Table of Contents            

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________   
FORM 10-Q
__________________________________________________   
        þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________

Commission File Number: 001-36347
__________________________________________________ 
image0a01a37.jpg
A-MARK PRECIOUS METALS, INC.
(Exact name of registrant as specified in its charter)
__________________________________________________
Delaware
(State of Incorporation)
 
11-2464169
(IRS Employer I.D. No.)
2121 Rosecrans Ave. Suite 6300
El Segundo, CA 90245
(Address of principal executive offices)(Zip Code)
(310) 587-1477
(Registrant’s Telephone Number, Including Area Code)
__________________________________________________            
Securities registered under Section 12(b) of the Exchange Act:
Title of each class
Common Stock, $0.01 par value
 
Name of each exchange on which registered
NASDAQ Global Select Market
Securities registered under Section 12 (g) of the Exchange Act: None
__________________________________________________            
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. þ   No. ¨
 
 
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
 
Yes. þ   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 in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer ¨
(Do not check if a smaller reporting company)
Smaller reporting company þ
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
¨
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes. ¨   No. þ
 
 
 
As of May 6, 2019, the registrant had 7,031,450 shares of common stock outstanding, par value $0.01 per share.
 
 
 


A-MARK PRECIOUS METALS, INC.

QUARTERLY REPORT ON FORM 10-Q
For the Nine Months Ended March 31, 2019

TABLE OF CONTENTS
 
 
 
Page
PART I
 
 
 
 
Item 1.
Condensed Consolidated Financial Statements
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
Item 4.
Controls and Procedures
 
 
 
 
PART II
 
 
 
 
Item 1.
Legal Proceedings
 
Item 1A.
Risk Factors
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 3.
Defaults upon Senior Securities
 
Item 4.
Mine Safety Disclosures
 
Item 5.
Other Information
 
Item 6.
Exhibits
Signatures
 
 


2
Table of Contents            

PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to the Condensed Consolidated Financial Statements
 
 
Page
 
 

3
Table of Contents            

A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except for share data)
 
March 31,
2019
 
June 30,
2018
 
 
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash (1)
$
4,749

 
$
6,291

Receivables, net (1)
15,725

 
35,856

Derivative assets (1)
6,243

 
7,395

Secured loans receivable (1)
111,246

 
110,424

Precious metals held under financing arrangements
212,622

 
262,566

Inventories:
 
 
 
   Inventories (1)
200,696

 
166,176

   Restricted inventories
65,723

 
113,940

 
266,419

 
280,116

 
 
 
 
Income taxes receivable
1,541

 
1,553

Prepaid expenses and other assets (1)
2,748

 
2,782

Total current assets
621,293

 
706,983

 
 
 
 
Plant, property and equipment, net
6,977

 
8,018

Goodwill
8,881

 
8,881

Intangibles, net
6,105

 
6,861

Long-term investments
11,621

 
8,388

Deferred tax assets - non-current
2,895

 
3,870

Total assets
$
657,772

 
$
743,001

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Lines of credit
$
149,000

 
$
200,000

Liability on borrowed metals
210,650

 
280,346

Product financing arrangements
65,723

 
113,940

Accounts payable
64,897

 
45,997

Derivative liabilities 
2,107

 
20,457

Accrued liabilities (1)
5,628

 
5,129

Total current liabilities
498,005

 
665,869

Debt obligation (related party)
—

 
7,226

Notes payable (1)
86,720

 
—

Other long-term liabilities (related party)
—

 
798

Total liabilities
584,725

 
673,893

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value, authorized 10,000,000 shares; issued and outstanding: none as of March 31, 2019 and June 30, 2018
—

 
—

Common stock, par value $0.01; 40,000,000 shares authorized; 7,031,450 shares issued and outstanding as of March 31, 2019 and June 30, 2018
71

 
71

Additional paid-in capital
26,198

 
24,717

Retained earnings
43,958

 
40,910

Total A-Mark Precious Metals, Inc. stockholders’ equity
70,227

 
65,698

Non-controlling interest
2,820

 
3,410

Total stockholders’ equity
73,047

 
69,108

Total liabilities, non-controlling interest and stockholders’ equity
$
657,772

 
$
743,001

 
 
 
 
(1) Includes amounts of the consolidated variable interest entity, which is presented separately in the table below.

See accompanying Notes to Condensed Consolidated Financial Statements

4
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A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)

On September 14, 2018, AM Capital Funding, LLC (“AMCF”), a wholly owned subsidiary of CFC, completed an issuance of Secured Senior Term Notes (collectively, the "Notes"): Series 2018-1, Class A in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million.  The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%.  The Notes have a maturity date of December 15, 2023.
The Company has both the power to direct the activities that most significantly impact AMCF’s economic performance, and the obligation to absorb losses or the right to receive benefits of AMCF that could potentially be significant to AMCF. Therefore, the Company has determined AMCF is a variable interest entity ("VIE") and that the Company is the primary beneficiary of the VIE. Therefore, the Company consolidates AMCF for accounting purposes.
The following table presents the assets and liabilities of this VIE, which is included in the condensed consolidated balance sheets above. The holders of the Notes have a first priority security interest in the assets as shown in the table below, which are in excess of the Notes' aggregate principal amount. Additionally, the liabilities of the VIE include intercompany balances, which are eliminated in consolidation. See Note 14 for additional information.
 
March 31,
2019
 
June 30,
2018
 
 
 
 
ASSETS OF THE CONSOLIDATED VIE
 
 
 
Cash
$
4,274

 
$
—

Receivables, net
3

 
—

Derivative assets
58

 
—

Secured loans receivable
69,892

 
—

Inventories
30,139

 
—

Prepaid expenses and other assets
36

 
—

Total assets of consolidated variable interest entities
$
104,402

 
$
—

LIABILITIES OF THE CONSOLIDATED VIE
 
 
 
Deferred payment obligations (1)
$
7,359

 
$
—

Accrued liabilities
687

 
—

Notes payable (2)
96,720

 
—

Total liabilities of consolidated variable interest entities
$
104,766

 
$
—

 


 
 
(1) This is an intercompany balance, which is eliminated in consolidation and hence not shown on the condensed consolidated balance sheets.
(2) $10.0 million of the Notes are held by A-Mark, which is eliminated in consolidation and hence not shown on the condensed consolidated balance sheets.

See accompanying Notes to Condensed Consolidated Financial Statements


5
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A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)




 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Revenues
 
$
1,266,986

 
$
1,994,963

 
$
3,932,988

 
$
5,839,491

 
Cost of sales
 
1,258,270

 
1,987,536

 
3,907,480

 
5,815,842

 
Gross profit
 
8,716

 
7,427

 
25,508

 
23,649

 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
(8,258
)
 
(9,423
)
 
(24,080
)
 
(25,748
)
 
Interest income
 
4,807

 
4,087

 
14,010

 
10,516

 
Interest expense
 
(4,239
)
 
(3,642
)
 
(12,447
)
 
(9,734
)
 
Other income
 
373

 
99

 
1,303

 
811

 
Unrealized gain (loss) on foreign exchange
 
(36
)
 
(32
)
 
(54
)
 
6

 
Net income (loss) before provision for income taxes
 
1,363

 
(1,484
)
 
4,240

 
(500
)
 
Income tax (expense) benefit
 
(402
)
 
807

 
(1,143
)
 
209

 
Net income (loss)
 
961

 
(677
)
 
3,097

 
(291
)
 
 
 Net (loss) income attributable to non-controlling interest
 
(29
)
 
(44
)
 
49

 
69

 
Net income (loss) attributable to the Company
 
$
990

 
$
(633
)
 
$
3,048

 
$
(360
)
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted net income (loss) per share attributable to A-Mark Precious Metals, Inc.:
 
Basic
 
$
0.14

 
$
(0.09
)
 
$
0.43

 
$
(0.05
)
 
Diluted
 
$
0.14

 
$
(0.09
)
 
$
0.43

 
$
(0.05
)
 
 
 
 
 
 
 
 
 
 
 
Dividends per share
 
$
—

 
$
0.08

 
$
—

 
$
0.24

 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
 
7,031,400

 
7,031,400

 
7,031,400

 
7,031,400

 
Diluted
 
7,084,400

 
7,031,400

 
7,087,300

 
7,031,400

 

See accompanying Notes to Condensed Consolidated Financial Statements

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A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except for share data)

 
 
Common Stock
(Shares)
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Total
 A-Mark Precious Metals, Inc.
Stockholders' Equity
 
Non-Controlling Interest
 
Total Stockholders’ Equity
 
Balance, June 30, 2018
 
7,031,450

 
$
71

 
$
24,717

 
$
40,910

 
$
65,698

 
$
3,410

 
$
69,108

 
Net income
 
—

 
—

 
—

 
3,048

 
3,048

 
49

 
3,097

 
Share-based compensation
 
—

 
—

 
842

 
—

 
842

 
—

 
842

 
Transactions with non-controlling interest
 
—

 
—

 
639

 
—

 
639

 
(639
)
 
—

 
Balance, March 31, 2019
 
7,031,450

 
$
71

 
$
26,198

 
$
43,958

 
$
70,227

 
$
2,820

 
$
73,047

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


See accompanying Notes to Condensed Consolidated Financial Statements



7
Table of Contents A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)





 
 
Nine Months Ended March 31,
 
 
 
2019
 
2018
 
Cash flows from operating activities:
 
 
 
 
 
Net income (loss)
 
$
3,097

 
$
(291
)
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 

 

 
Provision (reversal) for doubtful accounts
 
(30
)
 
—

 
Depreciation and amortization
 
2,088

 
1,994

 
Amortization of loan cost
 
854

 
1,055

 
Deferred income taxes
 
975

 
(239
)
 
Interest added to principal of secured loans
 
(16
)
 
(41
)
 
Change in accrued earn-out (non-cash)
 
(504
)
 
(529
)
 
Loss on debt extinguishment
 
7

 
—

 
Share-based compensation
 
842

 
1,020

 
Earnings from equity method investments
 
(934
)
 
(278
)
 
Changes in assets and liabilities:
 
 
 
 
 
Receivables
 
20,161

 
(919
)
 
Secured loans receivables
 
(1,747
)
 
313

 
Secured loans to Former Parent
 
4,007

 
(9,352
)
 
Derivative assets
 
1,152

 
10,777

 
Income tax receivable
 
12

 
(1,521
)
 
Precious metals held under financing arrangements
 
49,944

 
—

 
Inventories
 
13,697

 
(202,217
)
 
Prepaid expenses and other assets
 
(447
)
 
(2,330
)
 
Accounts payable
 
14,680

 
7,590

 
Derivative liabilities
 
(18,350
)
 
(16,411
)
 
Liabilities on borrowed metals
 
(69,696
)
 
228,720

 
Accrued liabilities
 
567

 
(1,597
)
 
Income taxes payable
 
—

 
(1,418
)
 
Net cash provided by operating activities
 
20,359

 
14,326

 
Cash flows from investing activities:
 
 
 
 
 
Capital expenditures for property and equipment
 
(290
)
 
(821
)
 
Purchase of long-term investments
 
(2,300
)
 
—

 
Secured loans receivables, net
 
(3,066
)
 
(9,175
)
 
Acquisition of subsidiary, net of cash
 
—

 
(9,548
)
 
Net cash used in investing activities
 
(5,656
)
 
(19,544
)
 
Cash flows from financing activities:
 
 
 
 
 
Product financing arrangements, net
 
(48,217
)
 
(37,973
)
 
Dividends
 
—

 
(1,686
)
 
Borrowings and repayments under lines of credit, net
 
(51,000
)
 
30,000

 
Repayments on notes payable to related party
 
(7,500
)
 
(500
)
 
Borrowings on unsecured advance
 
4,220

 
—

 
Proceeds from issuance of notes payable
 
90,000

 
7,500

 
Debt funding issuance costs
 
(3,748
)
 
(241
)
 
Net cash used in financing activities
 
(16,245
)
 
(2,900
)
 
 
 
 
 
 
 
Net decrease in cash, cash equivalents, and restricted cash
 
(1,542
)
 
(8,118
)
 
Cash, cash equivalents, and restricted cash, beginning of period
 
6,291

 
13,059

 
Cash, cash equivalents, and restricted cash, end of period
 
$
4,749

 
$
4,941

 

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Table of Contents A-MARK PRECIOUS METALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)





 
 
Nine Months Ended March 31,
 
 
 
2019
 
2018
 
   ( - Continued from preceding page - )
 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
 
Cash paid during the period for:
 
 
 
 
 
Interest
 
$
11,949

 
$
7,773

 
Income taxes
 
$
112

 
$
2,944

 
 
 
 
 
 
 
   Non-cash investing and financing activities:
 
 
 
 
 
Interest added to principal of secured loans
 
$
16

 
$
41

 
Debt funding issuance costs
 
$
—

 
$
534

 
Investment transactions with non-controlling interest
 
$
639

 
$
—

 

See accompanying Notes to Condensed Consolidated Financial Statements

9
Table of Contents            

A-MARK PRECIOUS METALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS
Basis of Presentation
The condensed consolidated financial statements comprise those of A-Mark Precious Metals, Inc. ("A-Mark" or the "Company") and its consolidated subsidiaries, which includes a variable interest entity ("VIE"). Intercompany accounts and transactions have been eliminated.
Business Segments
The Company conducts its operations in three reportable segments: (1) Wholesale Trading & Ancillary Services, (2) Secured Lending and (3) Direct Sales. Each of these reportable segments represents an aggregation of operating segments that meets the aggregation criteria set forth in the Segment Reporting Topic 280 of the Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification (“ASC”) (See Note 18).
Wholesale Trading & Ancillary Services
The Wholesale Trading & Ancillary Services segment operates as a full-service precious metals trading company. The products that this segment sells include gold, silver, platinum and palladium for storage and delivery primarily in the form of coins, bars, wafers and grain. Also, this segment's trading-related services include financing, consignment, logistics, hedging and various customized financial programs.
Through its wholly owned subsidiary, A-Mark Trading AG (“AMTAG”), the Company promotes A-Mark bullion products throughout the European continent. Transcontinental Depository Services (“TDS”), also a wholly owned subsidiary of the Company, offers worldwide storage solutions to institutions, dealers and consumers.
The Company's wholly-owned subsidiary, A-M Global Logistics, LLC ("Logistics"), operates the Company's logistics fulfillment center based in Las Vegas, Nevada. Logistics provides customers an array of complementary services, including packaging, shipping, handling, receiving, processing, and inventorying of precious metals and custom coins on a secure basis.
In August 2016, the Company formed AM&ST Associates, LLC ("AMST"), a joint venture with SilverTowne, L.P., referred to as SilverTowne, an Indiana-based producer of minted silver that resulted in the Company and SilverTowne, L.P. owning 55% and 45%, respectively, of AMST. During the first quarter of fiscal 2019, the Company increased its ownership interest of AMST to 69% and SilverTowne, L.P. currently owns 31% of AMST. The Company acquired its interest in AMST to provide greater product selection to our customers and greater pricing stability within the supply chain, as well as to gain increased access to silver during volatile market environments.
Secured Lending
The Company operates its Secured Lending segment through its wholly-owned subsidiary, Collateral Finance Corporation LLC ("CFC"). CFC has been in operation since 2005. CFC is a California licensed finance lender that originates and acquires commercial loans secured by bullion and numismatic coins. CFC's customers include coin and precious metal dealers, investors and collectors.
On September 14, 2018, AM Capital Funding, LLC (“AMCF”), a wholly owned subsidiary of CFC, completed an issuance of Secured Senior Term Notes (collectively, the "Notes"): Series 2018-1, Class A in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28 million.  The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%.  The Notes have a maturity date of December 15, 2023.
The Notes were issued under a Master Indenture and the Series 2018-1 Supplement thereto between AMCF and Citibank, N.A., as trustee. At March 31, 2019, the Company held $10.0 million of Class B Notes. The Notes are not insured or guaranteed by A-Mark or CFC. CFC acts as servicer with respect to the Notes.
CFC and A-Mark may from time to time also contribute cash or sell precious metals to AMCF in exchange for cash or subordinated, deferred payment obligations from AMCF. In addition, AMCF may from time to time sell precious metals to A-Mark for cash. For additional information regarding this securitization, see Note 14, "Notes Payable".
Direct Sales
The Company's wholly-owned subsidiary, Goldline, Inc. ("Goldline"), is a direct retailer of precious metals to the investor community. Goldline markets its precious metal products primarily on radio, the internet and television. Goldline sells gold and silver bullion in the form of coins, and bars, as well as numismatic coins.

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The Company entered into the Direct Sales segment through its acquisition of substantially all of the assets of Goldline, LLC ("Goldline, LLC" or the "Seller"), pursuant to the terms of an Asset Purchase Agreement (the “Purchase Agreement”), dated August 14, 2017, between Goldline (then known as Goldline Acquisition Corp.) and the Seller. The transaction closed on August 28, 2017 (the "Closing Date"). On the Closing Date, the estimated purchase price for the net assets was approximately $10.0 million (the “Initial Provisional Purchase Price”), which was based on the Seller’s preliminary balance sheet dated as of July 31, 2017. The net assets acquired consisted of both intangible assets, which the parties agreed had an aggregate fair value of $6.4 million, and specified net tangible assets of the Seller, which the parties initially agreed, based on the July 31, 2017 provisional date, had an estimated aggregate fair value of $3.6 million, subject to post-closing adjustment. In connection with the closing, Goldline paid to the Seller an amount equal to the Initial Provisional Purchase Price less $1.5 million (the "Holdback Amount"), which amount was held back and deposited into escrow to serve as security for the Seller’s indemnification obligations under the Purchase Agreement. As of March 31, 2019, the Holdback Amount is $0.8 million.
Pro-Forma Information
The following table compares the unaudited consolidated financial information for the nine months ended March 31, 2019 to the unaudited pro-forma consolidated financial information for the nine months ended March 31, 2018, whereby the Company assumed that the acquisition of the net assets of Goldline, LLC occurred on July 1, 2017, that is, on the first day of fiscal year 2018, rather than on the actual acquisition date of August 28, 2017.
in thousands, except for EPS
 
(Unaudited)
 
 
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
Pro-forma revenue
 
$
3,932,988

 
$
5,840,648

 
Pro-forma net income (loss)
 
$
3,048

 
$
(307
)
 
Pro-forma basic earnings (loss) per share
 
$
0.43

 
$
(0.04
)
 
Pro-forma dilutive earnings (loss) per share
 
$
0.43

 
$
(0.04
)
 
 
 
 
 
 
 
_________________________________
The table above excludes three-month comparable data. The pro-forma presentation is not applicable for these periods, as Goldline's actual results are included in our consolidated financial statements.
The above pro-forma supplemental information does not purport to be indicative of what the Company's operations would have been had these transactions occurred on July 1, 2017 and should not be considered indicative of future operating results. The Company believes the assumptions used provide a reasonable basis for reflecting the significant pro-forma effects directly attributable to the acquisition of Goldline. The unaudited pro-forma information accounts for amortization of acquired intangible assets (based on the preliminary purchase price allocation and an estimate of their useful lives), incremental financing costs resulting from the acquisition, elimination of prior sales and purchases between the entities, elimination of acquisition costs and an application of the Company's tax rate. For the nine months ended March 31, 2019 the Company used the tax rate of (27.0)%. For the nine months ended March 31, 2018 the Company used the pro-forma tax rate of 37.5%. The unaudited pro-forma results do not include any anticipated cost savings or other effects of the integration of Goldline.
Related Agreements
In connection with the closing of the acquisition, Goldline entered into a privately placed credit facility in the amount of $7.5 million (the “Goldline Credit Facility”) with various lenders (the "Goldline Lenders"), effective August 28, 2017. Certain directors and principal stockholders participated in the Goldline Credit Facility. Borrowings under the Goldline Credit Facility were used to finance a portion of the consideration payable under the Purchase Agreement. The principal balance of the Goldline Credit Facility, together with a 2% prepayment premium of $150,000, was repaid in full on December 7, 2018. (See Note 14).
On the Closing Date, the Seller and Goldline entered into a transition services agreement, pursuant to which Goldline will provide reasonable assistance to the Seller at no cost to the Seller (including access to records and services of transferring employees) for a period of two years following the closing date in connection with assisting the Seller with its continuing obligations for its retained liabilities that were not assumed by Goldline.
Also on the Closing Date, the Seller and the former CEO of the Seller also agreed that, for the period commencing on the Closing Date until the third anniversary thereof, neither they nor any of their affiliates will, directly or indirectly own, manage, operate, join, control, participate in, invest in or otherwise provide assistance to, in any manner, any “competing business” (as defined in the Purchase Agreement).


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Spinoff from Spectrum Group International, Inc.
On March 14, 2014, the Company's former parent, Spectrum Group International, Inc. (including its subsidiaries, "SGI" or the "Former Parent"), effected a spinoff (the "spinoff" or the "Distribution") of the Company from SGI. As a result of the Distribution, the Company became a publicly traded company independent from SGI. On March 17, 2014, A-Mark’s shares of common stock commenced trading on the NASDAQ Global Select Market under the symbol "AMRK."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements reflect the financial condition, results of operations, statement of stockholder equity and cash flows of the Company, and were prepared using accounting principles generally accepted in the United States (“U.S. GAAP”). These condensed consolidated financial statements include the accounts of A-Mark, and its wholly owned subsidiaries, CFC, AMTAG, TDS, Logistics, Goldline, its majority owned affiliate AMST, and its variable interest entity ("VIE") AMCF (collectively the “Company”). For the three and nine months ended March 31, 2019 and 2018, net income equaled comprehensive income as there were no items of comprehensive income.
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 disclosure 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, allowances for doubtful accounts, impairment assessments of plant, property and equipment and intangible assets, valuation allowance determination on deferred tax assets, contingent earn-out liabilities, and revenue recognition judgments. Significant estimates also include the Company's fair value determination with respect to its financial instruments and precious metals inventory. Actual results could materially differ from these estimates.
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 operations, condensed consolidated statement of stockholders’ equity, and condensed consolidated statements of cash flows for the periods presented in accordance with U.S. GAAP. Operating results for the nine months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2019 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 2018 (the “2018 Annual Report”), as filed with the SEC. Amounts related to disclosure of June 30, 2018 balances within these interim condensed consolidated financial statements were derived from the aforementioned audited consolidated financial statements and notes thereto included in the 2018 Annual Report.
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. Concentration of credit risk with respect to receivables is limited due to the large number of customers composing the Company's customer base, the geographic dispersion of the customers, and the collateralization of substantially all receivable balances. Based on an assessment of credit risk, the Company typically grants collateralized credit to its customers. 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. Credit risk with respect to loans of inventory to customers is minimal. 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.

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Foreign Currency
The functional currency of the Company is the United States dollar ("USD"). Also, the functional currency of the Company's wholly-owned foreign subsidiary, AMTAG, is USD, but it maintains its books of record in Euros. The Company remeasures the financial statements of AMTAG into USD. The remeasurement of local currency amounts into USD creates remeasurement gains and losses, which are included in the condensed consolidated statements of operations.
To manage the effect of foreign currency exchange fluctuations, the Company utilizes foreign currency forward contracts. These derivatives generate gains and losses when they are settled and/or when they are marked to market.
Business Combinations
The Company accounts for business combinations by applying the acquisition method in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. 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 non-controlling 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 non-controlling 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.
Contingent consideration is classified as a liability or equity, as applicable. Contingent consideration in connection with the acquisition of a business is measured at fair value on the acquisition date, and unless classified as equity, is remeasured at fair value each reporting period thereafter until the consideration is settled, with changes in fair value included in net income.
Net cash paid to acquire a business is classified as investing activities on the accompanying condensed consolidated statements of cash flow.
Variable Interest Entities
A variable interest entity ("VIE") is a legal entity that has either a total equity investment that is insufficient to finance its activities without additional subordinated financial support or whose equity investors 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.
The most common type of VIE is a special purpose entity ("SPE"). SPEs are commonly used in securitization transactions in order to isolate certain assets and distribute the cash flows from those assets to investors. SPEs are generally structured to insulate investors from claims on the SPE’s assets by creditors of other entities, including the creditors of the seller of the assets.
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 reconsiders its previous conclusions 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 the consolidated financial statements.
The Company has various forms of ongoing 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 (see Note 14).
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 does not have any cash equivalents as of March 31, 2019 and June 30, 2018.
As of March 31, 2019 and June 30, 2018, the Company has $0.3 million and $0.4 million, respectively, in a bank account that is restricted and serves as collateral against a standby letter of credit issued by the bank in favor of the landlord for our office space in Los Angeles, California.

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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 substance of these transactions are precious metals owned by the Company that generate financing income from customers and are not metals held as inventory for sale. As such, the Company has classified this material as "precious metals held under financing arrangements", rather than as "inventory - repurchase arrangements with customers". 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, 2019 and June 30, 2018, precious metals held under financing arrangements totaled $212.6 million and $262.6 million respectively.
The Company’s precious metals held under financing arrangements are "marked-to-market."
Inventories
Inventories principally include bullion and bullion coins that are acquired and initially recorded at fair market value. The fair market value of the bullion and bullion coins is comprised of two components: (1) published market values attributable to the costs of the raw precious metal, and (2) a published premium paid at acquisition of the metal. The premium is attributable to the additional value of the product in its finished goods form and the market value attributable solely to the premium may be readily determined, as it is published by multiple reputable sources.
The Company’s inventories, except for certain lower of cost or market 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 operations.
While the premium component included in inventories is marked-to-market, our commemorative coin inventory, including its premium component, is held at the lower of cost or market, 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.)
Plant, Property and Equipment
Plant, property and equipment is stated at cost less accumulated depreciation. Depreciation is 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 commences 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.

