its business, since other sources of supply are available that provide similar products on comparable terms.

19. SEGMENTS AND GEOGRAPHIC INFORMATION

The Company evaluates segment reporting in accordance with Segment Reporting Topic 280 of the ASC (“ASC 280”), each reporting period, including evaluating the organizational structure and the reporting package that is reviewed by the chief operating decision makers. The Company's operations are organized under three business segments (i) Wholesale Sales & Ancillary Services, (ii) Direct-to-Consumer, and (iii) Secured Lending. The Wholesale Sales & Ancillary Services segment includes the consolidating eliminations of inter-segment transactions and unallocated segment adjustments. See Note 1 for a description of the types of products and services from which each reportable segment derives its revenues.

Revenue


in thousands
	Three Months Ended March 31,								Nine Months Ended March 31,
	2023				2022				2023				2022
Revenue by segment(1)
Wholesale Sales & Ancillary Services	$	2,204,422			$	1,966,897			$	5,819,421			$	5,732,207
Eliminations of inter-segment sales		(409,282	)			(447,857	)			(1,052,440	)			(1,306,411	)
Wholesale Sales & Ancillary Services, net of eliminations (2)		1,795,140				1,519,040				4,766,981				4,425,796
Direct-to-Consumer		522,010		(a)		590,075		(b)		1,400,225		(c)		1,643,654		(d)
	$	2,317,150			$	2,109,115			$	6,167,206			$	6,069,450

(1)

The Secured Lending segment earns interest income from its lending activity and earns no revenue from the sales of precious metals. Therefore, no amounts are shown for the Secured Lending segment in the above table.

(2)

The eliminations of inter-segment sales are reflected in the Wholesale Sales & Ancillary Services segment.

(a)

Includes $2.1 million of inter-segment sales from the Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services segment.

(b)

Includes $0.4 million of inter-segment sales from the Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services segment.

(c)

Includes $2.7 million of inter-segment sales from the Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services segment.

(d)

Includes $2.0 million of inter-segment sales from the Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services segment.


in thousands
	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
Revenue by geographic region
United States	$	1,365,078	$	1,256,092	$	3,686,828	$	3,631,974
Europe		719,519		495,293		1,836,949		1,542,293
North America, excluding United States		218,810		342,392		613,454		850,681
Asia Pacific		13,065		9,592		22,846		34,586
Africa		—		—		—		17
Australia		678		5,746		7,129		9,899
	$	2,317,150	$	2,109,115	$	6,167,206	$	6,069,450

Gross Profit and Gross Margin Percentage


in thousands
	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
Gross profit by segment(1)
Wholesale Sales & Ancillary Services	$	25,943		$	32,002		$	93,236		$	85,474
Eliminations and adjustments		6,343			(1,463	)		972			(445	)
Wholesale Sales & Ancillary Services, net of eliminations and adjustments		32,286			30,539			94,208			85,029
Direct-to-Consumer, net of eliminations		43,212			41,544			121,851			108,986
	$	75,498		$	72,083		$	216,059		$	194,015
Gross margin percentage by segment
Wholesale Sales & Ancillary Services		1.177	%		1.627	%		1.602	%		1.491	%
Wholesale Sales & Ancillary Services, net of eliminations and adjustments		1.799	%		2.010	%		1.976	%		1.921	%
Direct-to-Consumer		8.278	%		7.040	%		8.702	%		6.631	%
Consolidated gross margin percentage		3.258	%		3.418	%		3.503	%		3.197	%

(1)

The Secured Lending segment earns interest income from its lending activity and earns no gross profit from the sales of precious metals. Therefore, no amounts are shown for the Secured Lending segment in the above table.

Operating Income and (Expenses)


in thousands
	Three Months Ended March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
Operating income (expense) by segment
Wholesale Sales & Ancillary Services	$	(14,990	)	$	(9,963	)	$	(26,889	)	$	(24,485	)
Eliminations		(64	)		(60	)		(178	)		(191	)
Wholesale Sales & Ancillary Services, net of eliminations	$	(15,054	)	$	(10,023	)	$	(27,067	)	$	(24,676	)

Wholesale Sales & Ancillary Services, net of eliminations
Selling, general and administrative expenses	$	(12,428	)	$	(11,203	)	$	(29,377	)	$	(28,748	)
Depreciation and amortization expense		(247	)		(214	)		(703	)		(673	)
Interest income		3,601			2,300			9,081			7,952
Interest expense		(5,979	)		(2,379	)		(13,696	)		(7,396	)
Earnings (losses) from equity method investments		(72	)		1,608			7,272			4,317
Other income, net		36			—			106			—
Unrealized gains (losses) on foreign exchange		35			(135	)		250			(128	)
	$	(15,054	)	$	(10,023	)	$	(27,067	)	$	(24,676	)
Direct-to-Consumer
Selling, general and administrative expenses	$	(10,900	)	$	(8,912	)	$	(31,625	)	$	(25,906	)
Depreciation and amortization expense		(3,005	)		(7,246	)		(8,817	)		(23,140	)
Interest expense		(1,287	)		(703	)		(3,020	)		(2,062	)
Other expense, net		—			(50	)		(12	)		(50	)
	$	(15,192	)	$	(16,911	)	$	(43,474	)	$	(51,158	)
Secured Lending
Selling, general and administrative expenses	$	(513	)