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Finite-lived Intangible Assets
Finite-lived intangible assets consist primarily of customer relationships, non-compete agreements and employment contracts which are amortized on a straight-line basis over their economic useful lives ranging from three years to fifteen years. We review our finite-lived intangible assets for impairment under the same policy described above for plant, property, 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) 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 the Intangibles - Goodwill and Other Topic 350 of the ASC. Goodwill is reviewed for impairment at a reporting unit level, which in our case, 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 a stable or improved fair value, 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 8).
Evaluation of indefinite-lived intangible assets for impairment
The Company evaluates its indefinite-lived intangible assets (i.e., trademarks and trade-names) 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 more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is not more likely than not 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 8).
Long-Term Investments
Investments in privately-held entities that are at least 20% but less than 50% owned by the Company are accounted for using the equity method. Under the equity method, the carrying value of the investment is adjusted for the Company’s proportionate share of the investee’s earnings or losses, with the corresponding share of earnings or losses reported in other income (expense). The carrying value of the investment is reduced by the amount of the dividends received from the equity-method investee, as they are considered a return of capital.
Investments in privately-held entities that are less than 20% owned by the Company are accounted for using the cost method, unless the Company can exercise significant influence or the investee is economically dependent upon the Company, in

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which case the equity method is used. Under the cost method, investments are carried at cost and other income is recorded when dividends are received from the cost-method investee.
We evaluate our long-term investments for impairment quarterly or whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. As of March 31, 2019 and June 30, 2018, the Company did not identify any impairments.
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.)
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 the 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: (1) the quantity, price and specific items being purchased have been established, (2) metals have been delivered to the customer, and (3) 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 trade 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 Trades 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 trade order types and the key factors that determine when settlement occurs and when revenue is recognized for each type:
•
Traditional physical trade orders — The quantity, specific product, and price are determined on the trade date. Payment or sufficient credit is verified prior to delivery of the metals on the settlement date.
•
Consignment trade orders — The Company delivers the items requested by the customer prior to establishing a firm trade 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.
•
Provisional trade orders — The quantity and type of metal is established at the trade 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.
•
Margin trade orders — The quantity, specific product and price are determined at trade 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 trade date). Revenue on margin trade orders is recognized when the order is paid in full and delivered to the customer.
•
Borrowed precious metals trade orders for unallocated positions — Customers may purchase unallocated metal positions in the Company's inventory. The quantity and type of metal is established at the trade 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.

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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 futures contracts traded on national futures exchanges or forward contracts with credit worthy financial institutions. 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, futures and option 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 gain 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 and option contracts are recorded in cost of sales.
The Company enters into futures, forward and option 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 (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 operations (see Note 11.)
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 ("ASC 606"),  which follows five basic steps to determine whether revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company recognizes revenue when 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: (1) the customer simultaneously receives and consumes the benefits as the Company performs, (2) the Company's performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (3) 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 are met, a performance obligation is satisfied at a point-in-time.
The Company recognizes storage revenue over time, 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 at a point-in-time, when the customer receives the benefit of the services (e.g., stated number of packages are shipped on behalf of the customer during a month). The Company recognizes revenue from the licensing of its functional intellectual property ("IP"), which include customer lists and sales lead information, at the point in time when the right to use the IP is transferred to the licensee, and any revenue generated from usage-based royalties associated with the licensing of the IP is recognized at the point in time when the licensee converts and actualizes customers from the IP. In aggregate, these types of service revenues account for less than 1% of the Company's combined revenue from all revenue streams.

Interest Income
In accordance with the Interest Topic 835 of the ASC ("ASC 835") 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 trade 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

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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 trade orders — Spot deferred trade orders are a special type of forward delivery trade 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 trade. Even though the contract allows for physical delivery, it rarely occurs for this type of trade. As a result, revenue is not recorded from these transactions, because no product is delivered to the customer. Spot deferred trades 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 trade 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 14.) 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 trades. The Company enters this type of transaction for additional liquidity.
•
Borrowed metals fees — The Company may incur financing costs from its liabilities on 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 collateral (determined at the spot price) plus certain processing and other fees. The Company enters this type of transaction as an additional source of liquidity, and usually monetizes the metals received under such arrangements. Repayment is usually required in the same form as the metals advanced, or in cash.
Other Income    
The Company's other income is derived from the Company's proportional interest in the reported net income or net loss in our investees that are accounted for under the equity method of accounting (see Note 9) and the gains or losses associated with revaluation adjustments to the contingent earn-out liability associated with our joint venture (AMST).
Contingent Earn-out Liability
We record an estimate of the fair value of contingent consideration related to the earn-out obligation to SilverTowne LP related to the SilverTowne Mint acquisition. On a quarterly basis, we revalue the liability and record increases or decreases in the fair value as an adjustment to earnings. Changes to the contingent consideration liability can result from adjustments to the discount rate, or from changes to the estimates of future throughput activity of AMST, which are considered Level 3 inputs (see Note 3). Consequentially, the assumptions used in estimating fair value require significant judgment. The use of different assumptions and judgments could result in a materially different estimate of fair value. As of March 31, 2019 and June 30, 2018 the balance of the contingent liability was $84,000 and $588,000 respectively. The current portion of this liability is recorded as a component in accrued liabilities and the non-current portion of this liability is shown as a component in other long-term liabilities. The remaining annual contingent payout obligations, if achieved, would become due on October 30, 2019. Below is a reconciliation of the contingent earn out liability for the nine months ended March 31, 2019.
in thousands
 
 
 
 
 
Contingent
 
Liabilities at fair value, based on Level 3 inputs:
 
Consideration
 
Balance at June 30, 2018
 
$
588

 
Revaluation adjustment
 
(504
)
 
Balance at March 31, 2019
 
$
84

 
 
 
 
 

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Advertising
Advertising expense was $619,000 and $961,000, respectively, for the three months ended March 31, 2019 and 2018. Advertising expense was $1,857,000 and $2,537,000, respectively, for the nine months ended March 31, 2019 and 2018.
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 operations. Shipping and handling costs incurred totaled $1,671,000 and $1,315,000, respectively, for the three months ended March 31, 2019 and 2018. Shipping and handling costs incurred totaled $4,782,000 and $3,498,000, respectively, for the nine months ended March 31, 2019 and 2018.
Share-Based Compensation
The Company accounts for equity awards under the provisions of the 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.
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 the 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 recognizes a benefit for tax positions that it believes will more likely than not be sustained upon examination. The amount of benefit recognized is the largest amount of benefit that the Company believes has more than a 50% probability of being realized upon settlement. The Company regularly monitors its tax positions and adjusts the amount of recognized tax benefit based on its evaluation of information that has become available since the end of its last financial reporting period. The annual tax rate includes the impact of these changes in recognized tax benefits. When adjusting the amount of recognized tax benefits, the Company does not consider new information that has become available after the balance sheet date, but does disclose the effects of new information whenever those effects would be material to the Company's condensed consolidated financial statements. The difference between the amount of benefit taken or expected to be taken in a tax return and the amount of benefit recognized for financial reporting represents unrecognized tax benefits. These unrecognized tax benefits are presented in the condensed consolidated balance sheets principally within accrued liabilities.
The Company accounts for uncertainty in income taxes under the provisions of ASC 740. These provisions clarify the accounting for uncertainty in income taxes recognized in an enterprise's financial statements, and prescribe a recognition threshold and measurement criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions also provide guidance on de-recognition, classification, interest, and penalties, accounting in interim periods, disclosure, and transition. The potential interest and/or penalties associated with an uncertain tax position are recorded in provision for income taxes on the condensed consolidated statements of operations. Please refer to Note 12 for further discussion regarding these provisions.
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.
The Company's condensed consolidated financial statements recognized the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods, as if the Company were a separate taxpayer prior to the date of the Distribution of the Company when it was a member of the consolidated income tax return group of its Former Parent (Spectrum Group International, Inc.). Following its spin-off, the Company files federal and state income tax filings that are separate from the Former Parent's tax filings. The Company recognizes current and deferred income taxes as a separate taxpayer for periods ending after the date of Distribution.

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Earnings per Share ("EPS")
The Company computes and reports both basic EPS and diluted EPS. Basic EPS is computed by dividing net earnings (losses) by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net earnings (losses) by the sum of the weighted average number of common shares and dilutive common stock equivalents outstanding during the period. Diluted EPS reflects the total potential dilution that could occur from outstanding equity awards, including unexercised stock options, utilizing the treasury stock method.
A reconciliation of shares used in calculating basic and diluted earnings per common shares for the three and nine months ended March 31, 2019 and 2018, is presented below.
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Basic weighted average shares outstanding
7,031

 
7,031

 
7,031

 
7,031

 
Effect of common stock equivalents — stock issuable under outstanding equity awards
53

 
—

(1) 
56

 
—

(1) 
Diluted weighted average shares outstanding
7,084

 
7,031

 
7,087

 
7,031

 
_________________________________
 
(1)
 
The Company incurred a net loss for the three and nine months ended March 31, 2018, and hence the basic and diluted EPS were the same. The inclusion of 853 thousands potential common shares (outstanding stock options) in the computation of net loss per share would have been anti-dilutive.
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends
Dividends are recorded if and when they are declared by the Board of Directors.
Recently Adopted Accounting Pronouncements
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 May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). The amendments in ASU 2016-08 clarify the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”). The amendments in ASU 2016-10 clarify aspects relating to the identification of performance obligations and improve the operability and understandability of the licensing implementation guidance. In May 2016, the FASB issued ASU No. 2016-12("ASU 2016-12"), Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in ASU 2016-12 address certain issues identified on assessing collectability, presentation of sales taxes, non-cash consideration, and completed contracts and contract modifications at transition. The Company implemented these pronouncements in the first quarter of fiscal 2019, which did not have a significant effect on the financial results of the Company since substantially all of the Company's revenue in fiscal years 2018 and 2017, fell under the authoritative guidance of ASC 815, which is outside the scope of ASC 606.
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, FASB issued ASU No. 2016-02, (“ASU 2016-02”), Leases (Topic 842). The amendments in this update require lessees to recognize a lease liability measured on a discounted basis and a right-of-use ("ROU") asset for all leases at the commencement date. This update is effective for the Company, on July 1, 2019 (for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years), and is to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are evaluating the new guidelines, but believe that adoption will not have a material impact on our consolidated financial position, results of operations or cash flows and related disclosures, as the Company has minimal lease commitments. Based on the Company's preliminary assessment, upon the adoption of the new standard, we expect to record approximately $6.5 million (or

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about 1% of the Company's total assets) of ROU assets and corresponding offsetting lease liabilities for leases classified as operating leases on our consolidated balance sheets. The Company’s accounting for finance leases will remain substantially unchanged with little or no impact to the consolidated statements of income.
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 requirements, known as the current expected credit loss model ("CECL") will require entities to adopt an impairment model based on expected losses rather than incurred losses. This update is effective for the Company, on July 1, 2020 (for fiscal years beginning after December 15, 2019 including interim periods within those fiscal years.) The Company is currently evaluating the potential impact of the adoption of the new standard on its consolidated statements of financial condition and results of operations.
3. ASSETS AND LIABILITIES, AT FAIR VALUE
Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of March 31, 2019 and June 30, 2018.
in thousands
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
 
Carrying Amount
 
Fair value
 
Carrying Amount
 
Fair value
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
Cash
 
$
4,749

 
$
4,749

 
$
6,291

 
$
6,291

Receivables, net
 
15,725

 
15,725

 
35,856

 
35,856

Secured loans receivable
 
111,246

 
111,246

 
110,424

 
110,424

Derivative asset on open sale and purchase commitments, net
 
3,037

 
3,037

 
2,274

 
2,274

Derivative asset on option contracts
 
185

 
185

 
390

 
390

Derivative asset on futures contracts
 
977

 
977

 
238

 
238

Derivative asset on forward contracts
 
2,044

 
2,044

 
4,493

 
4,493

Income taxes receivable
 
1,541

 
1,541

 
1,553

 
1,553

Financial liabilities:
 
 
 
 
 
 
 
 
Lines of credit
 
$
149,000

 
$
149,000

 
$
200,000

 
$
200,000

Debt obligation (related party)
 
—

 
—

 
7,226

 
7,226

Liability on borrowed metals
 
210,650

 
210,650

 
280,346

 
280,346

Product financing arrangements
 
65,723

 
65,723

 
113,940

 
113,940

Derivative liability on margin accounts
 
1,783

 
1,783

 
3,804

 
3,804

Derivative liability on price protection programs
 
84

 
84

 
168

 
168

Derivative liability on open sale and purchase commitments, net
 
240

 
240

 
16,485

 
16,485

Derivative liability on futures contracts
 
—

 
—

 
—

 
—

Derivative liability on forward contracts
 
—

 
—

 
—

 
—

Accounts payable
 
64,897

 
64,897

 
45,997

 
45,997

Accrued liabilities
 
5,628

 
5,628

 
5,129

 
5,129

Other long-term liabilities (related party) (1)
 
—

 
—

 
798

 
798

Notes payable
 
86,720

 
91,994

 
—

 
—

 
 
 
 
 
 
 
 
 
(1) Includes estimated contingent amounts due to SilverTowne.
 
 
 
 
 
 
 
 
 
The fair values of the financial instruments shown in the above table as of March 31, 2019 and June 30, 2018 represent the 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

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cash flows and appropriately risk adjusted discount rates, and available observable and unobservable inputs.
The carrying amounts of cash, secured loans receivable, receivables, income taxes receivable, accounts payable, and accrued liabilities approximate fair value due to their short-term nature. The carrying amounts of derivative assets and derivative liabilities, liability 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 and debt obligation approximate fair value based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities. The carrying value of other long-term liabilities represents the long-term portion of contingent earn-out liabilities that are remeasured on a quarterly basis. The Company’s notes payable are reported at their aggregate principal amount less unamortized original issue discount and deferred financing costs on the accompanying consolidated balance sheets. The fair value of these financial instruments 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.
Valuation Hierarchy
Topic 820 of the ASC 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.
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:
Inventory. Inventories, principally include bullion and bullion coins, are acquired and initially recorded at fair market value. The fair market value of the bullion and bullion coins are comprised of two components: 1) published market values attributable to the costs of the raw precious metal, and 2) a published premium paid at acquisition of the metal. The premium is attributable to the additional value of the product in its finished goods form and the market value attributable solely to the premium is readily determined, as it is published by multiple reputable sources. Except for commemorative coin inventory, which are included in inventory at the lower of cost or market, the Company’s inventories are 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 are 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 substance of these transactions are precious metals owned by the Company that generate financing income from customers and are not metals held as inventory for sale. As such, the Company has classified this material as "precious metals held under financing arrangements", rather than as "inventory - repurchase arrangements with customers". 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 commodities inventory are classified in Level 1 of the valuation hierarchy.
Derivatives. Futures contracts, forward contracts, option 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

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derived from the markets on which the underlying commodities are traded. Product financing arrangements are classified in Level 1 of the valuation hierarchy.
Liability on Price Protection Programs. The Company records an estimate of the fair value of the liability on the price protection programs based on the difference between the contractual price at trade date and the retail price at the remeasurement date (i.e., quarter-end) based on the expected redemption rate. As of March 31, 2019, the Company used the quoted market price based on the current spot rate and used an expected redemption rate of 100%. The use of a throughput rate ignores the future price volatility that would affect the timing and rate of redemption under the program, and, as a result, the liability on the price protection programs is classified in Level 3 of the valuation hierarchy.
Contingent Earn-out Liability. The Company records an estimate of the fair value of contingent consideration related to the earn-out obligation to SilverTowne LP related to the SilverTowne Mint transaction. On a quarterly basis, the liability is remeasured and increases or decreases in the fair value are recorded as an adjustment to other income on the condensed consolidated statements of operations. Changes to the contingent consideration liability can result from adjustments to the discount rate, or from changes to the estimates of future throughput activity of AMST. The assumptions used in estimating fair value require significant judgment. The use of different assumptions and judgments could result in a materially different estimate of fair value. The key inputs in determining fair value of our contingent consideration obligations include the changes in the assumed timing and amounts of future throughputs (i.e., operating income, operating cost per unit, and production volume) which affects the timing and amount of future earn-out payments. Contingent earn-out liability is classified in Level 3 of the valuation hierarchy.
The Company values the contingent obligation by determining the likelihood that the Company has achieved the following targeted amount of performance thresholds for each annual earn-out period. Such thresholds include (1) Producing a targeted amount of silver ounces, (2) Earning a targeted amount of operating income, and (3) Generating an operating cost per ounce that is less than a targeted level. Each category triggers a different annual payout obligation if achieved over a 3 year period, and as of March 31, 2019, the remaining annual contingent payout obligations, if achieved, would become due on October 30, 2019. The Company re-assesses this contingent obligation each quarter based on the most current facts and market conditions. The obligation continues to remain as a liability at its original recorded value unless, based on each quarterly evaluation, it becomes evident the Company will not achieve all or part of the threshold performance targets. In such case, the obligation is adjusted to its more current estimated value.
    

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The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 and June 30, 2018, aggregated by the level in the fair value hierarchy within which the measurements fall:
 
 
March 31, 2019
 
 
Quoted Price in
 
 
 
 
 
 
 
 
Active Markets
 
Significant Other
 
Significant
 
 
 
 
for Identical
 
Observable
 
Unobservable
 
 
 
 
Instruments
 
Inputs
 
Inputs
 
 
in thousands
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
 
Inventory (1)
 
$
266,386

 
$
—

 
$
—

 
$
266,386

Precious metals held under financing arrangements
 
212,622

 
—

 
—

 
212,622

Derivative assets — open sale and purchase commitments, net
 
3,037

 
—

 
—

 
3,037

Derivative assets — option contracts
 
185

 
—

 
—

 
185

Derivative assets — futures contracts
 
977

 
—

 
—

 
977

Derivative assets — forward contracts
 
2,044

 
—

 
—

 
2,044

Total assets, valued at fair value
 
$
485,251

 
$
—

 
$
—

 
$
485,251

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Liability on borrowed metals
 
$
210,650

 
$
—

 
$
—

 
$
210,650

Product financing arrangements
 
65,723

 
—

 
—

 
65,723

Derivative liabilities — price protection programs
 
—

 
—

 
84

 
84

Derivative liabilities — liability on margin accounts
 
1,783

 
—

 
—

 
1,783

Derivative liabilities — open sale and purchase commitments, net
 
240

 
—

 
—

 
240

Derivative liabilities — future contracts
 
—

 
—

 
—

 
—

Derivative liabilities — forward contracts
 
—

 
—

 
—

 
—

Contingent earn-out liability
 
—

 
—

 
84

 
84

Total liabilities, valued at fair value
 
$
278,396

 
$
—

 
$
168

 
$
278,564

____________________
(1) Commemorative coin inventory totaling $33 thousand is held at lower of cost or market and is thus excluded from this table.

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June 30, 2018
 
 
Quoted Price in
 
 
 
 
 
 
 
 
Active Markets
 
Significant Other
 
Significant
 
 
 
 
for Identical
 
Observable
 
Unobservable
 
 
 
 
Instruments
 
Inputs
 
Inputs
 
 
in thousands
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
 
Inventory (1)
 
$
280,017

 
$
—

 
$
—

 
$
280,017

Precious metals held under financing arrangements
 
262,566

 
—

 
—

 
262,566

Derivative assets — open sale and purchase commitments, net
 
2,274

 
—

 
—

 
2,274

Derivative assets — option contracts
 
390

 
—

 
—

 
390

Derivative assets — futures contracts
 
238

 
—

 
—

 
238

Derivative assets — forward contracts
 
4,493

 
—

 
—

 
4,493

Total assets, valued at fair value
 
$
549,978

 
$
—

 
$
—

 
$
549,978

Liabilities:
 
 
 
 
 
 
 
 
Liability on borrowed metals
 
$
280,346

 
$
—

 
$
—

 
$
280,346

Product financing arrangements
 
113,940

 
—

 
—

 
113,940

Derivative liabilities — price protection programs
 
—

 
—

 
168

 
168

Derivative liabilities — liability on margin accounts
 
3,804

 
—

 
—

 
3,804

Derivative liabilities — open sale and purchase commitments, net
 
16,485

 
—

 
—

 
16,485

Contingent earn-out liability
 
—

 
—

 
588

 
588

Total liabilities, valued at fair value
 
$
414,575

 
$
—

 
$
756

 
$
415,331

____________________
(1) Commemorative coin inventory totaling $99 thousand is held at lower of cost or market and is thus excluded from 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 ongoing basis but are subject to fair value adjustments only under certain circumstances. These include: cost method and equity method investments that are written down to fair value when a decline in the fair value is determined to be other-than-temporary, and plant, property and equipment, intangibles or goodwill, which are written down to fair value when they are held for sale or determined to be impaired. The resulting fair value measurements of the assets are considered to be Level 3 measurements. Determining fair value requires the exercise of significant judgments, including judgments about 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 reporting units. 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 evaluates its goodwill and other indefinite-lived intangibles for impairment on non-recurring basis in the fourth quarter of the fiscal year, or more frequently if indicators of potential impairment exist. As of June 30, 2018, the carrying value of the Company's indefinite-lived intangible and goodwill assets totaled $3.2 million and $8.9 million, respectively. As of March 31, 2019 , the carrying value of the Company's indefinite-lived intangible and goodwill assets totaled $3.2 million and $8.9 million, respectively (see Note 8).
The Company's three investments in noncontrolled entities do not have readily determinable fair values. Quoted prices of the investments are not available, and the Company identified no impairment indicators that may affect the carrying value of these investments. Based on the Company's assessment of the carrying value of these assets, during the three and nine months ended March 31, 2019 and 2018 the Company did not record any impairments related to these investments. As of March 31, 2019 and June 30, 2018, the carrying value of the Company's investments totaled $11.6 million and $8.4 million, respectively.

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4.
RECEIVABLES
Receivables consist of the following as of March 31, 2019 and June 30, 2018:
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
 
 
 
 
 
 
Customer trade receivables
 
$
8,996

 
$
22,813

 
Wholesale trade advances
 
5,418

 
10,722

 
Due from brokers
 
1,311

 
2,351

 
Subtotal
 
15,725

 
35,886

 
Less: allowance for doubtful accounts
 
—

 
(30
)
 
Receivables, net
 
$
15,725

 
$
35,856

 
 
 
 
 
 
 
Customer Trade Receivables. Customer trade receivables represent short-term, non-interest bearing amounts due from precious metal sales, advances related to financing products, and other secured interests in assets of the customer.
Wholesale Trade Advances. Wholesale trade advances represent advances of various bullion products and cash advances for purchase commitments of precious metal inventory. Typically, these advances are unsecured, short-term, and non-interest bearing, and are made to wholesale metals dealers and government mints.
Due from Brokers. Due from brokers principally consists of the margin requirements held at brokers related to open futures contracts (see Note 11).
Allowance for Doubtful Accounts
An allowance for doubtful accounts is a reduction of the total amount of receivables appearing on the Company’s condensed consolidated balance sheets. The allowance for doubtful accounts represents our estimate of the amount of accounts receivable that may not be paid by customers. A summary of the activity in the allowance for doubtful accounts is as follows:
 
in thousands
 
 
 
 
 
 
 
 
 
 
Period ended:
 
Beginning Balance
 
Provision
 
Charge-off
 
Ending Balance
 
Nine Months Ended March 31, 2019
 
$
30

 
$
(30
)
(1) 
$
—

 
$
—

 
Year Ended June 30, 2018
 
$
30

 
$
—

 
$
—

 
$
30

 
_________________________________
1)
Represents $30 thousand reversal of a provision for doubtful accounts.
 
5.
SECURED LOANS RECEIVABLE
Below is a summary of the carrying value of our secured loans as of March 31, 2019 and June 30, 2018:
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
 
 
 
 
 
 
Secured loans originated
 
$
38,949

 
$
23,300

 
Secured loans originated - with a related party
 
8,516

 
12,523

 
 
 
47,465

 
35,823

 
Secured loans acquired
 
63,781

(1) 
74,601

(2) 
Secured loans
 
$
111,246

 
$
110,424

 
_________________________________
(1)    Includes $29 thousand of loan premium as of March 31, 2019.
(2)    Includes $54 thousand of loan premium as of June 30, 2018.    
Secured Loans - Originated: Secured loans include short-term loans, which include a combination of on-demand lines and short term facilities, and long-term loans that are made to our customers. These loans are fully secured by the customers' assets

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that include bullion, numismatic and semi-numismatic material, which are typically held in safekeeping by the Company. (See Note 13 for further information regarding our secured loans made to related parties.)
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 aggregate carrying value 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, numismatic and semi-numismatic material that are held in safekeeping by the Company. Typically, the seller of the loan portfolio retains the responsibility for the servicing and administration of the loans.
    As of March 31, 2019 and June 30, 2018, our secured loans carried weighted-average effective interest rates of 9.8% and 9.6%, respectively, and mature in periods generally 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 who are not active customers of A-Mark are reflected as an investing activity on the condensed consolidated statements of cash flows as secured loans, 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
The Company's secured loan receivables portfolio is comprised of secured loans with similar credit risk profiles and methods for assessing and monitoring credit risk. This similarity allows the Company to apply a standard methodology to determine the credit quality for each loan and the allowance, if any, for credit losses. The credit quality of each loan is generally determined by the type (or class) of secured material, the initial and ongoing collateral value determination and the assessment of loan-to-value ratio. Historically, the Company has not established an allowance for any credit losses because, based on this methodology, it believes that each of its loans is fully secured by the underlying collateral.
The Company evaluates its loan portfolio in one of two classes of secured loan receivables: those loans secured by: 1) bullion items, and 2) numismatic and semi-numismatic coins. The Company's secured loans by portfolio class, which align with management reporting, are as follows:
in thousands
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Bullion
 
$
76,809

 
69.0
%
 
$
72,128

 
65.3
%
 
Numismatic and semi-numismatic
 
34,437

 
31.0

 
38,296

 
34.7

 
 
 
$
111,246

 
100.0
%
 
$
110,424

 
100.0
%
 
Each of the two classes of secured loans receivables have the same initial measurement attribute and a similar method for assessing and monitoring credit risk. The methodology of assessing the credit quality of the secured loans acquired by the Company is similar to the secured loans originated by the Company; they are administered using the same internal reporting system, collateralized by precious metals, for which loan-to-value determination procedures are applied.
Credit Quality of Loans and Non-Performing Status
Generally, interest is due and payable within 30 days. A loan is considered past due if interest is not paid in 30 days or collateral calls are not met timely. Typically, loans do not achieve the threshold of non-performing status due to the fact that customers are generally put into default for any interest past due over 30 days and for unsatisfied collateral calls. When this occurs the loan collateral is typically liquidated within 90 days.
For certain secured loans, interest is billed monthly and, if not paid, is added to the outstanding loan balance. These secured loans are considered past due if their current loan-to-value ratio fails to meet established minimum equity levels, and the borrower fails to meet the collateral call required to reestablish the appropriate loan-to-value ratio.    
Non-performing loans have the highest probability for credit loss. The allowance for credit losses attributable to non-performing loans is based on the most probable source of repayment, which is normally the liquidation of collateral. In determining collateral value, the Company estimates the current market value of the collateral and considers credit enhancements such as additional collateral and third-party guarantees. Due to the accelerated liquidation terms of the Company's loan portfolio, all past due loans are generally liquidated within 90 days of default.

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Further information about the Company's credit quality indicators includes differentiating by categories of current loan-to-value ratios. The Company desegregates its secured loans that are collateralized by precious metal products, as follows:
in thousands
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
Loan-to-value of 75% or more
 
$
68,040

 
61.2
%
 
$
69,629

 
63.1
%
Loan-to-value of less than 75%
 
43,206

 
38.8

 
40,795

 
36.9

Secured loans collateralized by precious metal products
 
$
111,246

 
100.0
%
 
$
110,424

 
100.0
%
    The Company had no loans with a loan-to-value ratio in excess of 100% at March 31, 2019 or June 30, 2018.
Impaired loans
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, non-performing or in bankruptcy. 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. Accrual is resumed, and previously suspended interest income is 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.
All loans are contractually subject to margin calls. As a result, loans typically do not become impaired due to the fact the Company has the ability to require margin calls which are due upon receipt. Per the terms of the loan agreement, the Company has the right to liquidate the loan collateral in the event of a default. The collateral material is highly liquid and can easily be sold by the Company to pay off the loan. In such circumstances, this would result in a short term impairment that would typically result in full repayment of the loan and fees due to the Company.
For the three months ended March 31, 2019 and 2018, the Company incurred no loan impairment costs. For the nine months ended March 31, 2019 and 2018, the Company incurred no loan impairment costs.
6.
INVENTORIES
Our inventory consists of the precious metals that the Company has physically received, and inventory held by third-parties, which, at the Company's option, it may or may not receive. Below, our inventory is summarized by classification at March 31, 2019 and June 30, 2018:
in thousands
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
Inventory held for sale
 
$
89,106

 
$
32,605

Repurchase arrangements with customers
 
89,687

 
104,907

Consignment arrangements with customers
 
4,375

 
10,785

Commemorative coins, held at lower of cost or market
 
33

 
99

Borrowed precious metals
 
17,495

 
17,780

Product financing arrangements, restricted
 
65,723

 
113,940

 
 
$
266,419

 
$
280,116

Inventory Held for Sale. Inventory held for sale represents precious metals, excluding commemorative coin inventory, that have been received by the Company and are not subject to repurchase by or consignment arrangements with third parties. As of March 31, 2019 and June 30, 2018, the inventory held for sale totaled $89.1 million and $32.6 million, respectively.
Repurchase Arrangements with Customers. 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 fair value of the product on the repurchase date. Under these arrangements, the Company, which holds legal title to the metals, earns financing income until the time the arrangement is terminated or the material is repurchased by the customer. In the event of a repurchase by the customer, the Company records a sale.
These arrangements are typically terminable by either party upon 14 days' notice. Upon termination, the customer’s rights to repurchase any remaining inventory is forfeited. As of March 31, 2019 and June 30, 2018, included within inventory is $89.7 million and $104.9 million, respectively, of precious metals products subject to repurchase arrangements with customers.
Consignment Arrangements with Customers. The Company periodically loans metals to customers on a short-term consignment basis. Inventories loaned under consignment arrangements to customers as of March 31, 2019 and June 30, 2018

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totaled $4.4 million and $10.8 million, respectively. Such transactions are recorded as sales and are removed from the Company's inventory at the time the customer elects to price and purchase the precious metals.
Commemorative Coins. Our commemorative coin inventory, including its premium component, is held at the lower of cost or market, 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. Our commemorative coins are not hedged, and are included in inventory at the lower of cost or market and totaled $33,000 and $99,000 as of March 31, 2019 and June 30, 2018, respectively.
Borrowed Precious Metals. Borrowed precious metals inventories include: (1) metals held by suppliers as collateral on advanced pool metals, (2) amounts due to suppliers for the use of consigned inventory, (3) unallocated metal positions held by customers in the Company’s inventory, and (4) shortages in unallocated metal positions held by the Company in the supplier’s inventory. Unallocated or pool metal represents an unsegregated inventory position that is due on demand, in a specified physical form, based on the total ounces of metal held in the position. Amounts due under these arrangements require delivery either in the form of precious metals, or cash. The Company's inventories included borrowed precious metals with market values totaling $17.5 million and $17.8 million as of March 31, 2019 and June 30, 2018, respectively, with a corresponding offsetting obligation reflected as liabilities on borrowed metals on the condensed consolidated balance sheets.
Product Financing Arrangements. In substance, these inventories represent amounts held as security by lenders for obligations under product financing arrangements. The Company enters into a product financing agreement for the transfer and subsequent re-acquisition of gold and silver at an agreed-upon price based on the spot price with a third party finance company. This inventory is restricted and is held at a custodial storage facility in exchange for a financing fee, paid to the third party finance company. During the term of the financing, the third party finance company holds the inventory as collateral, and both parties intend for the inventory to be returned to the Company at an agreed-upon price based on the spot price on the finance arrangement termination date. These transactions do not qualify as sales and have been accounted for as financing arrangements in accordance with ASC 470-40 Product Financing Arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing and the underlying inventory are carried at fair value, with changes in fair value included in cost of sales in the condensed consolidated statements of operations. Such obligations totaled $65.7 million and $113.9 million as of March 31, 2019 and June 30, 2018, respectively.
The Company mitigates market risk of its physical inventories and open commitments through commodity hedge transactions (see Note 11.) As of March 31, 2019 and June 30, 2018, the unrealized losses resulting from the difference between market value and cost of physical inventories were $1.9 million and $5.4 million, respectively.
Premium component of inventory
The Company's inventories primarily include bullion and bullion coins and are acquired and initially recorded at fair market value. The fair market value of the bullion and bullion coins is comprised of two components: (1) published market values attributable to the cost of the raw precious metal, and (2) a published premium paid at acquisition of the metal. The premium is attributable to the additional value of the product in its finished goods form and the market value attributable solely to the premium is readily determined, as it is published by multiple reputable sources. The premium is included in the cost of the inventory, paid at acquisition, and is a component of the total fair market value of the inventory. The precious metal component of the inventory may be hedged through the use of precious metal commodity positions, while the premium component of our inventory is not a commodity that may be hedged.
The Company’s inventories are subsequently recorded at their fair market values, that is, "marked-to-market", except for our commemorative coin inventory. The daily changes in the fair market value of our inventory are offset by daily changes in fair market value of hedging derivatives that are taken with respects 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 operations.
The premium component, at market value, included in the inventories as of March 31, 2019 and June 30, 2018 totaled $5.4 million and $3.5 million, respectively.

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7. PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment consists of the following at March 31, 2019 and June 30, 2018:
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Office furniture, and fixtures
 
$
2,072

 
$
2,056

 
Computer equipment
 
762

 
757

 
Computer software
 
3,508

 
3,471

 
Plant equipment
 
2,862

 
2,701

 
Building
 
319

 
315

 
Leasehold improvements
 
2,804

 
2,796

 
Total depreciable assets
 
12,327

 
12,096

 
Less: accumulated depreciation
 
(6,932
)
 
(5,597
)
 
Property and equipment not placed in service
 
1,546

 
1,483

 
Land
 
36

 
36

 
Plant, property and equipment, net
 
$
6,977

 
$
8,018

 
Depreciation expense for the three months ended March 31, 2019 and 2018 was $442,000 and $431,000, respectively. Depreciation expense for the nine months ended March 31, 2019 and 2018 was $1,335,000 and $1,333,000, respectively.
8. GOODWILL AND INTANGIBLE ASSETS
In connection with the acquisition of A-Mark by Former Parent on July 1, 2005, the accounts of the Company were adjusted using the push down basis of accounting to recognize the allocation of the consideration paid to the respective net assets acquired. In accordance with the push down basis of accounting, the Company's net assets were adjusted to their fair values as of the date of the acquisition based upon an independent appraisal.
Due to the Company's business combination with AMST that closed on August 31, 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. 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 more steady and 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. 
Due to the Company's acquisition of Goldline, 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 represents 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 is expected to lead to increased product margin spreads, lower distribution and storage costs for Goldline, and a larger customer base for the Company's secured lending operations.

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The carrying value of goodwill and other purchased intangibles as of March 31, 2019 and June 30, 2018 is as described below:
dollar amounts in thousands
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018

Estimated Useful Lives (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
 
$
8,848

 
$
(6,148
)
 
$
—

 
$
2,700

 
$
8,848

 
$
(5,467
)
 
$
—

 
$
3,381

Non-compete and other
3 - 5
 
2,300

 
(2,106
)
 
—

 
194

 
2,300

 
(2,056
)
 
—

 
244

Employment agreement
3
 
295

 
(247
)
 
—

 
48

 
295

 
(222
)
 
—

 
73

Intangibles subject to amortization
 
11,443

 
(8,501
)
 
—

 
2,942

 
11,443

 
(7,745
)
 
—

 
3,698

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trade name
Indefinite
 
$
4,454

 
$
—

 
$
(1,291
)
 
$
3,163

 
$
4,454

 
$
—

 
$
(1,291
)
 
$
3,163

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Identifiable intangible assets
 
$
15,897

 
$
(8,501
)
 
$
(1,291
)
 
$
6,105

 
$
15,897

 
$
(7,745
)
 
$
(1,291
)
 
$
6,861

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
Indefinite
 
$
10,245


$
—

 
$
(1,364
)
 
$
8,881

 
$
10,245

 
$
—

 
$
(1,364
)
 
$
8,881

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company's intangible assets are subject to amortization except for trade-names, which have an indefinite life. Intangible assets subject to amortization are amortized using the straight-line method over their useful lives, which are estimated to be three to fifteen years. Amortization expense related to the Company's intangible assets for the three months ended March 31, 2019 and 2018 was $252,000 and $251,000, respectively. Amortization expense related to the Company's intangible assets for the nine months ended March 31, 2019 and 2018 was $756,000 and $661,000, respectively.
Impairment
    The accumulated impairment charge of $2.7 million (goodwill and indefinite-lived intangible assets) was a non-recurring charge for fiscal 2018. No further impairment of goodwill or intangible assets has occurred for the nine months ended March 31, 2019.
Estimated Amortization
Estimated amortization expense on an annual basis for the succeeding five years is as follows (in thousands):
Fiscal Year Ending June 30,
 
Amount
2019 (3 months remaining)
 
$
255

2020
 
1,011

2021
 
599

2022
 
571

2023
 
128

Thereafter
 
378

Total
 
$
2,942


9.
LONG-TERM INVESTMENTS
The Company has three investments in privately-held entities, each of which is a precious metals retailer and customer of the Company. For each of these entities, the Company has: 1) an exclusive supplier agreement, for which these entities have agreed to purchase all bullion products required for their businesses exclusively from A-Mark, subject to certain limitations; 2) a product fulfillment services and storage agreement; and 3) the right to appoint a director to the entity's board of directors (which has been exercised in each case). The Company has determined that it is appropriate to account for each of these investments under the equity method of accounting. The following table shows the carrying value and ownership percentage of the Company's investment in each entity:

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March 31, 2019
 
June 30, 2018
Entity
 
Carrying Value
 
Ownership Percentage
 
Carrying Value
 
Ownership Percentage
 
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Company A (1)
 
$
2,002

 
7.4
%
 
$
500

 
2.50
%
Company B
 
8,803

 
20.6
%
 
7,888

 
20.6
%
Company C (2)
 
816

 
10.0
%
 
—

 
—
%
 
 
$
11,621

 
 
 
$
8,388

 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
1)
In December 2018, the Company purchased additional shares of Company A's common stock for $1.5 million, thereby increasing the Company’s aggregate ownership interest from 2.5% to 7.4%. In January 2019, the Company obtained a voting seat on Company A's board of directors. Effective with the third quarter of fiscal 2019, the Company changed the accounting of this investment from the cost method to the equity method.
2)
 On January 9, 2019, the Company made an $800,000 investment in Company's C's common stock, representing 10% of its equity.
 
 
 
 
 
 
 
 
 
 
The Company considers these equity method investees to be related parties. See Note 13 for a summary of the Company's aggregate balances and activity with these entities.

10. ACCOUNTS PAYABLE
Accounts payable consists of the following:
 
in thousands
 
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Trade payables to customers
 
$
8,871

 
$
175

 
Advances from customers
 
45,604

 
42,615

 
Deferred revenue
 
5,059

 
2,107

 
Other accounts payable
 
5,363

(1) 
1,100

 
 
 
 
$
64,897

 
$
45,997

 
_________________________________
1)
Balance includes $4.2 million short-term unsecured advance from a financial institution.

11.
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 relating 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 consolidated statements of operations.
Commodity Price Management
The Company manages the value of certain assets and liabilities of its trading business, including trading inventories, 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 inventories 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 Topic 815 of the ASC, 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 statement of operations 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 a derivative asset or liability on the condensed consolidated balance sheets.
The Company's trading inventories 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.

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The Company's precious metals inventories are subject to market value changes, created by changes in the underlying commodity market prices. Inventories purchased or borrowed by the Company are subject to price changes. Inventories borrowed are considered natural hedges, since changes in value of the metal held are offset by the obligation to return the metal to the supplier.
    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. Futures and forwards contracts open at end of any period typically settle within 30 days. 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 policy is to substantially hedge its inventory position, net of open sale and purchase commitments that are subject to price risk. The Company regularly enters into precious metals commodity forward and futures contracts with financial institutions to hedge price changes that would cause changes in the value of its physical metals positions and purchase commitments and sale commitments. 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 metals 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 represent 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. In the table below, the aggregate gross and net derivative receivables and payables balances are presented by contract type and type of hedge, as of March 31, 2019 and June 30, 2018.
 
 
March 31, 2019
 
June 30, 2018
 
 
 
 
 
in thousands
 
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
 
$
4,393

 
$
(1,356
)
 
$
—

 
$
3,037

 
$
2,602

 
$
(328
)
 
$
—

 
$
2,274

Option contracts
 
185

 
—

 
—

 
185

 
390

 
—

 
—

 
390

Future contracts
 
977

 
—

 
—

 
977

 
238

 
—

 
—

 
238

Forward contracts
 
2,053

 
(9
)
 
—

 
2,044

 
4,577

 
(84
)
 
—

 
4,493

 
 
$
7,608

 
$
(1,365
)
 
$
—

 
$
6,243

 
$
7,807

 
$
(412
)
 
$
—

 
$
7,395

Nettable derivative liabilities:
Open sale and purchase commitments
 
$
711

 
$
(471
)
 
$
—

 
$
240

 
$
17,132

 
$
(647
)
 
$
—

 
$
16,485

Margin accounts
 
6,657

 
—

 
(4,874
)
 
1,783

 
5,988

 
—

 
(2,184
)
 
3,804

Liability of price protection programs
 
84

 
—

 
—

 
84

 
168

 
—

 
—

 
168

Future contracts
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
 
$
7,452

 
$
(471
)
 
$
(4,874
)
 
$
2,107

 
$
23,288

 
$
(647
)
 
$
(2,184
)
 
$
20,457


Gains or Losses on Derivative Instruments
The Company records the derivative at the trade date with a corresponding unrealized gain (loss), shown as a component of cost of sales in the condensed consolidated statements of operations. 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

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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 and option contacts 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, 2019 and 2018.
in thousands
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Gains (losses) on derivative instruments:
 
Unrealized gains on open future commodity and forward contracts and open sale and purchase commitments, net
 
$
27,069

 
$
15,041

 
$
15,579

 
$
5,038

 
Realized gains (losses) on future commodity contracts, net
 
1,085

 
(3,241
)
 
4,571

 
8,781

 
 
 
$
28,154

 
$
11,800

 
$
20,150

 
$
13,819

 
The Company’s net gains on derivative instruments, as shown in the table above, were substantially offset by the changes in fair market value of the underlying precious metals inventory and open sale and purchase commitments, which were also recorded in cost of sales in the condensed consolidated statements of operations.

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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 is subject to price risk as of March 31, 2019 and at June 30, 2018.
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Inventory
 
$
266,419

 
$
280,116

 
Precious metals held under financing arrangements
 
212,622

 
262,566

 
 
 
479,041

 
542,682

 
 
 
 
 
 
 
Less unhedgeable inventory:
 
 
 
 
 
Commemorative coin inventory, held at lower of cost or market
 
(33
)
 
(99
)
 
Premium on metals position
 
(5,372
)
 
(3,530
)
 
Precious metal value not hedged
 
(5,405
)
 
(3,629
)
 
 
 
 
 
 
 
 
 
473,636

 
539,053

 
 
 
 
 
 
 
Commitments at market:
 
 

 
 

 
Open inventory purchase commitments
 
146,046

 
342,287

 
Open inventory sales commitments
 
(161,998
)
 
(138,022
)
 
Margin sale commitments
 
(6,657
)
 
(5,988
)
 
In-transit inventory no longer subject to market risk
 
(4,424
)
 
(1,060
)
 
Unhedgeable premiums on open commitment positions
 
1,178

 
541

 
Borrowed precious metals
 
(210,650
)
 
(280,346
)
 
Product financing arrangements
 
(65,723
)
 
(113,940
)
 
Advances on industrial metals
 
8,295

 
6,044

 
 
 
(293,933
)
 
(190,484
)
 
 
 
 
 
 
 
Precious metal subject to price risk
 
179,703

 
348,569

 
 
 
 
 
 
 
Precious metal subject to derivative financial instruments:
 
 
 
 
 
Precious metals forward contracts at market values
 
92,875

 
274,994

 
Precious metals futures contracts at market values
 
85,686

 
72,421

 
Total market value of derivative financial instruments
 
178,561

 
347,415

 
 
 
 
 
 
 
Net precious metals subject to commodity price risk
 
$
1,142

 
$
1,154

 

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Table of Contents            

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, 2019 and June 30, 2018, the Company had the following outstanding commitments and open forward and future contracts:
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Purchase commitments
 
$
146,046

 
$
342,287

 
Sales commitments
 
$
(161,998
)
 
$
(138,022
)
 
Margin sales commitments
 
$
(6,657
)
 
$
(5,988
)
 
Open forward contracts
 
$
92,875

 
$
274,994

 
Open futures contracts
 
$
85,686

 
$
72,421

 
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. At March 31, 2019, 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 accounting treatment of our foreign currency exchange derivative instruments is similar to the accounting treatment of our commodity derivative instruments, that is, the change in the value in the financial instrument is immediately recognized as a component of cost of sales. Unrealized (losses) on foreign exchange derivative instruments shown on the face of the condensed consolidated statements of operations totaled $(36,000) and $(32,000) for the three months ended March 31, 2019 and 2018, respectively. Unrealized (losses) gains on foreign exchange derivative instruments shown on the face of the condensed consolidated statements of operations totaled $(54,000) and $6,000 for the nine months ended March 31, 2019 and 2018, respectively. 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 are as follows:
in thousands
 
March 31, 2019
 
June 30, 2018
Foreign exchange forward contracts
 
$
2,489

 
$
4,130

Open sale and purchase commitment transactions, net
 
$
3,508

 
$
3,026

 
 
 
 
 
12.     INCOME TAXES

Income (loss) from operations before provision for income taxes is shown below:
in thousands
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
U.S.
 
$
1,355

 
$
(1,498
)
 
$
4,214

 
$
(528
)
 
Foreign
 
8

 
14

 
26

 
28

 
Net income (loss) before provision for income taxes
 
$
1,363

 
$
(1,484
)
 
$
4,240

 
$
(500
)
 
 
 
 
 
 
 
 
 
 
 

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The Company files a consolidated federal income tax return based on a June 30 tax year end. The provision for income tax (expense) benefit for the three and nine months ended March 31, 2019 and 2018 consists of the following:
in thousands
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Federal
 
$
(338
)
 
$
675

 
$
(959
)
 
$
109

 
State and local
 
(61
)
 
138

 
(177
)
 
107

 
Foreign
 
(3
)
 
(6
)
 
(7
)
 
(7
)
 
Provision for income tax (expense)/benefit
 
$
(402
)
 
$
807

 
$
(1,143
)
 
$
209

 
 
 
 
 
 
 
 
 
 
 
The effective tax rate for the three and nine months ended March 31, 2019 and 2018 are set forth below:
in thousands
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Effective tax rate
 
(29.5
)%
 
54.4
%
 
(27.0
)%
 
41.8
%
 
 
 
 
 
 
 
 
 
 
 
Tax Cuts and Jobs Act
The comparability of our effective tax rate in the three and nine months ended March 31, 2019 compared to the corresponding prior year period was impacted by the U.S. Tax Cuts and Jobs Act of 2017 (the "Tax Act"), which was effective for the Company starting in our second quarter of fiscal 2018. Information regarding our adoption and prospective impacts of the Tax Act on our tax is included in our Annual Report on Form 10-K for our fiscal year ended June 30, 2018. We completed our assessment of the income tax effects of the Tax Act within the measurement period as required in ASU 2018-05 ("SAB 118").
Tax Balances and Activity
Income Taxes Receivable and Payable
As of March 31, 2019 and June 30, 2018, income taxes receivable totaled $1.5 million and $1.6 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, 2019 and June 30, 2018, 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.
As of March 31, 2019, the consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax asset of $1.6 million and a federal deferred tax asset of $1.3 million. As of June 30, 2018, the consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax asset of $1.7 million and a federal deferred tax asset of $2.2 million.    
Net Operating Loss Carryforwards
As of March 31, 2019 and June 30, 2018, the Company has approximately $3.2 million and $2.9 million of federal net operating loss carryforwards and approximately $14.9 million and $15.5 million, state and city net operating loss carryforwards, respectively. The Company's combined federal, state and city tax-effected net operating loss carryforwards totaled, as of March 31, 2019 and June 30, 2018, $1.7 million and $1.7 million, respectively. These net operating loss carryforwards start to expire in the year ending June 30, 2022.
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 a tax benefit (i.e., an unrecognized tax benefit) on its consolidated statements of operations. 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. For the three and nine months ended March 31, 2019 there was no material movement in unrecognized tax benefits including interest and penalties.

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Tax Examinations
Refer to the information related to open tax examinations in our 2018 Annual Report on Form 10-K for the fiscal year ended June 30, 2018. All of the referenced tax examinations remain open, except for the IRS examination of the Company's fiscal 2015 federal tax return and New York State audit for fiscal years 2014-2016; these examinations were settled and closed during fiscal year 2019. The impact of these closed examinations to the Company's financial statements for fiscal 2019 were insignificant.

13. RELATED PARTY TRANSACTIONS
Former Parent and its Subsidiaries
In addition to transactions with other affiliates as indicated below, the Company engages with Stack’s Bowers Numismatics LLC ("Stack's Bowers Galleries"), a wholly owned subsidiary of the Former Parent, in (i) sales and purchase transactions, and (ii) transactions in which the Company assists Stack’s Bowers Galleries in financing the purchase of rare coins and precious metals products, both through precious metal repurchase arrangements in which the Company receives a fee based upon the commodity value of the coins, and through loans to Stack’s Bowers Galleries from CFC secured by the coins or precious metal. The effect of these transactions is included in the following tables.
Balances with Affiliated Companies or Persons
As of March 31, 2019 and June 30, 2018, the Company had related party receivables and payables balances as set forth below:
 in thousands
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
 
 
Receivables
 
Payables
 
Receivables
 
Payables
 
Former Parent/Stack's Bowers Galleries
 
$
9,430

(1) 
$
—

 
$
13,240

 
$
—

 
Equity method investees
 
2,774

(2) 
—

 
900

 
920

 
SilverTowne
 
185

(3) 
—

 
—

 
242

 
Goldline Lenders(4)
 
—

 
—

 
—

 
7,710

 
 
 
$
12,389

 
$
0

 
14,140

 
$
8,872

 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
(1) Balance principally includes two secured lines of credit with a balance of $4.5 million and $4.0 million (shown as a component of secured loans receivables) and trade receivables of $1.0 million. See "Secured Lines of Credit with Stack's Bowers Galleries", below.
 