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


			Page
PART I		FINANCIAL INFORMATION	3

	Item 1.	Financial Statements	3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	83
	Item 4.	Controls and Procedures	84

PART II		OTHER INFORMATION	84

	Item 1.	Legal Proceedings	84
	Item 1A.	Risk Factors	84
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	98
	Item 3.	Defaults Upon Senior Securities	98
	Item 4.	Mine Safety Disclosures	98
	Item 5.	Other Information	98
	Item 6.	Exhibits	99

Signatures			100


	Page
Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022	4
Condensed Consolidated Statements of Income for the Three and Nine Months Ended March 31, 2023 and 2022	6
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended March 31, 2023 and 2022	7
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022	8
Notes to the Condensed Consolidated Financial Statements	9
Note 1. Description of Business	9
Note 2. Summary of Significant Accounting Policies	10
Note 3. Assets and Liabilities, at Fair Value	21
Note 4. Receivables	24
Note 5. Secured Loans Receivable	24
Note 6. Inventories	26
Note 7. Leases	27
Note 8. Property, Plant, and Equipment	28
Note 9. Goodwill and Intangible Assets	28
Note 10. Long-Term Investments	30
Note 11. Accounts Payable and Other Current Liabilities	30
Note 12. Derivative Instruments and Hedging Transactions	30
Note 13. Income Taxes	33
Note 14. Related Party Transactions	34
Note 15. Financing Agreements	36
Note 16. Commitments and Contingencies	38
Note 17. Stockholders' Equity	39
Note 18. Customer and Supplier Concentrations	41
Note 19. Segments and Geographic Information	43
Note 20. Subsequent Events	46


	March 31, 2023			June 30, 2022
	(unaudited)
ASSETS
Current assets
Cash(1)	$	78,101		$	37,783
Receivables, net		90,076			97,040
Derivative assets		58,456			91,743
Secured loans receivable(1)		96,856			126,217
Precious metals held under financing arrangements(1)		24,014			79,766
Inventories:
Inventories(1)		675,414			458,347
Restricted inventories		292,104			282,671
		967,518			741,018
Income tax receivable		861			—
Prepaid expenses and other assets(1)		8,460			7,558
Total current assets		1,324,342			1,181,125
Operating lease right of use assets		5,410			6,482
Property, plant, and equipment, net		11,473			9,845
Goodwill		100,943			100,943
Intangibles, net		64,281			67,965
Long-term investments		80,995			70,828
Other long-term assets		5,459			5,471
Total assets	$	1,592,903		$	1,442,659
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Lines of credit	$	230,000		$	215,000
Liabilities on borrowed metals		25,730			59,417
Product financing arrangements		292,104			282,671
Accounts payable and other payables		10,164			6,127
Deferred revenue and other advances		253,688			175,545
Derivative liabilities		83,330			75,780
Accrued liabilities(1)		19,763			21,813
Income tax payable		—			382
Notes payable(1)		94,644			—
Total current liabilities		1,009,423			836,735
Notes payable (2)		1,752			94,073
Deferred tax liabilities		14,788			15,408
Other liabilities		4,802			5,972
Total liabilities		1,030,765			952,188
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of March 31, 2023 and June 30, 2022		—			—
Common stock, par value $0.01; 40,000,000 shares authorized; 23,596,341 and 23,379,888 shares issued and 23,260,606 and 23,379,888 shares outstanding as of March 31, 2023 and June 30, 2022, respectively		236			234
Treasury stock, 335,735 and 0 shares at cost as of March 31, 2023 and June 30, 2022, respectively		(9,762	)		—
Additional paid-in capital		168,253			166,526
Accumulated other comprehensive loss		(1,229	)		—
Retained earnings		403,473			321,849
Total A-Mark Precious Metals, Inc. stockholders’ equity		560,971			488,609
Noncontrolling interest		1,167			1,862
Total stockholders’ equity		562,138			490,471
Total liabilities, noncontrolling interest and stockholders’ equity	$	1,592,903		$	1,442,659


	March 31, 2023		June 30, 2022
ASSETS OF THE CONSOLIDATED VIE
Cash	$	1,578	$	3,264
Secured loans receivable		48,632		92,246
Precious metals held under financing arrangements		17,865		13,524
Inventories		50,106		4,752
Prepaid expenses and other assets		28		23
Total assets of the consolidated variable interest entity	$	118,209	$	113,809
LIABILITIES OF THE CONSOLIDATED VIE
Deferred payment obligations(1)	$	27,572	$	21,081
Accrued liabilities		594		832
Notes payable(2)		99,644		99,073
Total liabilities of the consolidated variable interest entity	$	127,810	$	120,986