(2) Balance primarily represents trade receivables, net (shown as a component of receivables).
 
(3) Balance primarily represents trade receivables, net (shown as a component of receivables).
 
(4) Principal balance of the Goldline Credit Facility of $7.5 million was repaid in full on December 7, 2018 before the August 2020 maturity date. The principal payment included a 2% premium of $150,000. (See Note 14 for further details.)
 
 
 
 
 
 
 
 
 
 
 
Secured Lines of Credit with Stack's Bowers Galleries
On September 19, 2017, CFC entered into a loan agreement with Stack's Bowers Galleries providing a secured line of credit, bearing interest at a competitive rate per annum, with a maximum borrowing line (subject to temporary increases) of $5.3 million. The loan is secured by precious metals and numismatic products. As of March 31, 2019 and June 30, 2018, the aggregate carrying value of this loan was $4.5 million and $3.0 million, respectively.
On March 1, 2018, CFC entered into a loan agreement with Stack's Bowers Galleries providing a secured line of credit on the wholesale value (i.e., the excess over the spot value of the metal), of numismatic products bearing interest at a competitive rate per annum, with a maximum borrowing line (subject to temporary increases) of $10.0 million. In addition to the annual rate of interest, the Company is entitled to receive a participation interest equal to 10% of the net profits realized by Stack's Bowers Galleries on the ultimate sale of the products. As of March 31, 2019 and June 30, 2018, the aggregate carrying value of this loan was $4.0 million and $9.5 million, respectively.
Long Term Debt Obligation with Goldline Lenders
On December 7, 2018, the Company repaid the $7.5 million principal amount outstanding under the Goldline Credit Facility to the Goldline Lenders in full.  Under the terms of the principal repayment, the applicable credit and related agreements have been terminated and none of the parties thereto has any further rights or obligations thereunder (see Note 14).
Activity with Affiliated Companies or Persons
Sales and Purchases Made to Affiliated Companies
During the three and nine months ended March 31, 2019 and 2018, the Company made sales and purchases to various

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companies, which have been deemed to be related parties, as follows:
in thousands
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
March 31, 2019
 
March 31, 2018
 
 
Sales
 
Purchases
 
Sales
 
Purchases
 
Sales
 
Purchases
 
Sales
 
Purchases
 
Former Parent/Stack's Bowers Galleries
 
$
4,417

 
$
3,924

 
$
12,189

 
$
211,120

 
$
23,505

 
$
21,883

 
$
24,686

 
$
214,661

 
Equity method investees
 
135,433

 
7,543

 
131,244

 
5,393

 
410,617

 
13,262

 
372,912

 
6,859

 
SilverTowne
 
2,537

 
121

 
5,101

 
699

 
11,218

 
1,498

 
12,384

 
7,078

 
 
 
$
142,387

 
$
11,588

 
$
148,534

 
$
217,212

 
$
445,340

 
$
36,643

 
$
409,982

 
$
228,598

 
Interest Income Earned from Affiliated Companies
During the three and nine months ended March 31, 2019 and 2018, the Company earned interest income related to loans made to Stack's Bowers Galleries and to financing arrangements (including repurchase agreements) with affiliated companies, as set forth below:
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Interest income from secured loans receivables
 
$
277

 
$
88

 
$
766

 
$
141

 
Interest income from finance products and repurchase arrangements
 
1,684

 
1,114

 
5,116

 
2,333

 
 
 
$
1,961

 
$
1,202

 
$
5,882

 
$
2,474

 
 
 
 
 
 
 
 
 
 
 
Interest Expense Incurred Related to Notes Payable and Long-Term Debt Obligation
During the three and nine months ended March 31, 2019 and 2018, the Company incurred interest expense (including debt amortization costs) related to the debt payable to SilverTowne and the Goldline Lenders, as set forth below:
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Interest expense incurred related to notes payable
 
$
—

 
$
—

 
$
—

 
$
4

 
Interest expense incurred related to long-term debt obligation
 
—

 
226

 
$
342

 
$
505

 
 
 
$
—

 
$
226

 
$
342

 
$
509

 
 
 
 
 
 
 
 
 
 
 
Other Income Earned from Equity Method Investee
During the three months ended March 31, 2019 and 2018, the Company recorded its proportional share of its equity method investees' net income as other income that total $374,000 and $99,000, respectively. During the nine months ended March 31, 2019 and 2018, the Company recorded its proportional share of its equity method investee's net income as other income that totalled $933,000 and $278,000, respectively. As of March 31, 2019 and June 30, 2018, the aggregate carrying balance of the equity method investments was $11.6 million and $8.4 million, respectively.
Other Expense Incurred with Goldline Lenders
On December 7, 2018, in connection $7.5 million payment of principal under the Goldline Credit Facility, the Goldline Lenders received a 2% ($150,000) premium (see Note 14).

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14.
FINANCING AGREEMENTS
Lines of Credit
Effective March 29, 2019, through an amendment and restatement of the applicable credit documents, A-Mark renewed its uncommitted demand borrowing facility ("Trading Credit Facility") with a syndicate of banks. Under the agreements, Coöperatieve Rabobank U.A. acts as joint lead lender and administrative agent/bookrunner and Natixis acts as joint lead arranger and syndication agent for the syndicate. The Trading Credit Facility is secured by substantially all of the Company’s assets on a first priority basis.  
As of March 31, 2019, the Trading Credit Facility provided the Company with access up to $260.0 million, featuring a $210.0 million base, with a $50.0 million accordion option. The Trading Credit Facility is scheduled to mature on March 27, 2020. From commencement of the Trading Credit Facility (i.e., March 31, 2016), the Company has incurred $3.4 million of accumulated loan costs. These loan costs have been capitalized when incurred and are amortized over the term of the Trading Credit Facility. As of March 31, 2019 and June 30, 2018, the remaining unamortized balance was approximately $0.7 million and $0.5 million, respectively.
The Company routinely uses the Trading Credit Facility to purchase and finance precious metals and for operating cash flow purposes. Amounts under the Trading Credit Facility bear interest based on London Interbank Offered Rate (“LIBOR”) plus a 2.50% margin for revolving credit line loans and a 4.50% margin for bridge loans (that is, for loans that exceed the available revolving credit line). The one-month LIBOR rate was approximately 2.50% and 2.09% as of March 31, 2019 and June 30, 2018, respectively. Borrowings are due on demand and totaled $149.0 million and $200.0 million at March 31, 2019 and at June 30, 2018, respectively. The amounts available under the respective borrowing facilities are determined at the end of each week following a specified borrowing base formula.  The Company is able to access additional credit as needed to finance operations, subject to the overall limits of the borrowing facilities and lender approval of the revised borrowing base calculation. Based on the latest approved borrowing bases in effect, the amounts available under the Trading Credit Facility, after taking into account current borrowings, totaled $9.2 million and $22.1 million as determined on March 31, 2019 and on June 30, 2018, respectively.
The Trading Credit Facility has certain restrictive financial covenants, including one requiring the Company to maintain a minimum tangible net worth. As of March 31, 2019 the minimum tangible net worth financial covenant under the Trading Credit Facility was $47.5 million. The Company is in compliance with all restrictive financial covenants as of March 31, 2019.
Interest expense related to the Company’s lines of credit totaled $2.0 million and $2.1 million, which represents 47.6% and 57.9% of the total interest expense recognized, for the three months ended March 31, 2019 and 2018, respectively. Our lines of credit carried a daily weighted average effective interest rate of 4.89% and 3.97%, respectively, for the three months ended March 31, 2019 and 2018.
Interest expense related to the Company’s lines of credit totaled $5.9 million and $5.8 million, which represents 47.5% and 59.9% of the total interest expense recognized, for the nine months ended March 31, 2019 and 2018, respectively. Our lines of credit carried a daily weighted average effective interest rate of 4.73% and 3.85%, respectively, for the nine months ended March 31, 2019 and 2018.
Debt Obligation with Goldline Lenders
On August 28, 2017, in connection with the closing of the Goldline acquisition (see Note 1), Goldline, then known as Goldline Acquisition Corp., entered into a privately placed credit facility in the amount of $7.5 million (the “Goldline Credit Facility”) with various lenders (the "Goldline Lenders"). Borrowings under the Goldline Credit Facility were used to finance a portion of the consideration payable pursuant to the Goldline acquisition.
The Goldline Credit Facility was secured by a first priority lien on substantially all of the assets of Goldline, and was guaranteed by the Company. Interest on the Goldline Credit Facility was payable quarterly in arrears at the rate of 8.5% per annum, and the Goldline Lenders under the Goldline Credit Facility were entitled to an additional funding fee payment at maturity equal to the greater of 3.0% of the principal amount of the Goldline Credit Facility and 10.0% of cumulative EBITDA (for the periods ending June 30, 2018, 2019 and 2020) of Goldline in excess of $10.0 million, on a pro rata basis. The Goldline Credit Facility had a three-year maturity, and all outstanding principal and unpaid interest was due upon maturity (August 28, 2020).
On December 7, 2018, the Company repaid the $7.5 million principal amount outstanding under the Goldline Credit Facility to the Goldline Lenders, together with a 2% ($150,000) premium (shown as a component of other expense) and unpaid interest through the date of repayment (shown as a component of interest expense).  Under the terms of the repayment, the applicable credit and related agreements have been terminated and none of the parties thereto has any further rights or obligations thereunder.
As of March 31, 2019 and June 30, 2018, the carrying balance of the Goldline Credit facility was $0.0 million and $7.2 million, respectively, and the remaining unamortized loan cost balance was approximately $0.0 million and $0.3 million,

40
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respectively, which is amortized ratably through the maturity date. As of March 31, 2019, the balance of the loan fee payable was $0.0 million.
Interest expense related to the Goldline Credit Facility (including debt loan amortization costs) totaled $226,000 which represents 6.2% of the total interest expense recognized, for the three months ended March 31, 2018. The Goldline Credit Facility's weighted average effective interest rate was 9.19% for the three months ended March 31, 2018., The Company did not incur interest expense related to the Goldline Credit Facility for the three months ended March 31, 2019.
Interest expense related to the Goldline Credit Facility (including debt loan amortization costs) totaled $342,000 which represents 2.7% of the total interest expense recognized, for the nine months ended March 31, 2019. The Goldline Credit Facility's weighted average effective interest rate was 4.17% for the nine months ended March 31, 2019. Interest expense related to the Goldline Credit Facility (including debt loan amortization costs) totaled $505,000 which represents 5.2% of the total interest expense recognized, for the nine months ended March 31, 2018. The Goldline Credit Facility's weighted average effective interest rate was 9.30% for the nine months ended March 31, 2018.
The obligations of Goldline and the Company under the Goldline Credit Facility had been subordinated to the Company’s obligations under the Trading Credit Facility (see Lines of Credit, above in Note 14).
Notes Payable
Securitization/Variable Interest Entity
On September 14, 2018, AM Capital Funding, LLC (“AMCF”), a wholly owned subsidiary of CFC, completed an issuance of Secured Senior Term Notes (collectively, the "Notes"): Series 2018-1, Class A (the “Class A Notes”) in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B (the “Class B Notes” and together with the Class A Notes, the “Notes”) in the aggregate principal amount of $28.0 million.  The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%.  The Notes have a maturity date of December 15, 2023. The Notes were issued under a Master Indenture and the Series 2018-1 Supplement thereto between AMCF and Citibank, N.A., as trustee. At March 31, 2019, the Company held $10.0 million of the Class B Notes (which was subsequently reduced to $5.0 million in the quarter ending June 30, 2019.) The Notes are not insured or guaranteed by A-Mark or CFC. CFC acts as servicer with respect to the Notes.
AMCF applied the net proceeds from the sale of the Notes to purchase loans and precious metals inventory, and to pay certain costs and expenses.
AMCF is a special purpose entity whose sole activity consists of operating, owning, and financing indenture assets. The Notes are primarily payable from, and secured by, (i) precious metals obtained by AMCF from third parties, and (ii) a portfolio of loans collateralized by precious metals, which loans were originated by either CFC or acquired by CFC from third parties and conveyed by CFC to AMCF. The indenture requires AMCF to maintain a specified level of collateral. The indenture also provides that AMCF’s assets are not to be commingled with those of CFC or A-Mark (or any affiliate), and that AMCF is to maintain separate books and records.
CFC and A-Mark may from time to time also contribute cash or sell precious metals to AMCF in exchange for cash or subordinated, deferred payment obligations from AMCF. In addition, AMCF may from time to time sell precious metals to A-Mark for cash.
As of March 31, 2019, the consolidated carrying balance of the Notes was $86.7 million (which excludes the $10.0 million note that the Company retained), and the remaining unamortized loan cost balance was approximately $3.3 million, which is amortized using the effective interest method through the maturity date. As of March 31, 2019, the balance of the interest payable was $234,000.
Interest on the Notes is payable monthly in arrears at the aggregate rate of 5.26% per annum. For the three months ended March 31, 2019, the interest expense related to the Notes (including loan amortization costs) totaled $1,433,000 which represents 33.8% of the total interest expense recognized by the Company. For the three months ended March 31, 2019, the Notes' weighted average effective interest rate was 5.88%. For the nine months ended March 31, 2019, the interest expense related to the Notes (including loan amortization costs) totaled $3,132,000 which represents 25.2% of the total interest expense recognized by the Company. For the nine months ended March 31, 2019, the Notes' weighted average effective interest rate was 5.88%.
The Company has both the power to direct the activities that most significantly impact AMCF’s economic performance, and the obligation to absorb losses or the right to receive benefits of AMCF that could potentially be significant to AMCF. Therefore, the Company has determined AMCF is a variable interest entity ("VIE") and that the Company is the primary beneficiary of the VIE. Therefore, the Company consolidates AMCF for accounting purposes. See Note 2 for additional information about our VIE policy.

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The assets and liabilities of the VIE are shown on the face of the condensed consolidated balance sheets of the Company at March 31, 2019 and June 30, 2018.
Liability on Borrowed Metals
The Company recorded liabilities on borrowed precious metals with market values totaling $210.7 million and $280.3 million as of March 31, 2019 and June 30, 2018, respectively, with the corresponding metals reflected on the condensed consolidated balance sheets.
Advanced pool metals
The Company borrows precious metals (usually in the form of pool metals) from its suppliers and customers under short-term agreements using other precious metals from its inventory as collateral. Amounts under these arrangements require repayment either in the same form of the metals borrowed or in cash. The Company has the ability to sell the metals and to repurchase similar metals as needed, under the terms of the arrangement, in order to repay the obligation. Once the obligation is repaid, the metals held as collateral are released back to the Company.
Liability on borrowed metals — Other
Liabilities may also arise from: (1) unallocated metal positions held by customers in the Company’s inventory, (2) amounts due to suppliers for the use of consigned inventory, and (3) shortages in unallocated metal positions held by the Company in the supplier’s inventory. Unallocated or pool metal represent an unsegregated inventory position that is due on demand, is a specified physical form, based on the total ounces of metal held in the position. Amounts due under these arrangements require delivery either in the form of precious metals, or in cash.
Product Financing Arrangements
The Company has agreements with financial institutions (third parties) that allow the Company to transfer its gold and silver inventory at an agreed-upon price based on the spot price with these third parties. Such agreements allow the Company to repurchase this inventory at an agreed-upon price based on the spot price on the repurchase date. The third party charges a monthly fee as a percentage of the market value of the outstanding obligation; such monthly charges are classified in interest expense. These transactions do not qualify as sales, and therefore have been accounted for as financing arrangements and are reflected in the condensed consolidated balance sheet as product financing arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing obligation and the underlying inventory (which is entirely restricted) are carried at fair value, with changes in fair value recorded as a component of cost of sales in the condensed consolidated statements of operations. Such obligation totaled $65.7 million and $113.9 million as of March 31, 2019 and June 30, 2018, respectively.
15. COMMITMENTS AND CONTINGENCIES
Refer to Note 15 of the Notes to Consolidated Financial Statements in the 2018 Annual Report for information relating to minimum rental payments under operating and capital leases, consulting and employment contracts, and other commitments. The Company is not aware of any material changes to commitments as summarized the 2018 Annual Report.

16. STOCKHOLDERS’ EQUITY
Share Repurchase Program
In April 2018, the Company's Board of Directors approved a share repurchase program which authorized the Company to purchase up to 500,000 shares of its common stock from time to time, either in the open market or in block purchase transactions. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors.  As of March 31, 2019, no shares had been repurchased under the program.
2014 Stock Award and Incentive Plan
Prior to the Distribution, the Company’s Board of Directors ("Board") adopted and the Company's then sole stockholder approved the 2014 Stock Award and Incentive Plan, which was approved by the Company's stockholders in February 2015. On November 2, 2017, the Company's stockholders approved the amended and restated 2014 Stock Award and Incentive Plan (the "2014 Plan"), to (i) increase the available shares authorized for issuance under the plan by 525,000 shares, (ii) extend the term of the 2014 Plan until 2027, an additional five years, and (iii) eliminate provisions that add back to the share reserve shares surrendered or withheld to pay the exercise price of an option or withheld to cover tax withholding obligations for any type of award, and shares as to which a stock appreciation right is exercised that exceed the number of shares actually delivered.
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

42
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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, dividend equivalent rights and other stock-based awards (which may include outright grants of shares). The 2014 Plan also authorizes grants of performance-based cash incentive awards. 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 to 250,000 shares in any fiscal 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 December 13, 2022.
As of March 31, 2019, 408,395 shares were available for grant under the 2014 Plan.
Valuation and Significant Assumptions of Equity Awards Issued
The Company uses the Black-Scholes option pricing model, which uses various inputs such as the estimated common share price, the risk-free interest rate, volatility, expected life and dividend yield, all of which are estimates.
Stock Options
During the three months ended March 31, 2019 and 2018, the Company incurred $289,251 and $282,105 of compensation expense related to stock options, respectively. During the nine months ended March 31, 2019 and 2018, the Company incurred $842,427 and $1,020,585 of compensation expense related to stock options, respectively. As of March 31, 2019, there was total remaining compensation expense of $1.2 million related to employee stock options, which will be recorded over a weighted average period of approximately 1.9 years.
The following table summarizes the stock option activity for the nine months ended March 31, 2019.
 
 
Options
 
Weighted Average Exercise Price Per Share
 
Aggregate Intrinsic Value
(in thousands)
 
Weighted Average Grant Date Fair Value Per Award
Outstanding at June 30, 2018
 
842,515

 
$
17.59

 
$
821

 
$
5.99

Granted
 
115,050

 
$
13.38

 
 
 
 
Cancellations, expirations and forfeitures
 
(400
)
 
$
16.52

 
 
 
 
Outstanding at March 31, 2019
 
957,165

 
$
17.08

 
$
548

 
$
5.88

 
 
 
 
 
 
 
 
 
Exercisable at March 31, 2019
 
584,947

 
$
16.47

 
$
548

 
$
6.11

 
Following is a summary of the status of stock options outstanding at March 31, 2019
 
 
 
 
Options Outstanding
 
Options Exercisable
Exercise Price Ranges
 
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
From
 
To
 
 
 
 
 
 
$
—

 
$
10.00

 
134,239

 
3.60
 
$
8.39

 
134,239

 
3.60
 
$
8.39

$
10.01

 
$
15.00

 
253,938

 
7.08
 
$
12.75

 
98,888

 
3.53
 
$
11.94

$
15.01

 
$
25.00

 
468,988

 
7.40
 
$
20.12

 
301,820

 
7.36
 
$
20.06

$
25.01

 
$
60.00

 
100,000

 
6.90
 
$
25.50

 
50,000

 
6.90
 
$
25.50

 
 
 
 
957,165

 
6.73
 
$
17.08

 
584,947

 
5.81
 
$
16.47


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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. 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 provide for a Board with staggered terms, 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.
17. CUSTOMER AND SUPPLIER CONCENTRATIONS
Customer Concentration
Customers providing 10 percent or more of the Company's revenues for the three and nine months ended March 31, 2019 and 2018 are presented on a comparative basis in the table below:
in thousands
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
 
 
 
Amount
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
 
Total revenue
 
$
1,266,986

 
100.0
%
 
$
1,994,963

 
100.0
%
 
$
3,932,988

 
100.0
%
 
$
5,839,491

 
100.0
%
 
Customer concentrations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HSBC Bank USA (1)
 
$
347,966

 
27.5
%
 
$
606,966

 
30.4
%
 
$
972,958

 
24.7
%
 
$
1,525,739

 
26.1
%
 
Mitsubishi Intl. Corp. (1)
 
77,530

 
6.1

 
401,127

 
20.1

 
432,461

 
11.0

 
1,321,001

 
22.6

 
 
 
 
$
425,496

 
33.6
%
 
$
1,008,093

 
50.5
%
 
$
1,405,419

 
35.7
%
 
$
2,846,740

 
48.7
%
 
________________________________
 
(1)
Sales with this trading partner are primarily comprised of sales on forward contracts that are entered into for hedging purposes rather than sales characterized with the physical delivery of precious metal product.
 
Customers providing 10 percent or more of the Company's accounts receivable as of March 31, 2019 and June 30, 2018 are presented on a comparative basis in the table below:
in thousands
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
 
 
 
 
 
 
Amount
 
Percent
 
Amount
 
Percent
Total accounts receivable, net
 
$
15,725

 
100.0
%
 
$
35,856

 
100.0
%
Customer concentrations
 
 
 
 
 
 
 
 
Customer A
 
$
5,252

 
33.4
%
 
$
7,468

 
20.8
%
Customer B
 
2,390

 
15.2

 
675

 
1.9

 
 
$
7,642

 
48.6
%
 
$
8,143

 
22.7
%
The loss of any of the above listed customers could have a material adverse effect on the operations of the Company.
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 or small group of suppliers is critical to its business, since other sources of supply are available that provide similar products on comparable terms.
18.
SEGMENTS AND GEOGRAPHIC INFORMATION
The Company evaluates segment reporting in accordance with FASB ASC 280, Segment Reporting, each reporting period, including evaluating the organizational structure and the reporting package that is reviewed by the Chief Operating Decision Makers (“CODM”). The Company's operations are organized under three business segments — Wholesale Trading & Ancillary Services, Secured Lending, and Direct Sales.

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Table of Contents            

Revenue
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Revenue by segment (1)(2)
 
 
 
 
 
 
 
 
 
Wholesale Trading & Ancillary Services (3)
 
$
1,251,385

 
$
1,977,273

 
$
3,893,886

 
$
5,782,135

 
Direct Sales
 
15,601

(a) 
17,690

(b) 
39,102

(c) 
57,356

(d) 
Total revenue
 
$
1,266,986

 
$
1,994,963

 
$
3,932,988

 
$
5,839,491

 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
 
 
 
 
 
(1) Intercompany purchases from and sales to the Direct Sales segment are transacted at Wholesale Trading & Ancillary Services segment's prices, which is consistent with arms-length transactions with third-parties.
 
 
 
(2) 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.
 
(3) The elimination of intercompany sales are reflected in the Wholesale Trading & Ancillary Services segment.
 
(a) Includes $0.3 million of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.
 
 
 
(b) Includes $4.3 million of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.
 
 
 
 
 
 
 
 
 
 
 
(c) Includes $0.6 million of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.
 
 
 
 
 
 
 
 
 
 
 
(d) Includes $21.9 million of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.
 
 
 
 
 
 
 
 
 
 
 

in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Revenue by geographic region
(as determined by the shipping address or where the services were performed):
 
United States
 
$
1,148,787

 
$
1,851,752

 
$
3,493,306

 
$
5,483,566

 
Europe
 
47,997

 
77,580

 
186,758

 
204,960

 
North America, excluding United States
 
67,637

 
64,463

 
246,306

 
146,237

 
Asia Pacific
 
2,295

 
684

 
5,252

 
2,410

 
Africa
 
—

 
—

 
1

 
1

 
Australia
 
270

 
484

 
1,365

 
2,317

 
Total revenue
 
$
1,266,986

 
$
1,994,963

 
$
3,932,988

 
$
5,839,491

 
 
 
 
 
 
 
 
 
 
 
Gross Profit and Gross Margin Percentage
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Gross profit by segment(1)
 
 
 
 
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
6,934

 
$
6,748

 
$
21,150

 
$
19,561

 
Direct Sales
 
1,782

 
679

 
4,358

 
4,088

 
Total gross profit
 
$
8,716

 
$
7,427

 
$
25,508

 
$
23,649

 
Gross margin percentage by segment(1)
 
 
 
 
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
0.554
%
 
0.341
%
 
0.543
%
 
0.338
%
 
Direct Sales
 
11.422
%
 
3.838
%
 
11.145
%
 
7.127
%
 
Weighted average gross margin percentage
 
0.688
%
 
0.372
%
 
0.649
%
 
0.405
%
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 
 
 
 
 

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Table of Contents            

Operating income and (expenses)
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Operating income and (expenses) by segment
 
 
 
 
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
$
(5,618
)
 
$
(5,216
)
 
$
(16,525
)
 
$
(16,002
)
 
Interest income
 
$
2,052

 
$
1,564

 
$
6,458

 
$
3,620

 
Interest expense
 
$
(2,401
)
 
$
(1,983
)
 
$
(7,255
)
 
$
(5,375
)
 
Other income, net
 
$
337

 
$
67

 
$
1,382

 
$
817

 
Secured Lending
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
$
(394
)
 
$
(571
)
 
$
(1,083
)
 
$
(1,302
)
 
Interest income
 
$
2,755

 
$
2,523

 
$
7,552

 
$
6,896

 
Interest expense
 
$
(1,838
)
 
$
(1,433
)
 
$
(4,850
)
 
$
(3,854
)
 
Other income, net
 
$
—

 
$
—

 
$
24

 
$
—

 
Direct Sales
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
$
(2,246
)
 
$
(3,636
)
 
$
(6,472
)
 
$
(8,444
)
 
Interest expense
 
$
—

 
$
(226
)
 
$
(342
)
 
$
(505
)
 
Other expense, net
 
—

 
—

 
$
(157
)
 
$
—

 
Net (loss) income before provision for income taxes
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Net (loss) income before provision for income taxes by segment
 
 
 
 
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
1,304

 
$
1,180

 
$
5,210

 
$
2,621

 
Secured Lending
 
523

 
519

 
1,643

 
1,740

 
Direct Sales
 
(464
)
 
(3,183
)
 
(2,613
)
 
(4,861
)
 
Total net income (loss) before provision for income taxes
 
$
1,363

 
$
(1,484
)
 
$
4,240

 
$
(500
)
 
Depreciation and Amortization
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Depreciation and amortization by segment
 
 
 
 
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
(386
)
 
$
(386
)
 
$
(1,177
)
 
$
(1,170
)
 
Direct Sales
 
(304
)
 
(296
)
 
(911
)
 
(824
)
 
Total depreciation and amortization
 
$
(690
)
 
$
(682
)
 
$
(2,088
)
 
$
(1,994
)
 

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Table of Contents            

Advertising expense
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Advertising expense by segment
 
 
 
 
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
(115
)
 
$
(157
)
 
$
(383
)
 
$
(441
)
 
Secured Lending
 
(5
)
 
(7
)
 
(9
)
 
(26
)
 
Direct Sales
 
(499
)
 
(797
)
 
(1,465
)
 
(2,070
)
 
Total advertising expense
 
$
(619
)
 
$
(961
)
 
$
(1,857
)
 
$
(2,537
)
 
Precious metals held under financing arrangements
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Precious metals held under financing arrangements by segment
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
212,622

 
$
262,566

 
Total precious metals held under financing arrangements
 
$
212,622

 
$
262,566

 
 
 
 
 
 
 
Inventory
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Inventories by segment
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
258,937

 
$
272,034

 
Direct Sales
 
7,482

 
8,082

 
Total inventories
 
$
266,419

 
$
280,116

 
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Inventories by geographic region
 
 
 
 
 
United States
 
$
253,074

 
$
273,008

 
Europe
 
3,797

 
1,965

 
North America, excluding United States
 
9,225

 
4,976

 
Asia
 
323

 
167

 
Total inventories
 
$
266,419

 
$
280,116

 
 
 
 
 
 
 
Assets
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Assets by segment
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
528,277

 
$
616,522

 
Secured Lending
 
116,312

 
111,304

 
Direct Sales
 
13,183

 
15,175

 
Total assets
 
$
657,772

 
$
743,001

 

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Table of Contents            

in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Assets by geographic region
 
 
 
 
 
United States
 
$
643,043

 
$
733,131

 
Europe
 
5,181

 
4,727

 
North America, excluding United States
 
9,225

 
4,976

 
Asia
 
323

 
167

 
Total assets
 
$
657,772

 
$
743,001

 
Long-term Assets
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Long-term assets by segment
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
32,597

 
$
31,328

 
Secured Lending
 
197

 
102

 
Direct Sales
 
3,685

 
4,588

 
Total long-term assets
 
$
36,479

 
$
36,018

 
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Long-term assets by geographic region
 
 
 
 
 
United States
 
$
36,426

 
$
35,965

 
     Europe
 
53

 
53

 
Total long-term assets
 
$
36,479

 
$
36,018

 
Capital Expenditures for Property and Equipment
in thousands
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
 
Capital expenditures on plant, property and equipment by segment
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
26

 
$
404

 
$
164

 
$
673

 
Secured Lending
 
91

 
—

 
91

 
—

 
Direct Sales
 
35

 
—

 
35

 
148

 
Total capital expenditures on property and equipment
 
$
152

 
$
404

 
$
290

 
$
821

 
 
 
 
 
 
 
 
 
 
 
Goodwill and Intangible Assets
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
Goodwill and Intangibles by segment
 
 
 
 
 
Wholesale Trading & Ancillary Services
 
$
12,196

 
$
12,516

 
Direct Sales
 
2,790

 
3,226

 
Total goodwill and intangible assets
 
$
14,986

 
$
15,742

 
19.
SUBSEQUENT EVENTS
None.


48
Table of Contents            

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements that are considered forward-looking statements. Forward-looking statements give the Company's current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this Quarterly Report, including statements regarding the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on the Company's current plans, and the Company's actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Quarterly Report may turn out to be inaccurate. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Form 10-Q.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and notes contained elsewhere in this Form 10-Q. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Quarterly Report, particularly in “Risk Factors.”
INTRODUCTION
Management's discussion and analysis of financial condition and results of operations is provided as a supplement to the accompanying condensed consolidated financial statements and related notes to help provide an understanding of our results of operations and financial condition. Our discussion is organized as follows:
•
Executive overview. This section provides a general description of our business, as well as significant transactions and events that we believe are important in understanding the results of operations.
•
Results of operations. This section provides an analysis of our results of operations presented in the accompanying condensed consolidated statements of operations by comparing the results for the respective years. Included in our analysis is a discussion of five performance metrics: (i) ounces of gold and silver sold, (ii) Wholesale trading ticket volume, (iii) Direct Sales ticket volume, (iv) inventory turnover ratio and (v) number of secured loans at period-end.
•
Results of Segments. This section provides an analysis of our results of operations presented for our three segments:
◦
Wholesale Trading and Ancillary Services,
◦
Secured Lending, and
◦
Direct Sales
for the comparable periods.
•
Financial condition and liquidity and capital resources. This section provides an analysis of our cash flows, as well as a discussion of our outstanding debt as of March 31, 2019. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund our future commitments, as well as a discussion of other financing arrangements.
•
Critical accounting estimates. This section discusses those accounting policies that both are considered important to our financial condition and results, and require significant judgment and estimates on the part of management in their application. In addition, all of our policies, including critical accounting policies, are summarized in Note 2 to the accompanying condensed consolidated financial statements.
•
Recent accounting pronouncements. This section discusses new accounting pronouncements, dates of implementation and impact on our accompanying condensed consolidated financial statements.

49
Table of Contents            

EXECUTIVE OVERVIEW
Our Business
We conduct our operations in three reportable segments: (1) Wholesale Trading & Ancillary Services, (2) Secured Lending and (3) Direct Sales.
Wholesale Trading & Ancillary Services Segment
The Wholesale Trading & Ancillary Services segment operates as a full-service precious metals trading company. We offer gold, silver, platinum and palladium in the form of bars, plates, powder, wafers, grain, ingots and coins. Our Industrial unit services manufacturers and fabricators of products utilizing or incorporating precious metals. Our Coin and Bar unit deals in over 200 coin and bar products in a variety of weights, shapes and sizes for distribution to dealers and other qualified purchasers. We have trading centers in El Segundo, California and Vienna, Austria for buying and selling precious metals, which are open 24 hours each trading day, even when many major world commodity markets are closed. In addition to wholesale trading activity, A-Mark offers its customers a variety of services, including financing, storage, consignment, logistics and various customized financial programs. As a U.S. Mint-authorized purchaser of gold, silver and platinum coins, A-Mark purchases product directly from the U.S. Mint and other sovereign mints for sale to its customers.
Through our wholly-owned subsidiary Transcontinental Depository Services, referred to as TDS, we offer a variety of managed storage options for precious metals products to financial institutions, dealers, investors and collectors around the world. Our storage business generated less than 1% of total revenues for each of the periods presented.
The Company's wholly-owned subsidiary, A-M Global Logistics, LLC, referred to as Logistics, is based in Las Vegas, Nevada, and provides our customers an array of complementary services, including receiving, handling, inventorying, processing, packing, and shipping of precious metals and custom coins on a secure basis. Our logistics business generated less than 1% of the total revenues for each of the periods presented.
In August 2016, the Company formed AMST, a joint venture with SilverTowne, L.P., referred to as SilverTowne, an Indiana-based producer of minted silver. As of March 31, 2019, the Company and SilverTowne, L.P. own 69% and 31%, respectively, of AMST. AMST acquired the entire minting operations (referred to as SilverTowne Mint) of SilverTowne, L.P., with the goal of providing greater product selection to our customers and greater pricing stability within the supply chain, as well as to gain increased access to silver during volatile market environments, which have historically resulted in higher demand for precious metals products.
Secured Lending Segment
The Company operates its Secured Lending segment through its wholly-owned subsidiary, CFC. CFC has been in operation since 2005.
CFC is a California licensed finance lender that originates and acquires commercial loans secured by bullion and numismatic coins. CFC's customers include coin and precious metal dealers, investors and collectors. As of March 31, 2019, CFC had approximately $111.2 million in secured loans outstanding, of which approximately 57.3% were originated by third parties and acquired by CFC and approximately 42.7% were originated by CFC.
On September 14, 2018, AM Capital Funding, LLC, referred to as AMCF, a wholly owned subsidiary of CFC, completed an issuance of Secured Senior Term Notes (collectively, the "Notes"): Series 2018-1, Class A in the aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million.  The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%.  The Notes have a maturity date of December 15, 2023. For additional information regarding this securitization, see Note 14, "Notes Payable".
Prior to fiscal quarter ended June 30, 2018, the operations of CFC, which now comprise our Secured Lending segment, had been considered part of the Wholesale Trading and & Ancillary Services segment.
Direct Sales Segment
The Company operates its Direct Sales segment through its wholly-owned subsidiary Goldline Inc. (“Goldline”). The Company acquired the business in August 2017 through an asset purchase transaction with Goldline LLC (see Note 1.) Goldline LLC had been in operation since 1960.
Goldline is a direct retailer of precious metals to the investor community. Goldline markets its precious metal products primarily on radio, the internet and television, as well as through telephonic sales efforts, particularly to Goldline’s repeat customers. The Company acquired the Goldline business with the objective of enhancing the Company’s distribution capabilities by adding a direct-to-client distribution channel. The Company also anticipated that the acquisition would diversify the product and services offering to Goldline customers, through access to the Company’s wider assortment of precious metal coins and bars, including CFC's secured lending services and TDS’s storage and asset protection services.

50
Table of Contents            

Our Strategy
The Company has grown from a small numismatics firm in 1965 to a significant participant in the bullion and coin markets, with approximately $7.6 billion and $7.0 billion in revenues for fiscal years 2018 and 2017, respectively. Our strategy continues to focus on growth, including the volume of our business, our geographic presence, particularly in Europe, and the scope of complementary products, services and technological tools that we offer to our customers. We intend to promote our growth by leveraging off the strengths of our existing integrated operations: the depth of our customer relations; our access to market makers, suppliers and government mints and other mints; our trading systems in the U.S. and Europe, are available 24 hours a day 7 days a week; our expansive precious metals dealer network; our depository relationships around the world; our knowledge of secured lending; our logistics capabilities; our trading expertise; and the quality and experience of our management team.
Our Customers
Our customers include financial institutions, bullion retailers, industrial manufacturers and fabricators, sovereign mints, refiners, coin and metal dealers, investors and collectors. The Company makes a two way market, which results in many customers also operating as our suppliers.  This diverse base of customers purchases a variety of products from the Company in a multitude of grades, primarily in the form of coins and bars.
Factors Affecting Revenues, Gross Profits, Interest Income and Interest Expense
Revenues. The Company enters into transactions to sell and deliver gold, silver, platinum and palladium to industrial and commercial users, coin and bullion dealers, mints, and financial institutions. The metals are investment or industrial grade and are sold in a variety of shapes and sizes.
The Company also sells precious metals on forward contracts at a fixed price based on current prevailing precious metal spot prices with a certain delivery date in the future (up to six months from date of the forward contract.) Typically, these forward contracts are net settled against our other forward positions or are settled in cash, whereby no physical product is delivered. Sales on forward contracts can be a substantial portion of revenues in any given period. We enter into these forward contacts as part of our hedging strategy to mitigate our price risk of holding inventory; they are not entered into for speculative purposes.
In addition, the Company earns revenue by providing storage solutions for precious metals and numismatic coins for financial institutions, dealers, investors and collectors worldwide and by providing storage and order-fulfillment services to our retail customers. These revenue streams are complementary to our trading activity, and represent less than 1% of our revenues.
The Company operates in a high volume/low margin industry.  Revenues are impacted by three primary factors: product volume, market prices and market volatility. A material change in any one or more of these factors may result in a significant change in the Company’s revenues. A significant increase or decrease in revenues can occur simply based on changes in the underlying commodity prices and may not be reflective of an increase or decrease in the volume of products sold. 
Gross Profits. Gross profit is the difference between our revenues and the cost of our products. Since we quote prices based on the current commodity market prices for precious metals, we enter into a combination of forward and futures contracts to effect a hedge position equal to the underlying precious metal commodity value, which substantially represents inventory subject to price risk.  We enter into these derivative transactions solely for the purpose of hedging our inventory, and not for speculative purposes. Our gross profit includes the gains and losses resulting from these derivative instruments. However, the gains and losses on the derivative instruments are substantially offset by the gains and losses on the corresponding changes in the market value of our precious metals inventory. As a result, our results of operations generally are not materially impacted solely by changes in commodity prices.
Volatility also affects our gross profits. Greater volatility typically causes the trading spreads to widen resulting in an increase in the gross profit. Product supply constraints during extended periods of higher volatility has historically resulted in a heightening of wider trading spreads resulting in further improvement in the gross profit.
Interest Income. The Company enters into secured loans and secured financing structures with its customers under which it charges interest. Through its wholly owned subsidiary, CFC, the Company also enters into loans secured by precious metals and numismatic material owned by the borrowers and held by the Company for the term of the loan. The Company offers a number of secured financing options to its customers to finance their precious metals purchases including consignments and other structured inventory finance products whereby the Company earns a fee based on the underlying value of the precious metal.
    Interest Expense. The Company incurs interest expense as a result of usage under its lines of credit, notes and related-party debt. The Company also incurs interest expense as a result of its product financing agreements for the transfer and subsequent re-acquisition of gold and silver at a fixed price with a third-party finance company, and may incur interest expense when we borrow precious metals from our suppliers under short-term arrangements, which can bear interest at a designated rate.

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Table of Contents            

Performance Metrics        
In addition to financial statement indicators, management also utilizes certain key operational metrics to assess the performance of our business.
Gold and Silver Ounces Sold and Delivered to Customers. We look at the number of ounces of gold and silver sold and delivered to our customers (excluding ounces recorded on forward contracts). These metrics reflect our business volume without regard to changes in commodity pricing, which also impacts revenue and can mask actual business trends.
Wholesale Trading & Ancillary Services Segment Ticket Volume and Direct Sales Segment Ticket Volume. Another measure of our business volume, unaffected by changes in commodity pricing, is Wholesale Trading & Ancillary Services segment ticket volume and Direct Sales segment ticket volume, which is the total number of orders processed by our trading desks in El Segundo, California and Vienna, Austria. In periods of higher volatility, there is generally increased trading in the commodity markets, and increased demand for our products, which translates into higher business volume. Generally, the ounces sold on a per-trading-ticket basis is substantially higher for orders placed telephonically compared to those placed on our online portal platform.
Inventory Turnover. Inventory turnover is another performance measure on which we are focused. We define inventory turnover as the cost of sales during the relevant period divided by the average inventory during the period. Inventory turnover is a measure of how quickly inventory has moved during the period. A higher inventory turnover ratio, which we typically experience during periods of higher volatility when trading is more robust, reflects a more efficient use of our capital.     
Number of Secured Loans. Finally, as a measure of the size of our secured lending segment, we look at the number of outstanding secured loans to customers at the end of the fiscal quarter.
Fiscal Year
Our fiscal year end is June 30 each year. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years.

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RESULTS OF OPERATIONS
Overview of Results of Operations for the Three Months Ended March 31, 2019 and 2018
Condensed Consolidated Results of Operations
The operating results of our business for the three months ended March 31, 2019 and 2018 are as follows:
in thousands, except per share data and performance metrics
 
 
Three Months Ended March 31,
2019
 
2018
 
$
 
%
 
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Revenues
$
1,266,986

 
100.000
 %
 
$
1,994,963

 
100.000
 %
 
$
(727,977
)
 
(36.5
)%
Gross profit
8,716

 
0.688
 %
 
7,427

 
0.372
 %
 
$
1,289

 
17.4
 %
Selling, general and administrative expenses
(8,258
)
 
(0.652
)%
 
(9,423
)
 
(0.472
)%
 
$
(1,165
)
 
(12.4
)%
Interest income
4,807

 
0.379
 %
 
4,087

 
0.205
 %
 
$
720

 
17.6
 %
Interest expense
(4,239
)
 
(0.335
)%
 
(3,642
)
 
(0.183
)%
 
$
597

 
16.4
 %
Other income
373

 
0.029
 %
 
99

 
0.005
 %
 
$
274

 
276.8
 %
Unrealized loss on foreign exchange
(36
)
 
(0.003
)%
 
(32
)
 
(0.002
)%
 
$
4

 
12.5
 %
Net income (loss) before provision for income taxes
1,363

 
0.108
 %
 
(1,484
)
 
(0.074
)%
 
$
2,847

 
191.8
 %
Income tax (expense) benefit
(402
)
 
(0.032
)%
 
807

 
0.041
 %
 
$
1,209

 
149.8
 %
Net income (loss)
961

 
0.076
 %
 
(677
)
 
(0.034
)%
 
$
1,638

 
241.9
 %
 
Net loss attributable to non-controlling interest
(29
)
 
(0.002
)%
 
(44
)
 
(0.002
)%
 
$
(15
)
 
(34.1
)%
Net income (loss) attributable to the Company
$
990

 
0.078
 %
 
$
(633
)
 
(0.032
)%
 
$
1,623

 
256.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted net (loss) income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.14

 
 
 
$
(0.09
)
 
 
 
$
0.23

 
255.6
 %
Diluted
$
0.14

 
 
 
$
(0.09
)
 
 
 
$
0.23

 
255.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Performance Metrics: (1)
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold(2)
474,000

 
 
 
618,000

 
 
 
(144,000
)
 
(23.3
)%
Silver ounces sold(3)
16,751,000

 
 
 
11,365,000

 
 
 
5,386,000

 
47.4
 %
Inventory turnover ratio(4)
4.6

 
 
 
4.8

 
 
 
(0.2
)
 
(4.2
)%
Number of secured loans at period end(5)
2,568

 
 
 
3,124

 
 
 
(556
)
 
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
(1)
 
See "Results of Segments" for ticket count volume by segment.
 
 
 
 
 
(2)
 
Gold ounces sold represents the ounces of gold product sold and delivered to the customer during the period, excluding ounces of gold recorded on forward contracts.
 
 
 
 
 
(3)
 
Silver ounces sold represents the ounces of silver product sold and delivered to the customer during the period, excluding ounces of silver recorded on forward contracts.
 
 
 
 
 
(4)
 
Inventory turnover ratio is the cost of sales divided by average inventory. This calculation excludes precious metals held under financing arrangements, which are not classified as inventory on the consolidated balance sheets.
 
 
 
 
 
(5)
 
Number of outstanding secured loans to customers at the end of the period.
 


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Overview of Results of Operations for the Nine Months Ended March 31, 2019 and 2018

Condensed Consolidated Results of Operations
The operating results of our business for the nine months ended March 31, 2019 and 2018 are as follows:
in thousands, except per share data and performance metrics
 
 
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
 
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Revenues
$
3,932,988

 
100.000
 %
 
$
5,839,491

 
100.000
 %
 
$
(1,906,503
)
 
(32.6
)%
Gross profit
25,508

 
0.649
 %
 
23,649

 
0.405
 %
 
$
1,859

 
7.9
 %
Selling, general and administrative expenses
(24,080
)
 
(0.612
)%
 
(25,748
)
 
(0.441
)%
 
$
(1,668
)
 
(6.5
)%
Interest income
14,010

 
0.356
 %
 
10,516

 
0.180
 %
 
$
3,494

 
33.2
 %
Interest expense
(12,447
)
 
(0.316
)%
 
(9,734
)
 
(0.167
)%
 
$
2,713

 
27.9
 %
Other income
1,303

 
0.033
 %
 
811

 
0.014
 %
 
$
492

 
60.7
 %
Unrealized (loss) gain on foreign exchange
(54
)
 
(0.001
)%
 
6

 
—
 %
 
$
60

 
1,000.0
 %
Net income (loss) before provision for income taxes
4,240

 
0.108
 %
 
(500
)
 
(0.009
)%
 
$
4,740

 
948.0
 %
Income tax (expense) benefit
(1,143
)
 
(0.029
)%
 
209

 
0.004
 %
 
$
1,352

 
646.9
 %
Net income (loss)
3,097

 
0.079
 %
 
(291
)
 
(0.005
)%
 
$
3,388

 
1,164.3
 %
 
Net income attributable to non-controlling interest
49

 
0.001
 %
 
69

 
0.001
 %
 
$
(20
)
 
(29.0
)%
Net income (loss) attributable to the Company
$
3,048

 
0.078
 %
 
$
(360
)
 
(0.006
)%
 
$
3,408

 
946.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted net income per share attributable to A-Mark Precious Metals, Inc.:
Per Share Data:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.43

 
 
 
$
(0.05
)
 
 
 
$
0.48

 
960.0
 %
Diluted
$
0.43

 
 
 
$
(0.05
)
 
 
 
$
0.48

 
960.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
Performance Metrics:(1)
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold(2)
1,449,000

 
 
 
1,326,000

 
 
 
123,000

 
9.3
 %
Silver ounces sold(3)
55,071,000

 
 
 
37,860,000

 
 
 
17,211,000

 
45.5
 %
Inventory turnover ratio(4)
14.3

 
 
 
14.8

 
 
 
(0.5
)
 
(3.4
)%
Number of secured loans at period end(5)
2,568

 
 
 
3,124

 
 
 
(556
)
 
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
(1)
 
See "Results of Segments" for ticket count volume by segment.
 
 
 
 
 
(2)
 
Gold ounces sold represents the ounces of gold product sold and delivered to the customer during the period, excluding ounces of gold recorded on forward contracts.
 
 
 
 
 
(3)
 
Silver ounces sold represents the ounces of silver product sold and delivered to the customer during the period, excluding ounces of silver recorded on forward contracts.
 
 
 
 
 
(4)
 
Inventory turnover ratio is the cost of sales divided by average inventory. This calculation excludes precious metals held under financing arrangements, which are not classified as inventory on the consolidated balance sheets.
 
 
 
 
 
(5)
 
Number of outstanding secured loans to customers at the end of the period.
 


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Revenues
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metrics
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Revenues
$
1,266,986

 
100.000
%
 
$
1,994,963

 
100.000
%
 
$
(727,977
)
 
(36.5
)%
Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold
474,000

 
 
 
618,000

 
 
 
(144,000
)
 
(23.3
)%
Silver ounces sold
16,751,000

 
 
 
11,365,000

 
 
 
5,386,000

 
47.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
Revenues for the three months ended March 31, 2019 decreased $728.0 million, or 36.5%, to $1.267 billion from $1.995 billion in 2018. Our revenues decreased primarily due to lower forward sales (about $0.6 billion of the aggregate change), lower gold and silver prices and lower gold ounces sold, offset by an increase in the total amount of silver ounces sold.
Gold ounces sold for the three months ended March 31, 2019 decreased 144,000 ounces, or 23.3%, to 474,000 ounces from 618,000 ounces in 2018. Silver ounces sold for the three months ended March 31, 2019 increased 5,386,000 ounces, or 47.4%, to 16,751,000 ounces from 11,365,000 ounces in 2018. On average, the selling prices for gold decreased by 1.5% and selling prices for silver decreased by 7.2% during the three months ended March 31, 2019 as compared to 2018.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metrics
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Revenues
$
3,932,988

 
100.000
%
 
$
5,839,491

 
100.000
%
 
$
(1,906,503
)
 
(32.6
)%
Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold
1,449,000

 
 
 
1,326,000

 
 
 
123,000

 
9.3
 %
Silver ounces sold
55,071,000

 
 
 
37,860,000

 
 
 
17,211,000

 
45.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
Revenues for the nine months ended March 31, 2019 decreased $1.907 billion, or 32.6%, to $3.933 billion from $5.839 billion in 2018. Our revenues decreased primarily due to lower forward sales (about $2.2 billion of the aggregate change) and lower gold and silver prices, offset by an increase in the total amount of gold and silver ounces sold.
Gold ounces sold for the nine months ended March 31, 2019 increased 123,000 ounces, or 9.3%, to 1,449,000 ounces from 1,326,000 ounces in 2018. Silver ounces sold for the nine months ended March 31, 2019 increased 17,211,000 ounces, or 45.5%, to 55,071,000 ounces from 37,860,000 ounces in 2018. On average, the selling prices for gold decreased by 3.7% and selling prices for silver decreased by 10.1% during the nine months ended March 31, 2019 as compared to 2018.
    