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


	Common Stock				Additional Paid-in			Retained			Accumulated other comprehensive			Treasury Stock						Total A-Mark Precious Metals, Inc. Stockholders'			Non-controlling			Total Stockholders’
	Shares		Amount		Capital			Earnings			income (loss)			Shares			Amount			Equity			Interest			Equity
Balance, June 30, 2021		22,459,314	$	113	$	150,420		$	212,090		$	—			—		$	—		$	362,623		$	1,319		$	363,942
Net income		—		—		—			26,024			—			—			—			26,024			100			26,124
Share-based compensation		—		—		473			—			—			—			—			473			—			473
Exercise of share-based awards		120,630		—		762			—			—			—			—			762			—			762
Net settlement of share-based awards		670		—		(13	)		—			—			—			—			(13	)		—			(13	)
Common stock issued for increase in long-term investments		123,180		1		2,977			—			—			—			—			2,978			—			2,978
Dividends declared ($1.00 per common share)		—		—		—			(22,639	)		—			—			—			(22,639	)		—			(22,639	)
Balance, September 30, 2021		22,703,794		114		154,619			215,475			—			—			—			370,208			1,419			371,627
Net income		—		—		—			31,794			—			—			—			31,794			145			31,939
Share-based compensation		—		—		582			—			—			—			—			582			—			582
Exercise of share-based awards		624		—		652			—			—			—			—			652			—			652
Net settlement of share-based awards		114,840		1		(13	)		—			—			—			—			(12	)		—			(12	)
Balance, December 31, 2021		22,819,258		115		155,840			247,269			—			—			—			403,224			1,564			404,788
Net income		—		—		—			37,382			—			—			—			37,382			164			37,546
Share-based compensation		—		—		573			—			—			—			—			573			—			573
Exercise of share-based awards		208,344		1		592			—			—			—			—			593			—			593
Net settlement of share-based awards		418		—		(8	)		—			—			—			—			(8	)		—			(8	)
Balance, March 31, 2022		23,028,020	$	116	$	156,997		$	284,651		$	—			—		$	—		$	441,764		$	1,728		$	443,492

Balance, June 30, 2022		23,379,888	$	234	$	166,526		$	321,849		$	—			—		$	—		$	488,609		$	1,862		$	490,471
Net income		—		—		—			45,125			—			—			—			45,125			112			45,237
Share-based compensation		—		—		535			—			—			—			—			535			—			535
Earnings distribution paid to noncontrolling interest		—		—		—			—			—			—			—			—			(1,001	)		(1,001	)
Cumulative translation adjustment, net of tax		—		—		—			—			52			—			—			52			—			52
Common stock issued as employee compensation		10,500		—		293			—			—			—			—			293			—			293
Exercise of share-based awards		3,333		—		63			—			—			—			—			63			—			63
Net settlement of share-based awards		59,618		1		(1,606	)		—			—			—			—			(1,605	)		—			(1,605	)
Dividends declared ($1.00 per common share)		—		—		3			(23,468	)		—			—			—			(23,465	)		—			(23,465	)
Dividends declared ($0.20 per common share)		—		—		—			(4,690	)		—			—			—			(4,690	)		—			(4,690	)
Balance, September 30, 2022		23,453,339		235		165,814			338,816			52			—			—			504,917			973			505,890
Net income		—		—		—			33,481			—			—			—			33,481			116			33,597
Share-based compensation		—		—		534			—			—			—			—			534			—			534
Cumulative translation adjustment, net of tax		—		—		—			—			(1,103	)		—			—			(1,103	)		—			(1,103	)
Exercise of share-based awards		73,336		1		661			—			—			—			—			662			—			662
Net settlement of share-based awards		3,296		—		—			—			—			—			—			—			—			—
Balance, December 31, 2022		23,529,971		236		167,009			372,297			(1,051	)		—			—			538,491			1,089			539,580
Net income		—		—		—			35,920			—			—			—			35,920			78			35,998
Share-based compensation		—		—		538			—			—			—			—			538			—			538
Cumulative translation adjustment, net of tax		—		—		—			—			(178	)		—			—			(178	)		—			(178	)
Exercise of share-based awards		66,370		—		700			—			—			—			—			700			—			700
Repurchases of common stock		—		—		—			—			—			(335,735	)		(9,762	)		(9,762	)		—			(9,762	)
Dividends declared ($0.20 per common share)		—		—		6			(4,744	)		—			—			—			(4,738	)		—			(4,738	)
Balance, March 31, 2023		23,596,341	$	236	$	168,253		$	403,473		$	(1,229	)		(335,735	)	$	(9,762	)	$	560,971		$	1,167		$	562,138


Year ending June 30,	Operating Leases
2023 (remainder of year)	$	408
2024		1,624
2025		1,599
2026		1,171
2027		823
Thereafter		1,326
Total lease payments		6,951
Imputed interest		(811	)
Total operating lease liability	$	6,140		(1)
Operating lease liability - current	$	1,338		(2)
Operating lease liability - long-term		4,802		(3)
	$	6,140		(1)