Gross Profit
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Gross profit
$
8,716

 
0.688
%
 
$
7,427

 
0.372
%
 
$
1,289

 
17.4
 %
Performance Metric
 
 
 
 
 
 
 
 
 
 
 
Inventory turnover ratio
4.6

 
 
 
4.8

 
 
 
(0.2
)
 
(4.2
)%
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit for the three months ended March 31, 2019 increased by $1.3 million, or 17.4%, to $8.7 million from $7.4 million in 2018. Overall gross profit increased primarily due to improved gross profits from the Wholesale Trading & Ancillary Services and the Direct Sales segments, offset by lower trading profits.
The Company’s gross margin percentage increased by 84.9% to 0.688% from 0.372% in 2018. The increase in gross margin percentage was largely attributable to lower forward sales ($0.6 billion), which increase revenues but are associated with negligible gross margin percentages, and by higher gross margin earned by the Wholesale Trading & Ancillary segment and Direct Sales segment. The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.
Our inventory turnover rate for the three months ended March 31, 2019 decreased by 4.2%, to 4.6 from 4.8 in 2018. The decrease in our inventory turnover rate was primarily due to the lower volume of ounces sold on forward contracts offset by lower

55
Table of Contents            

average product financing arrangements and borrowed metal inventory balances during the three months ended March 31, 2019 as compared to 2018.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Gross profit
$
25,508

 
0.649
%
 
$
23,649

 
0.405
%
 
$
1,859

 
7.9
 %
Performance Metric
 
 
 
 
 
 
 
 
 
 
 
Inventory turnover ratio
14.3

 
 
 
14.8

 
 
 
(0.5
)
 
(3.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit for the nine months ended March 31, 2019 increased by $1.9 million, or 7.9%, to $25.5 million from $23.6 million in 2018. Overall gross profit increased due to improved gross profits of the Wholesale & Trading and Ancillary segment and Direct Sales segment (eg., Goldline), offset by lower trading profits.
The Company’s gross margin percentage increased by 60.2% to 0.649% from 0.405% in 2018. The increase in in gross margin percentage was largely attributable to lower forward sales ($2.2 billion), which increase revenues but are associated with negligible gross margin percentages, and by higher gross margin earned by the Wholesale Trading & Ancillary segment and Direct Sales segment. The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.
Our inventory turnover rate for the nine months ended March 31, 2019 decreased by 3.4%, to 14.3 from 14.8 in 2018. The decrease in our inventory turnover rate was primarily due to the lower volume of ounces sold on forward contracts, offset by lower average product financing arrangements and borrowed metal inventory balances during the nine months ended March 31, 2019 as compared to 2018.
Selling, General and Administrative Expense
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Selling, general and administrative expenses
$
(8,258
)
 
(0.652
)%
 
$
(9,423
)
 
(0.472
)%
 
$
(1,165
)
 
(12.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses for the three months ended March 31, 2019 decreased $1.2 million, or 12.4%, to $8.3 million from $9.4 million in 2018. The change was primarily due to lower operating expenses incurred by our Direct Sales segment of $1.4 million, partially offset by increased overall compensation costs of $0.5 million.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Selling, general and administrative expenses
$
(24,080
)
 
(0.612
)%
 
$
(25,748
)
 
(0.441
)%
 
$
(1,668
)
 
(6.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses for the nine months ended March 31, 2019 decreased $1.7 million, or 6.5%, to $24.1 million from $25.7 million in 2018. The change was primarily due to lower operating expenses incurred by our Direct Sales segment of $2.0 million, lower investigatory acquisition costs of $0.7 million, lower legal costs of $0.3 million, which were partially offset by an increased overall compensation costs of $1.4 million. Our Direct Sales Segment reported a decrease in selling, general, and administrative expense even though the Direct Sales segment was only owned for seven months in the prior comparable period.

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Table of Contents            

Interest Income    
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest income
$
4,807

 
0.379
%
 
$
4,087

 
0.205
%
 
$
720

 
17.6
 %
Performance Metric
 
 
 
 
 
 
 
 
 
 
 
Number of secured loans at period-end
2,568

 
 
 
3,124

 
 
 
(556
)
 
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
Interest income for the three months ended March 31, 2019 increased $0.7 million, or 17.6%, to $4.8 million from $4.1 million in 2018. The aggregate increase in interest income was primarily due to interest income from our Secured Lending Segment and other finance product income.
The increase in interest income from our Secured Lending segment increased by $0.2 million in comparison to the same year-ago period, which represents approximately 32.2% of the aggregate increase. This increase in interest from secured loans was primarily due to increases in interest rates and an increase in the value of the secured loan portfolio. The number of secured loans outstanding decreased by 17.8% to 2,568 from 3,124 in 2018. This decrease was due to lower metal prices in the first quarter of fiscal 2019 that lowered the customer's collateral value, which lead to loans being liquidated. The Company did not incur any loan losses from the liquidations.
Other finance product income was derived from finance fees earned related to repurchase arrangements with customers and increased by 24.5% or by $0.4 million in comparison to the same year-ago period, which represents approximately 52.6% of the aggregate increase.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest income
$
14,010

 
0.356
%
 
$
10,516

 
0.180
%
 
$
3,494

 
33.2
 %
Performance Metric
 
 
 
 
 
 
 
 
 
 
 
Number of secured loans at period-end
2,568

 
 
 
3,124

 
 
 
(556
)
 
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
Interest income for the nine months ended March 31, 2019 increased $3.5 million, or 33.2%, to $14.0 million from $10.5 million in 2018. The aggregate increase in interest income was primarily due to interest income earned by our Secured Lending Segment and other finance product income.
The increase in interest income from our Secured Lending segment increased by $0.7 million or by 9.5% in comparison to the same year-ago period, which represents approximately 18.8% of the aggregate increase. This increase in interest from secured loans was primarily due to increases in interest rates and an increase in the value of the secured loan portfolio. The number of secured loans outstanding decreased by 17.8% to 2,568 from 3,124 in 2018. This decrease was due to lower metal prices in the first quarter of fiscal 2019 that lowered the customer's collateral value, which lead to loans being liquidated. The Company did not incur any loan losses from the liquidations.
The aggregate increase in interest income also increased due to other finance product income. Our finance fees earned related to repurchase arrangements with customers increased by 58.0% or by $2.1 million in comparison to the same year-ago period, which represent approximately 59.3% of the aggregate increase.
Interest Expense
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest expense
$
(4,239
)
 
(0.335
)%
 
$
(3,642
)
 
(0.183
)%
 
$
597

 
16.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for the three months ended March 31, 2019 increased $0.6 million, or 16.4% to $4.2 million from $3.6 million in 2018. The increase was related primarily to our recently issued note payable related to our Secured Lending segment, and the increase in our liability on borrowed metals, partially offset by a reduction of interest expense product financing arrangements and the Goldline Credit Facility. As compared to the same year-ago period, the following interest expense components increased

57
Table of Contents            

by: (i) $1.1 million, related to our long-term notes payable (including debt amortization costs) that was issued in first quarter of fiscal year 2019 and (ii) $0.1 million, related to our liability on borrowed metals, partially offset by (iii) $(0.2) million related to product financing arrangements and (iv) $(0.2) million related to the Goldline Credit Facility. The Goldline Credit Facility was paid off in full during second quarter of fiscal year 2019.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest expense
$
(12,447
)
 
(0.316
)%
 
$
(9,734
)
 
(0.167
)%
 
$
2,713

 
27.9
%
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for the nine months ended March 31, 2019 increased $2.7 million, or 27.9% to $12.4 million from $9.7 million in 2018. The increase was related primarily to our recently issued note payable related to our Secured Lending segment, the increase in our liability on borrowed metals, partially offset by a reduction in interest expense related to product financing arrangements and the Goldline Credit Facility. As compared to the same year-ago period, the following interest expense components increased by: (i) $2.8 million, related to our long-term notes payable (including debt amortization costs) that was issued in first quarter of fiscal year 2019 and (ii) $0.8 million, related to our liability on borrowed metals, partially offset by (iii) $(0.4) million related to product financing arrangements and (iv) $(0.2) million related to the Goldline Credit Facility (including debt amortization costs). The Goldline Credit Facility was paid off in full during second quarter of fiscal year 2019.
Provision for Income Taxes
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Income tax (expense) benefit
$
(402
)
 
(0.032
)%
 
$
807

 
0.041
%
 
$
1,209

 
149.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Our income tax (expense) benefit was $(0.4) million and $0.8 million for the three months ended March 31, 2019 and 2018, respectively. Our effective tax rate was approximately (29.5)% and 54.4% for the three months ended March 31, 2019 and 2018, respectively. For the three months ended March 31, 2019, our effective tax rate differs from the federal statutory rate primarily due to state taxes (net of federal tax benefit), non-deductible company provided transportation benefits, and the exclusion of profits related to the Company's minority interest in Silver Town Mint. For the three months ended December 31, 2018, our effective tax rate differs from federal statutory rate primarily due to state taxes (net of federal tax benefit) and the exclusion of profits related to the Company's minority interest in the SilverTowne Mint. The lower effective tax rate, for the three months ended March 31, 2019, was primarily due to a lower federal statutory rate at the reduced corporate tax rate under the Tax Cuts and Jobs Act (the "Tax Act"). Information regarding our adoption and prospective impacts of the Tax Act on our tax is included in our Annual Report on Form 10-K for our fiscal year ended June 30, 2018.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Income tax (expense) benefit
$
(1,143
)
 
(0.029
)%
 
$
209

 
0.004
%
 
$
1,352

 
646.9
%
 
 
 
 
 
 
 
 
 
 
 
 
Our income tax (expense) benefit was $(1.1) million and $0.2 million for the nine months ended March 31, 2019 and 2018, respectively. Our effective tax rate was approximately (27.0)% and 41.8% for the nine months ended March 31, 2019 and 2018, respectively. For the nine months ended March 31, 2019, our effective tax rate differs from the federal statutory rate primarily due to state taxes (net of federal tax benefit), non-deductible company provided transportation benefits, and the exclusion of profits related to the Company's minority interest in Silver Town Mint. For the nine months ended March 31, 2018, our effective tax rate differs from federal statutory rate primarily due to state taxes (net of federal tax benefit) and the exclusion of profits related to the Company's minority interest in the SilverTowne Mint. The lower effective tax rate, for the nine months ended March 31, 2019, was primarily due to a lower federal statutory rate at the reduced corporate tax rate under the Tax Cuts and Jobs Act (the "Tax Act"). Information regarding our adoption and prospective impacts of the Tax Act on our tax is included in our Annual Report on Form 10-K for our fiscal year ended June 30, 2018.

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Table of Contents            

Segment Results of Operations
The Company conducts its operations in three reportable segments: (1) Wholesale Trading & Ancillary Services, (2) Secured Lending and (3) Direct Sales. Each of these reportable segments represents an aggregation of operating segments that meets the aggregation criteria set forth in the Segment Reporting Topic 280 of the FASB Accounting Standards Codification (“ASC”).
Results of Operations — Wholesale Trading & Ancillary Services Segment
Overview of Results of Operations for the Three Months Ended March 31, 2019 and 2018
The operating results of our Wholesale Trading & Ancillary Services segment for the three months ended March 31, 2019 and 2018 are as follows:
in thousands, except per share data and performance metrics
 
 
Three Months Ended March 31,
2019
 
2018
 
$
 
%
 
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Revenues
$
1,251,385

 
100.000
 %
 
$
1,977,273

 
100.000
 %
 
$
(725,888
)
 
(36.7
)%
Gross profit
6,934

 
0.554
 %
 
6,748

 
0.341
 %
 
$
186

 
2.8
 %
Selling, general and administrative expenses
(5,618
)
 
(0.449
)%
 
(5,216
)
 
(0.264
)%
 
$
402

 
7.7
 %
Interest income
2,052

 
0.164
 %
 
1,564

 
0.079
 %
 
$
488

 
31.2
 %
Interest expense
(2,401
)
 
(0.192
)%
 
(1,983
)
 
(0.100
)%
 
$
418

 
21.1
 %
Other income
373

 
0.030
 %
 
99

 
0.005
 %
 
$
274

 
276.8
 %
Unrealized loss on foreign exchange
(36
)
 
(0.003
)%
 
(32
)
 
(0.002
)%
 
$
4

 
12.5
 %
Net income before provision for income taxes
$
1,304

 
0.104
 %
 
$
1,180

 
0.060
 %
 
$
124

 
10.5
 %
 
 
 
 
 
 
 
 
 
 
 


Performance Metrics:
 
 
 
 
 
 
 
 
 
 


Gold ounces sold(1)
469,000

 
 
 
614,000

 
 
 
(145,000
)
 
(23.6
)%
Silver ounces sold(2)
16,392,000

 
 
 
11,227,000

 
 
 
5,165,000

 
46.0
 %
Wholesale Trading & Ancillary Services segment ticket volume(3)
30,966

 
 
 
28,869

 
 
 
2,097

 
7.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
(1)
 
Gold ounces sold represents the ounces of gold product sold and delivered to the customer during the period, excluding ounces of gold recorded on forward contracts.
 
 
 
 
 
(2)
 
Silver ounces sold represents the ounces of silver product sold and delivered to the customer during the period, excluding ounces of silver recorded on forward contracts.
 
 
 
 
 
(3)
 
Trading ticket volume represents the total number of product orders processed by our trading desks in El Segundo, California and Vienna, Austria, for the Wholesale Trading & Ancillary Services segment.
 


59
Table of Contents            

Overview of Results of Operations for the Nine Months Ended March 31, 2019 and 2018
The operating results of our Wholesale Trading & Ancillary Services segment for the nine months ended March 31, 2019 and 2018 are as follows:
in thousands, except performance metrics
 
 
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
 
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Revenues
$
3,893,886

 
100.000
 %
 
$
5,782,135

 
100.000
 %
 
$
(1,888,249
)
 
(32.7
)%
Gross profit
21,150

 
0.543
 %
 
19,561

 
0.338
 %
 
$
1,589

 
8.1
 %
Selling, general and administrative expenses
(16,525
)
 
(0.424
)%
 
(16,002
)
 
(0.277
)%
 
$
523

 
3.3
 %
Interest income
6,458

 
0.166
 %
 
3,620

 
0.063
 %
 
$
2,838

 
78.4
 %
Interest expense
(7,255
)
 
(0.186
)%
 
(5,375
)
 
(0.093
)%
 
$
1,880

 
35.0
 %
Other income
1,436

 
0.037
 %
 
811

 
0.014
 %
 
$
625

 
77.1
 %
Unrealized (loss) gain on foreign exchange
(54
)
 
(0.001
)%
 
6

 
—
 %
 
$
60

 
NM

Net income before provision for income taxes
$
5,210

 
0.134
 %
 
$
2,621

 
0.045
 %
 
$
2,589

 
98.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
Performance Metrics:
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold(1)
1,437,000

 
 
 
1,313,000

 
 
 
124,000

 
9.4
 %
Silver ounces sold(2)
54,179,000

 
 
 
37,570,000

 
 
 
16,609,000

 
44.2
 %
Wholesale Trading & Ancillary Services segment ticket volume(3)
95,986

 
 
 
89,016

 
 
 
6,970

 
7.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
NM
 
Not meaningful.
 
 
 
 
 
(1)
 
Gold ounces sold represents the ounces of gold product sold and delivered to the customer during the period, excluding ounces of gold recorded on forward contracts.
 
 
 
 
 
(2)
 
Silver ounces sold represents the ounces of silver product sold and delivered to the customer during the period, excluding ounces of silver recorded on forward contracts.
 
 
 
 
 
(3)
 
Trading ticket volume represents the total number of product orders processed by our trading desks in El Segundo, California and Vienna, Austria, for the Wholesale Trading & Ancillary Services segment.
 
 
 
 
 


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Table of Contents            

Revenues — Wholesale Trading & Ancillary Services
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metrics
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Revenues
$
1,251,385

 
100.000
%
 
$
1,977,273

 
100.000
%
 
$
(725,888
)
 
(36.7
)%
Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold
469,000

 
 
 
614,000

 
 
 
(145,000
)
 
(23.6
)%
Silver ounces sold
16,392,000

 
 
 
11,227,000

 
 
 
5,165,000

 
46.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
Revenues for the three months ended March 31, 2019 decreased $725.9 million, or 36.7%, to $1.251 billion from $1.977 billion in 2018. Our revenues decreased primarily due to lower forward sales (about $0.6 billion of the aggregate change), lower gold and silver prices and lower gold ounces sold, offset by an increase in the total amount of silver ounces sold.
Gold ounces sold for the three months ended March 31, 2019 decreased 145,000 ounces, or 23.6%, to 469,000 ounces from 614,000 ounces in 2018. Silver ounces sold for the three months ended March 31, 2019 increased 5,165,000 ounces, or 46.0%, to 16,392,000 ounces from 11,227,000 ounces in 2018. On average, the selling prices for gold decreased by 1.6% and selling prices for silver decreased by 7.5% during the three months ended March 31, 2019 as compared to 2018.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metrics
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Revenues
$
3,893,886

 
100.000
%
 
$
5,782,135

 
100.000
%
 
$
(1,888,249
)
 
(32.7
)%
Performance Metrics
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold
1,437,000

 
 
 
1,313,000

 
 
 
124,000

 
9.4
 %
Silver ounces sold
54,179,000

 
 
 
37,570,000

 
 
 
16,609,000

 
44.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
Revenues for the nine months ended March 31, 2019 decreased $1.888 billion, or 32.7%, to $3.894 billion from $5.782 billion in 2018. Our revenues decreased primarily due to lower forward sales (about $2.2 billion of the aggregate change) and lower gold and silver prices, offset by an increase in the total amount of gold and silver ounces sold.
Gold ounces sold for the nine months ended March 31, 2019 increased 124,000 ounces, or 9.4%, to 1,437,000 ounces from 1,313,000 ounces in 2018. Silver ounces sold for the nine months ended March 31, 2019 increased 16,609,000 ounces, or 44.2%, to 54,179,000 ounces from 37,570,000 ounces in 2018. On average, the selling prices for gold decreased by 3.6% and selling prices for silver decreased by 10.3% during the nine months ended March 31, 2019 as compared to 2018.
    
Gross Profit — Wholesale Trading & Ancillary Services
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Gross profit
$
6,934

 
0.554
%
 
$
6,748

 
0.341
%
 
$
186

 
2.8
%
Performance Metric
 
 
 
 
 
 
 
 
 
 
 
Wholesale trading ticket volume
30,966

 
 
 
28,869

 
 
 
2,097

 
7.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit for the three months ended March 31, 2019 increased by $0.2 million, or 2.8%, to $6.9 million from $6.7 million in 2018. Overall gross profit increased primarily due to improved gross profits that were primarily due to improved sales volumes; primarily offset by lower trading profits.
The Company’s profit margin percentage increased by 62.5% to 0.554% from 0.341% in 2018. The increase in gross margin percentage was largely attributable to lower forward sales ($0.6 billion), which increase revenues but are associated with negligible gross margin percentages, and by higher gross margin percentage earned. The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.

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Table of Contents            

The wholesale trading ticket volume for the three months ended March 31, 2019 increased by 2,097 tickets, or 7.3%, to 30,966 tickets from 28,869 tickets in 2018. The increase in our trading ticket volume is indicative of higher trading activity as compared to 2018.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Gross profit
$
21,150

 
0.543
%
 
$
19,561

 
0.338
%
 
$
1,589

 
8.1
%
Performance Metric
 
 
 
 
 
 
 
 
 
 
 
Wholesale trading ticket volume
95,986

 
 
 
89,016

 
 
 
6,970

 
7.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit for the nine months ended March 31, 2019 increased by $1.6 million, or 8.1%, to $21.2 million from $19.6 million in 2018. Overall gross profit increased primarily due to improved gross profits that were primarily due to improved sales volumes; primarily offset by lower trading profits.
The Company’s profit margin percentage increased by 60.7% to 0.543% from 0.338% in 2018. The increase in gross margin percentage was largely attributable to lower forward sales ($2.2 billion), which increase revenues but are associated with negligible gross margin percentages, and by higher gross margin percentage earned. The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.
The wholesale trading ticket volume for the nine months ended March 31, 2019 increased by 6,970 tickets, or 7.8%, to 95,986 tickets from 89,016 tickets in 2018. The increase in our trading ticket volume is indicative of higher trading activity as compared to 2018.
Selling, General and Administrative Expenses — Wholesale Trading & Ancillary Services
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Selling, general and administrative expenses
$
(5,618
)
 
(0.449
)%
 
$
(5,216
)
 
(0.264
)%
 
$
402

 
7.7
%
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses for the three months ended March 31, 2019 increased $0.4 million, or 7.7%, to $5.6 million from $5.2 million in 2018. The increase was primarily due to increased overall compensation costs of $0.5 million.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Selling, general and administrative expenses
$
(16,525
)
 
(0.424
)%
 
$
(16,002
)
 
(0.277
)%
 
$
523

 
3.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses for the nine months ended March 31, 2019 increased $0.5 million, or 3.3%, to $16.5 million from $16.0 million in 2018. The increase was primarily due to increased overall compensation costs of $1.4 million, partially offset by lower investigatory acquisition costs of $0.7 million, and lower legal costs of $0.3 million.
Interest Income — Wholesale Trading & Ancillary Services
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest income
$
2,052

 
0.164
%
 
$
1,564

 
0.079
%
 
$
488

 
31.2
%
 
 
 
 
 
 
 
 
 
 
 
 
Interest income for the three months ended March 31, 2019 increased $0.5 million, or 31.2%, to $2.1 million from $1.6 million in 2018. The aggregate increase interest income increased primarily due to other finance product income. Our finance fees earned from repurchase arrangements with customers increased by $0.4 million or 24.5% or in comparison to the same year-ago period.

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Table of Contents            

Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest income
$
6,458

 
0.166
%
 
$
3,620

 
0.063
%
 
$
2,838

 
78.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Interest income for the nine months ended March 31, 2019 increased $2.8 million, or 78.4%, to $6.5 million from $3.6 million in 2018. The aggregate increase in interest income increased primarily due to other finance product income. Our finance fees earned from repurchase arrangements with customers increased by 58.0% or by $2.1 million in comparison to the same year-ago period.
Interest Expense — Wholesale Trading & Ancillary Services
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest expense
$
(2,401
)
 
(0.192
)%
 
$
(1,983
)
 
(0.100
)%
 
$
418

 
21.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for the three months ended March 31, 2019 increased $0.4 million, or 21.1% to $2.4 million from $2.0 million in 2018. The increase was related primarily to our recently issued note payable, and the increase in our liability on borrowed metals. As compared to the same year-ago period, the following interest expense components increased by: (i) $0.5 million related to our recently issued notes payable and Trading Credit Facility, (ii) $0.1 million, related to our liability on borrowed metals, and decreased by (iii) $0.2 million related to product financing arrangements.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest expense
$
(7,255
)
 
(0.186
)%
 
$
(5,375
)
 
(0.093
)%
 
$
1,880

 
35.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for the nine months ended March 31, 2019 increased $1.9 million, or 35.0% to $7.3 million from $5.4 million in 2018. The increase was related primarily to our recently issued note payable, the increase in our liability on borrowed metals, partially offset by a reduction in product financing arrangements. As compared to the same year-ago period, the following interest expense components increased by: (i) $1.5 million related to our recently issued notes payable and Trading Credit Facility, (ii) $0.8 million, related to our liability on borrowed metals, and decreased by (iii) $0.4 million related to product financing arrangements.

63
Table of Contents            

Results of Operations — Secured Lending Segment
Overview of Results of Operations for the Three Months Ended March 31, 2019 and 2018
The operating results of our Secured Lending segment for the three months ended March 31, 2019 and 2018 are as follows:
in thousands, except performance metrics
Three Months Ended March 31,
2019
 
2018
 
$
 
%
 
$
 
% of interest income
 
$
 
% of interest income
 
Increase/(decrease)
 
Increase/(decrease)
Interest income
$
2,755

 
100.000
 %
 
$
2,523

 
100.000
 %
 
$
232

 
9.2
 %
Interest expense
(1,838
)
 
(66.715
)%
 
(1,433
)
 
(56.797
)%
 
$
405

 
28.3
 %
Selling, general and administrative expenses
(394
)
 
(14.301
)%
 
(571
)
 
(22.632
)%
 
$
(177
)
 
(31.0
)%
Net income before provision for income taxes
$
523

 
18.984
 %
 
$
519

 
20.571
 %
 
$
4

 
0.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
Performance Metrics:
 
 
 
 
 
 
 
 
 
 
 
Number of secured loans at period end (1)
2,568

 
 
 
3,124

 
 
 
(556
)
 
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
NM
 
Not meaningful.
 
 
 
 
 
(1)
 
Number of outstanding secured loans to customers at the end of the period.
 
Overview of Results of Operations for the Nine Months Ended March 31, 2019 and 2018
The operating results of our Secured Lending segment for the nine months ended March 31, 2019 and 2018 are as follows:
in thousands, except performance metrics
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
 
$
 
% of interest income
 
$
 
% of interest income
 
Increase/(decrease)
 
Increase/(decrease)
Interest income
$
7,552

 
100.000
 %
 
$
6,896

 
100.000
 %
 
$
656

 
9.5
 %
Interest expense
(4,850
)
 
(64.221
)%
 
(3,854
)
 
(55.888
)%
 
$
996

 
25.8
 %
Selling, general and administrative expenses
(1,083
)
 
(14.341
)%
 
(1,302
)
 
(18.881
)%
 
$
(219
)
 
(16.8
)%
Other income
24

 
0.318
 %
 
—

 
—
 %
 
$
24

 
NM

Net income before provision for income taxes
$
1,643

 
21.756
 %
 
$
1,740

 
25.232
 %
 
$
(97
)
 
(5.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
Performance Metrics:
 
 
 
 
 
 
 
 
 
 
 
Number of secured loans at period end (1)
2,568

 
 
 
3,124

 
 
 
(556
)
 
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
NM
 
Not meaningful.
 
 
 
 
 
(1)
 
Number of outstanding secured loans to customers at the end of the period.
 

64
Table of Contents            

Interest Income — Secured Lending
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of interest income
 
$
 
% of interest income
 
Increase/(decrease)
 
Increase/(decrease)
Interest income
$
2,755

 
100.000
%
 
$
2,523

 
100.000
%
 
$
232

 
9.2
 %
Performance Metric
 
 
 
 
 
 
 
 
 
 
 
Number of secured loans at period-end
2,568

 
 
 
3,124

 
 
 
(556
)
 
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
Interest income for the three months ended March 31, 2019 increased $232,000, or 9.2%, to $2.8 million from $2.5 million in 2018. This increase was primarily due to increases in interest rates, while the aggregate average value of the secured loan portfolio increased over the comparable period. The number of secured loans outstanding decreased by 17.8% to 2,568 from 3,124 in 2018. This decrease was due to lower metal prices in the first quarter of fiscal 2019 that lowered the customer's collateral value, which lead to loans being liquidated. The Company did not incur any loan losses from the liquidations.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018     
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of interest income
 
$
 
% of interest income
 
Increase/(decrease)
 
Increase/(decrease)
Interest income
$
7,552

 
100.000
%
 
$
6,896

 
100.000
%
 
$
656

 
9.5
 %
Performance Metric
 
 
 
 
 
 
 
 
 
 
 
Number of secured loans at period-end
2,568

 
 
 
3,124

 
 
 
(556
)
 
(17.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
Interest income for the nine months ended March 31, 2019 increased $0.7 million, or 9.5%, to $7.6 million from $6.9 million in 2018. This increase was primarily due to increases in interest rates and the aggregate value of the secured loan portfolio. The number of secured loans outstanding decreased by 17.8% to 2,568 from 3,124 in 2018. This decrease was due to lower metal prices in the first quarter of fiscal 2019 that lowered the customer's collateral value, which led to loans being liquidated. The Company did not incur any loan losses from the liquidations.
Interest Expense — Secured Lending
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of interest income
 
$
 
% of interest income
 
Increase/(decrease)
 
Increase/(decrease)
Interest expense
$
(1,838
)
 
(66.715
)%
 
$
(1,433
)
 
(56.797
)%
 
$
405

 
28.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for the three months ended March 31, 2019 increased $0.4 million, or 28.3% to $1.8 million from $1.4 million in 2018. The increase was related primarily to secured bullion loans financed by the recently issued note payable, which carries a higher interest rate than the Trading Credit Facility, which financed such loans in the same year ago period.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of interest income
 
$
 
% of interest income
 
Increase/(decrease)
 
Increase/(decrease)
Interest expense
$
(4,850
)
 
(64.221
)%
 
$
(3,854
)
 
(55.888
)%
 
$
996

 
25.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for the nine months ended March 31, 2019 increased $1.0 million, or 25.8% to $4.9 million from $3.9 million in 2018. The increase was related primarily to secured bullion loans financed by the recently issued note payable, which carries a higher interest rate than the Trading Credit Facility, which financed such loans in the same year ago period.

65
Table of Contents            

Selling, General and Administrative Expenses — Secured Lending
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of interest income
 
$
 
% of interest income
 
Increase/(decrease)
 
Increase/(decrease)
Selling, general and administrative expenses
$
(394
)
 
(14.301
)%
 
$
(571
)
 
(22.632
)%
 
$
(177
)
 
(31.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses for the three months ended March 31, 2019 decreased $177,000, or 31.0%, to $0.4 million from $0.6 million in 2018.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of interest income
 
$
 
% of interest income
 
Increase/(decrease)
 
Increase/(decrease)
Selling, general and administrative expenses
$
(1,083
)
 
(14.341
)%
 
$
(1,302
)
 
(18.881
)%
 
$
(219
)
 
(16.8
)%
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses for the nine months ended March 31, 2019 decreased $219,000, or 16.8%, to $1.1 million from $1.3 million in 2018.

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Table of Contents            

Results of Operations — Direct Sales Segment
Overview of Results of Operations for the Three Months Ended March 31, 2019 and 2018
The Direct Sales segment was created on August 28, 2017 as a result of the Goldline acquisition. The operating results of our Direct Sales segment for the three months ended March 31, 2019 and 2018 are as follows:
in thousands, except performance metrics
 
Three Months Ended March 31,
2019
 
2018
 
$
 
%
 
 
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
 
Revenues
$
15,601

(a) 
100.000
 %
 
$
17,690

(c) 
100.000
 %
 
$
(2,089
)
 
(11.8
)%
 
Gross profit
1,782

 
11.422
 %
(b) 
679

 
3.838
 %
(d) 
$
1,103

 
162.4
 %
 
Selling, general and administrative expenses
(2,246
)
 
(14.397
)%
 
(3,636
)
 
(20.554
)%
 
$
(1,390
)
 
(38.2
)%
 
Interest expense
—

 
—
 %
 
(226
)
 
(1.278
)%
 
$
226

 
100.0
 %
 
Net loss before provision for income taxes
$
(464
)
 
(2.974
)%
 
$
(3,183
)
 
(17.993
)%
 
$
(2,719
)
 
(85.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Metrics:
 
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold(1)
5,000

 
 
 
4,000

 
 
 
1,000

 
25.0
 %
 
Silver ounces sold(2)
359,000

 
 
 
138,000

 
 
 
221,000

 
160.1
 %
 
Direct Sales segment ticket volume(3)
5,093

 
 
 
4,771

 
 
 
322

 
6.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
NM
 
Not meaningful.
 
 
 
 
 
(a)
 
Includes $0.3 million of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.
 
 
 
 
 
(b)
 
Gross profit percentage realized from sales, excluding intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary services segment, is 11.660% for the period.
 
 
 
 
 
(c)
 
Includes $4.3 million of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.
 
 
 
 
 
(d)
 
Gross profit percentage realized from sales, excluding intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary services segment, is 8.830% for the period.
 
 
 
 
 
(1)
 
Gold ounces sold represents the ounces of gold product sold to third-party customers during the three-month period.
 
 
 
 
 
(2)
 
Silver ounces sold represents the ounces of silver product sold to third-party customer during the three-month period.
 
 
 
 
 
(3)
 
Direct Sales segment trading ticket volume represents the total number of product orders processed.
 
 
 
 
 


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Overview of Results of Operations for the Nine Months Ended March 31, 2019 and 2018
The Direct Sales segment was formed on August 28, 2017 as a result of the Goldline acquisition. Accordingly, comparative prior period data only contains approximately four months of activity. The operating results of our Direct Sales segment for the nine months ended March 31, 2019 and 2018 are as follows:
in thousands, except performance metrics
 
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
 
 
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
 
Revenues
$
39,102

(a) 
100.000
 %
 
$
57,356

(c) 
100.000
 %
 
$
(18,254
)
 
(31.8
)%
 
Gross profit
4,358

 
11.145
 %
(b) 
4,088

 
7.127
 %
(d) 
$
270

 
6.6
 %
 
Selling, general and administrative expenses
(6,472
)
 
(16.552
)%
 
(8,444
)
 
(14.722
)%
 
$
(1,972
)
 
(23.4
)%
 
Interest expense
(342
)
 
(0.875
)%
 
(505
)
 
(0.881
)%
 
$
(163
)
 
(32.3
)%
 
Other expense
(157
)
 
(0.402
)%
 
—

 
—
 %
 
$
157

 
NM

 
Net loss before provision for income taxes
$
(2,613
)
 
(6.683
)%
 
$
(4,861
)
 
(8.475
)%
 
$
(2,248
)
 
(46.2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performance Metrics:
 
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold(1)
12,000

 
 
 
13,000

 
 
 
(1,000
)
 
(7.7
)%
 
Silver ounces sold(2)
892,000

 
 
 
290,000

 
 
 
602,000

 
207.6
 %
 
Direct Sales ticket volume(3)
13,045

 
 
 
11,701

 
 
 
1,344

 
11.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________________________
 
 
 
 
NM
 
Not meaningful.
 
 
 
 
 
(a)
 
Includes $0.6 million of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.
 
 
 
 
 
(b)
 
Gross profit percentage, excluding intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, is 11.342% for the period.
 
 
 
 
 
(c)
 
Includes $21.9 million of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.
 
 
 
 
 
(d)
 
Gross profit percentage, excluding intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, is 15.836% for the period.
 
 
 
 
 
(1)
 
Gold ounces sold represents the ounces of gold product sold to third-party customers during the period.
 
 
 
 
 
(2)
 
Silver ounces sold represents the ounces of silver product sold to third-party customer during the period.
 
 
 
 
 
(3)
 
Direct Sales segment trading ticket volume represents the total number of product orders processed.
 
 
 
 
 


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Table of Contents            

Segment Results — Direct Sales
Revenues
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
 
in thousands, except performance metrics
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
 
Revenues
$
15,601

 
100.000
%
 
$
17,690

 
100.000
%
 
$
(2,089
)
 
(11.8
)%
 
Performance Metrics:
 
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold
5,000

 
 
 
4,000

 
 
 
1,000

 
25.0
 %
 
Silver ounces sold
359,000

 
 
 
138,000

 
 
 
221,000

 
160.1
 %
 
Revenues for the three months ended March 31, 2019 decreased $2.1 million, or 11.8%, to $15.6 million from $17.7 million in 2018. Excluding intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, revenues for the three months ended March 31, 2019 increased $1.9 million or 14.4% to $15.3 million from $13.4 million in 2018.
Gold ounces sold for the three months ended March 31, 2019 increased 1,000 ounces, or 25.0%, to 5,000 ounces from 4,000 ounces in 2018. Silver ounces sold for the three months ended March 31, 2019 increased 221,000 ounces, or 160.1%, to 359,000 ounces from 138,000 ounces in 2018. On average, the selling prices for gold increased by 1.9% and selling prices for silver decreased by 5.6% during the three months ended March 31, 2019 as compared to 2018.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
 
in thousands, except performance metrics
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
 
Revenues
$
39,102

 
100.000
%
 
$
57,356

 
100.000
%
 
$
(18,254
)
 
(31.8
)%
 
Performance Metrics:
 
 
 
 
 
 
 
 
 
 
 
 
Gold ounces sold
12,000

 
 
 
13,000

 
 
 
(1,000
)
 
(7.7
)%
 
Silver ounces sold
892,000

 
 
 
290,000

 
 
 
602,000

 
207.6
 %
 
Revenues for the nine months ended March 31, 2019 decreased $18.3 million, or 31.8%, to $39.1 million from $57.4 million in 2018.     Excluding intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, revenues for the nine months ended March 31, 2019 increased $3.1 million or 8.6% to $38.5 million from $35.5 million in 2018.
Gold ounces sold for the nine months ended March 31, 2019 decreased 1,000 ounces, or 7.7%, to 12,000 ounces from 13,000 ounces in 2018. Silver ounces sold for the nine months ended March 31, 2019 increased 602,000 ounces, or 207.6%, to 892,000 ounces from 290,000 ounces in 2018. On average, the selling prices for gold decreased by 12.9% and selling prices for silver decreased by 12.7% during the nine months ended March 31, 2019 as compared to 2018.

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Table of Contents            

Gross Profit
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
 
in thousands, except performance metric
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
 
Gross profit
$
1,782

 
11.422
%
 
$
679

 
3.838
%
 
$
1,103

 
162.4
%
 
Performance Metric:
 
 
 
 
 
 
 
 
 
 
 
 
Direct Sales segment ticket volume
5,093

 
 
 
4,771

 
 
 
322

 
6.7
%
 
Gross profit for the three months ended March 31, 2019 increased by $1.1 million, or 162.4%, to $1.8 million from $0.7 million in 2018. The Company’s profit margin percentage increased by 197.6% to 11.422% from 3.838% in 2018. Excluding the impact of intercompany sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, the Direct Sales segment's gross profit margin percentage increased by 32.1% to 11.660% from 8.830% in 2018.
The Direct Sales segment ticket volume for the three months ended March 31, 2019 increased by 322 tickets, or 6.7%, to 5,093 tickets from 4,771 tickets in 2018. The increase in our trading ticket volume is indicative of higher trading activity as compared to 2018.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands, except performance metric
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Gross profit
$
4,358

 
11.145
%
 
$
4,088

 
7.127
%
 
$
270

 
6.6
%
Performance Metric:
 
 
 
 
 
 
 
 
 
 
 
Direct Sales ticket volume
13,045

 
 
 
11,701

 
 
 
1,344

 
11.5
%
Gross profit for the nine months ended March 31, 2019 increased by $0.3 million, or 6.6%, to $4.4 million from $4.1 million in 2018. For the nine months ended March 31, 2019, the Company’s profit margin percentage increased by 56.4% to 11.1% from 7.1% in 2018.
The Direct Sales segment ticket volume for the nine months ended March 31, 2019 increased by 1,344 tickets, or 11.5%, to 13,045 tickets from 11,701 tickets in 2018. The increase in our trading ticket volume is indicative of higher trading activity as compared to 2018.
Selling, General and Administrative Expense
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
 
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
 
Selling, general and administrative expenses
$
(2,246
)
 
(14.397
)%
 
$
(3,636
)
 
(20.554
)%
 
$
(1,390
)
 
(38.2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses for the three months ended March 31, 2019 decreased $1.4 million, or 38.2%, to $2.2 million from $3.6 million in 2018. The decrease in selling, general and administrative expenses was primarily due to lower overall compensation costs.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Selling, general and administrative expenses
$
(6,472
)
 
(16.552
)%
 
$
(8,444
)
 
(14.722
)%
 
$
(1,972
)
 
(23.4
)%
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses for the nine months ended March 31, 2019 decreased $2.0 million, or 23.4%, to $6.5 million from $8.4 million in 2018. The decrease in selling, general and administrative expenses was primarily due to lower

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Table of Contents            

overall compensation costs. Our Direct Sales Segment reported a decrease in selling, general, and administrative expense even though the Direct Sales segment was only owned for seven months in the prior comparable period.
Interest expense

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Three Months Ended March 31,
2019
 
2018
 
$
 
%
 
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
 
Interest expense
$
—

 
—
%
 
$
(226
)
 
(1.278
)%
 
$
226

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for the three months ended March 31, 2019 decreased $226,000, or 100.0% to $0.0 from $226,000 in 2018. The decrease relates to the extinguishment of the Goldline Credit Facility in the second quarter of fiscal 2019.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Interest expense
$
(342
)
 
(0.875
)%
 
$
(505
)
 
(0.881
)%
 
$
(163
)
 
(32.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense for the nine months ended March 31, 2019 decreased $163,000, or 32.3% to $342,000 from $505,000 in 2018. The decrease primarily relates to the extinguishment of the Goldline Credit Facility in the second quarter of fiscal 2019.
Other expense
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
For the three months ended March 31, 2019 and 2018, we did not have any other expense activity.
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
Nine Months Ended March 31,
2019
 
2018
 
$
 
%
in thousands
$
 
% of revenue
 
$
 
% of revenue
 
Increase/(decrease)
 
Increase/(decrease)
Other expense
$
(157
)
 
(0.402
)%
 
$
—

 
—
%
 
$
157

 
NM
 
 
 
 
 
 
 
 
 
 
 
 
Other expense for the nine months ended March 31, 2019 increased $157,000, to $157,000 from $0.0 in 2018, which was related to a premium associated with the extinguishment Goldline Credit Facility before its maturity date.



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Table of Contents            

LIQUIDITY AND FINANCIAL CONDITION
Primary Sources and Uses of Cash
Overview
Liquidity is defined as our ability to generate sufficient amounts of cash to meet all of our cash needs. Liquidity is of critical importance to us and imperative to maintain our operations on a daily basis.
A substantial portion of our assets are liquid. As of March 31, 2019, approximately 94% of our assets consisted of cash, customer receivables, derivative assets, secured loans receivables, precious metals held under financing arrangements and inventory, measured at fair value. Cash generated from the sales of our precious metals products is our primary source of operating liquidity.
Typically, the Company acquires its inventory by: (1) purchasing inventory from our suppliers by utilizing our own capital and lines of credit; (2) borrowing precious metals from our suppliers under short-term arrangements which may bear interest at a designated rate, and (3) repurchasing inventory at an agreed-upon price based on the spot price on the specified repurchase date.
In addition to selling inventory, the Company generates cash from earning interest income. Through CFC, the Company enters into secured loans and secured financing structures with its customers under which it charges interest. The Company offers a number of secured financing options to its customers to finance their precious metals purchases including consignments and other structured inventory finance products. The loans are secured by precious metals and numismatic material owned by the borrowers and held by the Company as security for the term of the loan. Furthermore, our customers may enter into agreements whereby the customer agrees to repurchase our precious metals at the prevailing spot price for delivery of the product at a specific point in time in the future; interest income is earned from the contract date until the material is delivered and paid for in full.
We continually review our overall credit and capital needs to ensure that our capital base, both stockholders’ equity and available credit facilities, can appropriately support our anticipated financing needs. The Company also continually monitors its current and forecasted cash requirements, and draws upon and pays down its lines of credit so as to minimize interest expense.
The Company believes that the Trading Credit Facility (as defined below) the notes payable, liability on borrowed metals, and product financing arrangements provides adequate means to capital for its operations (see Note 14).
Lines of Credit
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
March 31, 2019 Compared to June 30, 2018
 
Lines of credit
 
$
149,000

 
$
200,000

 
$
(51,000
)
 
 
 
 
 
 
 
 
 
Effective March 29, 2019, through an amendment and restatement of the applicable credit documents, A-Mark renewed its uncommitted demand borrowing facility ("Trading Credit Facility") with a syndicate of banks. Under the agreements, Coöperatieve Rabobank U.A. acts as joint lead lender and administrative agent/bookrunner and Natixis acts as joint lead arranger and syndication agent for the syndicate. As of March 31, 2019, the Trading Credit Facility provided the Company with access up to $260.0 million, featuring a $210.0 million base, with a $50.0 million accordion option. The maturity date of the new credit facility is March 27, 2020.

Debt Obligation (Related Party)
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
March 31, 2019 Compared to June 30, 2018
 
Debt Obligation - related party
 
$
—

 
$
7,226

 
$
(7,226
)
 
On August 28, 2017, the Company entered into a privately placed credit facility in the amount of $7.5 million (the “Goldline Credit Facility”) with various lenders. The outstanding principal and unpaid interest was due upon maturity (August 28, 2020), but was paid off in full on December 7, 2018 (see Note 14), as the Company secured a more favorable source of funding (see Notes Payable below).

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Table of Contents            

Notes Payable
in thousands
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
March 31, 2019 Compared to June 30, 2018
Notes payable
 
$
86,720

 
$
—

 
$
86,720

On September 14, 2018, AM Capital Funding, LLC (“AMCF”), a wholly owned subsidiary of 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.  The Class A Notes bear interest at a rate of 4.98% and the Class B Notes bear interest at a rate of 5.98%. The Notes have a maturity date of December 15, 2023.
As of March 31, 2019, the consolidated carrying balance of the Note was $86.7 million (which excludes the $10.0 million note that the Company retained), and the remaining unamortized loan cost balance was approximately $3.3 million, which is amortized ratably through the maturity date (see Note 14).
Liability on Borrowed Metals
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
March 31, 2019 Compared to June 30, 2018
 
Liability on borrowed metals
 
$
210,650

 
$
280,346

 
$
(69,696
)
 
We borrow precious metals (usually in the form of pool metals) from our suppliers and customers under short-term arrangements using other precious metal from our inventory as collateral. Amounts under these arrangements require repayment either in the form of precious metals or cash. Liabilities also arise from unallocated metal positions held by customers in our inventory. Typically, these positions are due on demand, in a specified physical form, based on the total ounces of metal held in the position.
Product Financing Arrangements
in thousands
 
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
March 31, 2019 Compared to June 30, 2018
 
Product financing arrangements
 
$
65,723

 
$
113,940

 
$
(48,217
)
 
The Company has agreements with financial institutions and other third parties that allow the Company to transfer its gold and silver inventory to the third party at an agreed-upon price based on the spot price, which provides alternative sources of liquidity. During the term of the agreement both parties intend for inventory to be returned at an agreed-upon price based on the spot price on the termination (repurchase) date. The third parties charge monthly interest as a percentage of the market value of the outstanding obligation; such monthly charges are classified in interest expense. These transactions do not qualify as sales and therefore have been accounted for as financing arrangements and reflected in the condensed consolidated balance sheet as product financing arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing arrangements and the underlying inventory (which is entirely restricted) are carried at fair value, with changes in fair value included as a component of cost of sales.
Secured Loans Receivable
in thousands
 
 
 
 
 
 
March 31, 2019
 
June 30, 2018
 
March 31, 2019 Compared to June 30, 2018
Secured loans receivable
 
$
111,246

 
$
110,424

 
$
822

CFC is a California licensed finance lender that makes and acquires commercial loans secured by bullion and numismatic coins that affords our customers a convenient means of financing their inventory or collections (see Note 5).  Most of the Company's secured loans are short-term in nature. The renewal of these instruments is at the discretion of the Company and, as such, provides us with some flexibility in regards to our capital deployment strategies.

73
Table of Contents            

Dividends
In fiscal 2015, the Board of Directors of the Company initiated a cash dividend policy that called for the payment of a quarterly cash dividend of $0.05 per common share. In fiscal 2016, the Board of Directors modified the policy by increasing the quarterly cash dividend to $0.07 per common share, and in fiscal 2017 the quarterly cash dividend was increased to $0.08 per common share.
The declaration of cash dividends is subject to the determination each quarter by the Board of Directors, based on its assessment of a number of factors, including the Company’s financial performance, available cash resources, cash requirements, bank covenants, and alternative uses of cash that the Board of Directors may conclude would represent an opportunity to generate a greater return on investment for the Company. Based on those assessments, and in order to increase its financial flexibility and strengthen its balance sheet, the Company has not made a dividend payment since January 2018. Going forward, the Board of Directors will continue to re-assess its capital resources on a quarterly basis and may or may not determine to reinstate the dividend based on that assessment.
Cash Flows
The majority of the Company’s trading activities involve two day value trades under which payment is received in advance of delivery or product is received in advance of payment. The high volume, rapid rate of inventory turnover, and high average value per trade can cause material changes in the sources of cash used in or provided by operating activities on a daily basis. The Company manages these variances through its liquidity forecasts and counterparty limits by maintaining a liquidity reserve to meet the Company’s cash needs. The Company uses various short-term financial instruments to manage the rapid cycle of our trading activities from customer purchase order to cash collections and product delivery, which can cause material changes in the amount of cash used in or provided by financing activities on a daily basis.
The following summarizes components of our condensed consolidated statements of cash flows for the nine months ended March 31, 2019 and 2018:
in thousands
 
 
 
 
 
Nine Months Ended
 
March 31,
2019
 
March 31,
2018
 
Nine Months Ended March 31, 2019 Compared to Nine Months Ended March 31, 2018
 
Net cash provided by operating activities
 
$
20,359

 
$
14,326

 
$
6,033

 
Net cash used in investing activities
 
$
(5,656
)
 
$
(19,544
)
 
$
13,888

 
Net cash used in financing activities
 
$
(16,245
)
 
$
(2,900
)
 
$
(13,345
)
 
Our principal capital requirements have been to fund (i) working capital and (ii) capital expenditures. Our working capital requirements fluctuate with market conditions, the availability of precious metals and the volatility of precious metals commodity pricing.
Net cash provided by operating activities
Operating activities provided $20.4 million and provided $14.3 million in cash for the nine months ended March 31, 2019 and 2018, respectively, representing a $6.0 million increase in the source of cash compared to the nine months ended March 31, 2018. This period over period increase in the of source of funds in operating activities was primarily due to changes in the balances of: inventories, receivables, precious metals held under financing arrangements, income tax receivables and payables, secured loans to Former Parent, accounts payable, prepaid expenses and other assets, and accrued liabilities; offset by changes in the balances of: liability on borrowed metals and derivative assets.
Net cash used in investing activities
Investing activities used $5.7 million and used $19.5 million in cash for the nine months ended March 31, 2019 and 2018, respectively, representing a $13.9 million increase in the source of cash compared to the nine months ended March 31, 2018. This period over period increase in the source of cash is the result of the change in balance of secured loans of $6.1 million compared to the comparable prior period, and due to the prior fiscal year's acquisition activity of $9.5 million, offset by purchase of cost-method investment for $2.3 million.

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Net cash used in financing activities
Financing activities used $16.2 million and used $2.9 million in cash for the nine months ended March 31, 2019 and 2018, respectively, representing an increase of $13.3 million in the use of cash from financing activities compared to the nine months ended March 31, 2018. This period over period increase in funds used in financing activities was primarily due to changes in the balance of product financing arrangements of $10.2 million, change in the balances in the Trading Credit Facility of $81.0 million and repayments of related party debt obligation of $7.0 million, offset by a $82.5 million increase in funds from the proceeds from the issuance of notes payable, and $4.2 million increase from borrowings on an unsecured advance.
CAPITAL RESOURCES
We believe that our current cash availability under the Trading Credit Facility, product financing arrangements, financing derived from borrowed metals and the cash we anticipate to generate from operating activities will provide us with sufficient liquidity to satisfy our working capital needs, capital expenditures, investment requirements and commitments through at least the next twelve months.
CONTRACTUAL OBLIGATIONS, CONTINGENT LIABILITIES AND COMMITMENTS
Counterparty Risk
We manage our counterparty risk by setting credit and position risk limits with our trading counterparties. These limits include gross position limits for counterparties engaged in sales and purchase transactions and inventory consignment transactions with us. They also include collateral limits for different types of sale and purchase transactions that counterparties may engage in from time to time.
Commodities Risk and Derivatives
We use a variety of strategies to manage our risk including fluctuations in commodity prices for precious metals. Our inventories consist of, and our trading activities involve, precious metals and precious metal products, whose prices are linked to the corresponding precious metal commodity prices. Inventories purchased or borrowed by us are subject to price changes. Inventories borrowed are considered natural hedges, since changes in value of the metal held are offset by the obligation to return the metal to the supplier or deliver metals to the customer.
Open sale and purchase commitments in our trading activities 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). We seek to minimize the effect of price changes of the underlying commodity through the use of forward and futures contracts. Our open sale and purchase commitments generally settle within 2 business days, and for those commitments that do not have stated settlement dates, we have the right to settle the positions upon demand.
Our policy is to substantially hedge our underlying precious metal commodity inventory position. We regularly enter into metals commodity forward and futures contracts with financial institutions to hedge price changes that would cause changes in the value of our physical metals positions and purchase commitments and sale commitments. We have access to all of the precious metals markets, allowing us to place hedges. However, we also maintain relationships with major market makers in every major precious metals dealing center, which allows us to enter into contracts with market makers. Our forwards contracts open at March 31, 2019 are scheduled to settle within 60 days. Futures positions do not have settlement dates, although the Company typically closes its future positions within a week.
The Company enters into these derivative transactions solely for the purpose of hedging our inventory holding risk, and not for speculative market purposes. Due to the nature of our hedging strategy, we are not using hedge accounting as defined under, Derivatives and Hedging Topic 815 of the Accounting Standards Codification ("ASC".) Unrealized gains or losses resulting from our futures and forward contracts are reported as cost of sales with the related amounts due from or to counterparties reflected as a derivative asset or liability. 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 and option contacts are recorded in cost of sales. The Company’s net gains on derivative instruments for the three months ended March 31, 2019 and 2018, totaled $28.2 million and $11.8 million, respectively. The Company’s net gains on derivative instruments for the nine months ended March 31, 2019 and 2018, totaled $20.2 million and $13.8 million, respectively. These net gains (losses) on derivative instruments were substantially offset by the changes in fair market value of the underlying precious metals inventory and open sale and purchase commitments, which is also recorded in cost of sales in the condensed consolidated statements of operations.

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The purpose of the Company's hedging policy is to substantially match the change in the value of the derivative financial instrument to the change in the value of the underlying hedged item. The following table summarizes the results of our hedging activities, showing the precious metal commodity inventory position, net of open sale and purchase commitments, which is subject to price risk, compared to change in the value of the derivative instruments as of March 31, 2019 and at June 30, 2018:
in thousands
 
March 31, 2019
 
June 30, 2018
Inventory
 
$
266,419

 
$
280,116

Precious metals held under financing arrangements
 
212,622

 
262,566

 
 
479,041

 
542,682

 
 
 
 
 
Less unhedgeable inventory:
 
 
 
 
Commemorative coin inventory, held at lower of cost or market
 
(33
)
 
(99
)
Premium on metals position
 
(5,372
)
 
(3,530
)
Precious metal value not hedged
 
(5,405
)
 
(3,629
)
 
 
 
 
 
 
 
473,636

 
539,053

 
 
 
 
 
Commitments at market:
 
 

 
 

Open inventory purchase commitments
 
146,046

 
342,287

Open inventory sales commitments
 
(161,998
)
 
(138,022
)
Margin sale commitments
 
(6,657
)
 
(5,988
)
In-transit inventory no longer subject to market risk
 
(4,424
)
 
(1,060
)
Unhedgeable premiums on open commitment positions
 
1,178

 
541

Borrowed precious metals
 
(210,650
)
 
(280,346
)
Product financing arrangements
 
(65,723
)
 
(113,940
)
Advances on industrial metals
 
8,295

 
6,044

 
 
(293,933
)
 
(190,484
)
 
 
 
 
 
Precious metal subject to price risk
 
179,703

 
348,569

 
 
 
 
 
Precious metal subject to derivative financial instruments:
 
 
 
 
Precious metals forward contracts at market values
 
92,875

 
274,994

Precious metals futures contracts at market values
 
85,686

 
72,421

Total market value of derivative financial instruments
 
178,561

 
347,415

 
 
 
 
 
Net precious metals subject to commodity price risk
 
$
1,142

 
$
1,154


We are exposed to the risk of default of the counterparties to our derivative contracts. Significant judgment is applied by us when evaluating the fair value implications. We regularly review the creditworthiness of our major counterparties and monitor our exposure to concentrations. At March 31, 2019, we believe our risk of counterparty default is mitigated based on our evaluation of the creditworthiness of our major counterparties, the strong financial condition of our counterparties, and the short-term duration of these arrangements.
Commitments and Contingencies
Refer to Note 15 of the Notes to Consolidated Financial Statements in the 2018 Annual Report for information relating Company's commitments and contingencies.

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OFF-BALANCE SHEET ARRANGEMENTS
As of March 31, 2019 and June 30, 2018, we had the following outstanding sale and purchase commitments and open forward and future contracts, which are normal and recurring, in nature:
in thousands
 
March 31, 2019
 
June 30, 2018
Purchase commitments
 
$
146,046

 
$
342,287

Sales commitments
 
$
(161,998
)
 
$
(138,022
)
Margin sale commitments
 
$
(6,657
)
 
$
(5,988
)
Open forward contracts
 
$
92,875

 
$
274,994

Open futures contracts
 
$
85,686

 
$
72,421

Foreign exchange forward contracts
 
$
2,489

 
$
4,130

The notional amounts of the commodity forward and futures contracts and the open sales and purchase orders, as shown in the table above, are not reflected at the notional amounts in the condensed consolidated balance sheets. The Company records commodity forward and futures contracts at the fair value, which is the difference between the market price of the underlying metal or contract measured on the reporting date and the trade amount measured on the date the contract was transacted. The fair value of the open derivative contracts are shown as a component of derivative assets or derivative liabilities in the accompanying condensed consolidated balance sheets.
The Company enters into the derivative forward and future transactions solely for the purpose of hedging its inventory holding risk, and not for speculative market purposes. The Company’s gains (losses) on derivative instruments are substantially offset by the changes in fair market value of the underlying precious metals inventory position, including our open sale and purchase commitments. The Company records the derivatives at the trade date, and any corresponding unrealized gains or losses are shown as a component of cost of sales in the condensed consolidated statements of operations. We adjust the carrying value of the derivatives to fair value on a daily basis until the transactions are physically settled (see Note 11.)
CRITICAL ACCOUNTING ESTIMATES
Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). In connection with the preparation of our financial statements, we are required to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that we believe to be relevant at the time our condensed consolidated financial statements are prepared. On a regular basis, we review our accounting policies, assumptions, estimates and judgments to ensure that our condensed consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could materially differ from our estimates.
Our significant accounting policies are discussed in Note 2 Summary of Significant Accounting Policies of the accompanying condensed consolidated financial statements. We believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. We have reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.
Revenue Recognition
The Company accounts for its metals and sales contracts using settlement date accounting. Pursuant to such accounting, the Company recognizes the sale or purchase of the metals at settlement date. During the period between the trade and settlement dates, the Company has entered into a forward contract that meets the definition of a derivative in accordance with the Derivatives and Hedging Topic 815 of the ASC. The Company records the derivative at the trade date with any corresponding unrealized gain (loss), shown as component of cost of sales in the condensed consolidated statements of operations. The Company adjusts the derivatives to fair value on a daily basis until the transactions are settled. When these contracts are settled, the unrealized gains and losses are reversed, and revenue is recognized for contracts that are physically settled. For contracts that are net settled, the realized gains and losses are recorded in cost of sales, with the exception of forward contracts, where their associated realized gain and losses are recorded in revenue and cost of sales, respectively.

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Inventories
The Company's inventories primarily include bullion and bullion coins, which are initially recorded at fair market value. The fair market value of the bullion and bullion coins is comprised of two components: (1) published market values attributable to the cost of the raw precious metal, and (2) a published premium paid at acquisition of the metal. The premium is attributable to the additional value of the product in its finished goods form and the market value attributable solely to the premium may be readily determined, as it is published by multiple reputable sources. The premium is included in the cost of the inventory, paid at acquisition, and is a component of the total fair market value of the inventory. The precious metal component of the inventory may be hedged through the use of precious metal commodity positions, while the premium component of our inventory is not a commodity that may be hedged.
The Company’s inventories, except for certain lower of cost or market basis products (as described below), are subsequently recorded at their fair market values. 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 operations.
While the premium component included in inventories is marked-to-market, our commemorative coin inventory, including its premium component, is held at the lower of cost or market, 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. Additionally, neither the commemorative coin inventory nor the premium component of our inventory is hedged.
Inventories include amounts borrowed from suppliers and customers arising from various arrangements including unallocated metal positions held by customers in the Company’s inventory, amounts due to suppliers for the use of consigned inventory, metals held by suppliers as collateral on advanced pool metals, as well as shortages in unallocated metal positions held by the Company in the supplier’s inventory. Unallocated or pool metal represents an unsegregated inventory position that is due on demand, in a specified physical form, based on the total ounces of metal held in the position. Amounts under these arrangements require delivery either in the form of precious metals or cash. The Company mitigates market risk of its physical inventories and open commitments through commodity hedge transactions (see Note 11.)
The Company enters into product financing agreements for the transfer and subsequent option to reacquire its gold and silver inventory at an agreed-upon price based on the spot price with a third party finance company. This inventory is restricted and is held at a custodial storage facility in exchange for a financing fee, charged by the third party finance company. During the term of the financing agreement, the third party company holds the inventory as collateral, and both parties intend for the inventory to be returned to the Company at an agreed-upon price based on the spot price on the termination (repurchase) date. The third party charges a monthly fee as percentage of the market value of the outstanding obligation; such monthly charge is classified as interest expense. These transactions do not qualify as sales and have been accounted for as financing arrangements in accordance with ASC 470-40 Product Financing Arrangements, and are reflected in the condensed consolidated balance sheets as product financing arrangements. The obligation is stated at the amount required to repurchase the outstanding inventory. Both the product financing and the underlying inventory (which is restricted) are carried at fair value, with changes in fair value included in cost of sales in the condensed consolidated statements of operations.
The Company periodically loans metals to customers on a short-term consignment basis. Such inventories are removed at the time the customer elects to price and purchase the metals, and the Company records a corresponding sale and receivable.
The Company enters into financing arrangements with certain customers under which A-Mark purchases precious metals products that are subject to repurchase by the customer at the fair value of the product on the repurchase date. The Company or the counterparty may typically terminate any such arrangement with 14 days' notice.  Upon termination the customer’s rights to repurchase any remaining inventory is forfeited.
Goodwill and Other Purchased Intangible Assets
We evaluate goodwill and other indefinite-lived intangibles for impairment annually in the fourth quarter of the fiscal year (or more frequently if indicators of potential impairment exist) in accordance with the Intangibles - Goodwill and Other Topic 350 of the ASC. Other finite-lived intangible assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be recoverable. We may 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. If, based on this qualitative assessment, we determine that goodwill is more likely than not to be impaired, a quantitative impairment test is performed. This step requires us to determine the fair value of the business, and compare the calculated fair value of a 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 will be recognized

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for the amount by which the carrying amount exceeds the reporting unit’s fair value.
The Company also performs impairment reviews on its indefinite-lived intangible assets (i.e., trademarks and trade-names). 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 more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If the Company determines that it is not more likely than not 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 a 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 will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value.
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 the 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 recognizes a benefit for tax positions that it believes will more likely than not be sustained upon examination. The amount of benefit recognized is the largest amount of benefit that the Company believes has more than a 50% probability of being realized upon settlement. The Company regularly monitors its tax positions and adjusts the amount of recognized tax benefit based on its evaluation of information that has become available since the end of its last financial reporting period. The annual tax rate includes the impact of these changes in recognized tax benefits. When adjusting the amount of recognized tax benefits, the Company does not consider information that has become available after the balance sheet date, but does disclose the effects of new information whenever those effects would be material to the Company's condensed consolidated financial statements. The difference between the amount of benefit taken or expected to be taken in a tax return and the amount of benefit recognized for financial reporting represents unrecognized tax benefits. These unrecognized tax benefits are presented in the condensed consolidated balance sheets principally within accrued liabilities.
The Company accounts for uncertainty in income taxes under the provisions of ASC 740. These provisions clarify the accounting for uncertainty in income taxes recognized in an enterprise's financial statements, and prescribe a recognition threshold and measurement criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions also provide guidance on de-recognition, classification, interest, and penalties, accounting in interim periods, disclosure, and transition. The potential interest and/or penalties associated with an uncertain tax position are recorded in provision for income taxes on the condensed consolidated statements of operations. Please refer to Note 12 for further discussion regarding these provisions.
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.
The Company's condensed consolidated financial statements recognized the current and deferred income tax consequences that result from the Company's activities during the current and preceding periods, as if the Company were a separate taxpayer prior to the date of the Distribution of the Company when it was a member of the consolidated income tax return group of its Former Parent (Spectrum Group International, Inc.) Following its spin-off, the Company files federal and state income tax filings that are separate from the Former Parent's tax filings. The Company recognizes current and deferred income taxes as a separate taxpayer for periods ending after the date of Distribution.

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Business Combinations
The Company evaluates each purchase transaction to determine whether the acquired assets meet the definition of a business. The Company accounts for business combinations by applying the acquisition method in accordance with “ASC 805, Business Combinations. Transaction costs related to acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed and non-controlling 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 non-controlling interests, if any, in an acquired entity, net of fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets and liabilities.
Contingent Earn-out Liability
Contingent consideration is classified as a liability or equity, as applicable. Contingent consideration in connection with the acquisition of a business is measured at fair value on acquisition date, and unless classified as equity, is remeasured at fair value each reporting period thereafter until the consideration is settled, with changes in fair value included in net income.
We record an estimate of the fair value of contingent consideration, related to the earn-out obligations to SilverTowne LP related to SilverTowne Mint transaction. On a quarterly basis, we revalue the liability and record increases or decreases in the fair value as an adjustment to earnings. Changes to the contingent consideration liability can result from adjustments to the discount rate, or from changes to the estimates of future throughput activity of AMST, which are considered Level 3 inputs (see Note 3). Consequentially, the assumptions used in estimating fair value require significant judgment. The use of different assumptions and judgments could result in a materially different estimate of fair value.
RECENT ACCOUNTING PRONOUNCEMENTS
For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note 2.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Closing Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In the fourth quarter of fiscal 2019, the Company implemented a new financial accounting system for our Secured Lending segment to improve operational oversight and efficiency. The system implementation was not made in response to address any prior significant deficiency or material weakness in our internal controls. The new financial accounting system will affect the processes that constitute our internal control over financial reporting and will require testing for effectiveness as of June 30, 2019, in accordance with the requirements of Section 404(a) of Sarbanes-Oxley.

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PART II — OTHER INFORMATION
ITEM 3. LEGAL PROCEEDINGS
We are from time to time are involved in legal proceedings, claims or investigations that are incidental to the conduct of our business.
Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on current information, including our assessment of the merits of the particular claim, we do not expect that these legal proceedings or claims will have any material adverse impact on our future consolidated financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
Risks Relating to Our Business Generally
Our business is heavily dependent on our credit facility.
Our business depends substantially on our ability to obtain financing for our operations. The Trading Credit Facility (as further described and defined below) provides the Company with the liquidity to buy and sell billions of dollars of precious metals annually. The Trading Credit Facility is an uncommitted demand facility provided by a syndicate of financial institutions (the “Trading Credit Lenders”), and is currently scheduled to mature on March 27, 2020.  A-Mark routinely uses funds drawn under the Trading Credit Facility to purchase metals from its suppliers and for operating cash flow purposes.  Our CFC subsidiary also uses the funds drawn under the Trading Credit Facility to finance its lending activities.
Pursuant to the terms of the Trading Credit Facility, each Trading Credit Lender may, at any time in its sole discretion (subject to certain notice requirements), decline to make loans to us. If we are unable to access funds under the Trading Credit Facility, we may be limited in the manner in which we conduct our business and we may be unable to engage in favorable business activities or finance future operations or capital needs.
The Trading Credit Facility requires us to maintain certain financial ratios and to comply with various operational and other covenants. Upon the occurrence of an event of default under the Trading Credit Facility that was not cured or waived pursuant to the terms of the Trading Credit Facility, the Trading Credit Lenders could elect to declare all amounts outstanding under the Trading Credit Facility to be due and payable immediately. Further, Trading Credit Lenders holding 50% or more of the indebtedness under the Trading Credit Facility may require us to repay all outstanding indebtedness under the Trading Credit Facility at any time, even if we are in compliance with the financial and other covenants under the Trading Credit Facility. 
We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments, including the Trading Credit Facility, upon demand or acceleration, or at maturity, or that we would be able to refinance or restructure the payments under the Trading Credit Facility. The failure of A-Mark to renew or replace the Trading Credit Facility under such circumstances would reduce the financing available to us and could limit our ability to conduct our business, including the lending activity of our CFC subsidiary.  There can be no assurance that we could procure replacement financing on commercially acceptable terms on a timely basis, or at all. We have pledged a significant portion of our assets as collateral under the Trading Credit Facility, and if we were unable to repay the amounts outstanding thereunder, the administrative agent under the Trading Credit Facility could proceed against the collateral granted to secure such indebtedness.
We are subject to fluctuations in interest rates based on the variable interest terms of the Trading Credit Facility and we may not be able to pass along to our customers and borrowers some or any part of an increase in the interest that we are required to pay under the Trading Credit Facility. Amounts under the Trading Credit Facility bear interest based on one month LIBOR plus (i) 2.50% for revolving credit line loans and (ii) 4.50% for loans extended in excess of the then-available revolving credit line. The LIBOR was approximately 2.50% as of March 31, 2019.
We could suffer losses with our financing operations.
We engage in a variety of financing activities with our customers:
•
Receivables from our customers with whom we trade in precious metal products are effectively short-term, non-interest bearing extensions of credit that are, in certain cases, secured by the related products maintained in the Company’s possession or by a letter of credit issued on behalf of the customer. On average, these receivables are outstanding for periods of between 8 and 9 days.
•
The Company operates a financing business through CFC that makes secured loans at loan-to-value ratios—principal loan amount divided by the liquidation value, as conservatively estimated by management, of the collateral—of, in most cases, 50% to 85%. These loans are both variable and fixed interest rate loans, with some maturities on-demand and others from three to twelve months.

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•
We make advances to our customers on unrefined metals secured by materials received from the customer. These advances are limited to a portion of the materials received.
•
The Company makes unsecured, short-term, non-interest bearing advances to wholesale metals dealers and government mints.
•
The Company periodically extends short-term credit through the issuance of notes receivable to approved customers at interest rates determined on a customer-by-customer basis.
Our ability to minimize losses on the credit that we extend to our customers depends on a variety of factors, including:
•
our loan underwriting and other credit policies and controls designed to assure repayment, which may prove inadequate to prevent losses;
•
our ability to sell collateral upon customer defaults for amounts sufficient to offset credit losses, which can be affected by a number of factors outside of our control, including (i) changes in economic conditions, (ii) increases in market rates of interest and (iii) changes in the condition or value of the collateral; and
•
the reserves we establish for loan losses, which may prove inadequate.
CFC May in Certain Circumstances Be Required to Repurchase Loans that It Has Securitized.
CFC has entered into a securitization financing whereby it has transferred, and may continue from time to time to transfer, to its subsidiary AMCF loans secured by precious metal coins or bullion. AMCF has issued 4.98% Class A Notes due 2023 and 5.98% Class B Notes due 2023 which are secured by these loans and related assets. While the notes are not recourse to the Company or CFC, CFC is required to provide certain warranties concerning the loans and the security interest in the metals collateral securing the loans. In the event the warranties made with respect to any loan are breached and the breach materially and adversely affects the interests of the noteholders, CFC is required to either cure the breach or repurchase the loan within specified a timeframe. If CFC were to default on its repurchase obligations, this could materially adversely affect the business of CFC, and could adversely affect the Company’s future ability to access the credit markets.
CFC and the Company have exposure to the performance of AM Capital Funding.
Regulation RR of the SEC requires the sponsor of an asset-backed securitization transaction, or certain of its affiliates, to retain an economic interest in the transaction. In compliance with this rule, CFC retained the equity interest in AMCF and the Company currently holds $5.0 million of Class B Notes, which are subordinated to the Class A Notes. In addition, CFC and the Company may, from time to time, also contribute cash or sell precious metals to AMCF in exchange for subordinated, deferred payment obligations from AMCF. If the performance of AMCF were to suffer such that AMCF were unable to service its notes, CFC and the Company could lose part or all of their investments in AMCF.
Under the terms of the servicing arrangements for the precious metals loan securitization, CFC may be required to liquidate the collateral securing securitized loans, even if this would impair relationships with its customers.
CFC is the servicer for the loans transferred to AMCF in the securitization transaction. If, under certain circumstances, the equity levels of the obligors on particular loans falls below a specified level and those obligors fail to pay in additional equity, CFC is required to liquidate the metals collateral securing those loans within a specified time period. CFC does not have the flexibility to defer or refrain from the liquidation, even if CFC were to determine that it would be in its best interests to do so. This requirement could impair valuable relationships that the Company may otherwise have with its customers whose loans have been securitized.
Our business is dependent on a concentrated customer base.
One of A-Mark's key assets is its customer base. This customer base provides deep distribution of product and makes A-Mark a desirable trading partner for precious metals product manufacturers, including sovereign mints seeking to distribute precious metals coinage or large refiners seeking to sell large volumes of physical precious metals. Two customers represented 35.7% of A-Mark's revenues for the nine months ended March 31, 2019. Those same two customers represented 48.7% of A-Mark's revenues for the nine months ended March 31, 2018. If our relationship with these customers deteriorated, or if we were to lose these customers, our business would be materially adversely affected.

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The loss of a government purchaser/distributorship arrangement could materially adversely affect our business.
A-Mark’s business is heavily dependent on its purchaser/distributorship arrangements with various governmental mints. Our ability to offer numismatic coins and bars to our customers on a competitive basis is based on the ability to purchase products directly from a government source. The arrangements with the governmental mints may be discontinued by them at any time. The loss of an authorized purchaser/distributor relationship, including with the U.S. Mint could have a material adverse effect on our business.
The materials held by A-Mark are subject to loss, damage, theft or restriction on access.
A-Mark has significant quantities of high-value precious metals on site, at third-party depositories and in transit. There is a risk that part or all of the gold and other precious metals held by A-Mark, whether on its own behalf or on behalf of its customers, could be lost, damaged or stolen. In addition, access to A-Mark’s precious metals could be restricted by natural events (such as an earthquake) or human actions (such as a terrorist attack). Although we maintain insurance on terms and conditions that we consider appropriate, we may not have adequate sources of recovery if our precious metals inventory is lost, damaged, stolen or destroyed, and recovery may be limited. Among other things, our insurance policies exclude coverage in the event of loss as a result of terrorist attacks or civil unrest.
In addition, with the establishment of our Logistics facility and the transfer of our wholesale storage operations from third party depositories to that facility, we are assuming greater potential liability for any loss suffered in connection with the stored inventory. Among other things, our insurance, rather than the third-party depository’s, is now the primary risk policy. While we believe we have adequate insurance coverage covering these operations, in the event of any loss in excess of our coverage, we may be held liable for that excess.
Our business is subject to the risk of fraud and counterfeiting.
The precious metals (particularly bullion) business is exposed to the risk of loss as a result of “materials fraud” in its various forms. We seek to minimize our exposure to this type of fraud through a number of means, including third-party authentication and verification, reliance on our internal experts and the establishment of procedures designed to detect fraud. However, there can be no assurance that we will be successful in preventing or identifying this type of fraud, or in obtaining redress in the event such fraud is detected.
Our business is influenced by political conditions and world events.
The precious metals business is especially subject to global political conditions and world events. Precious metals are viewed by some as a secure financial investment in times of political upheaval or unrest, particularly in developing economies, which may drive up pricing. The volatility of the commodity prices for precious metals is also likely to increase in politically uncertain times. Conversely, during periods of relative international calm precious metal volatility is likely to decrease, along with demand, and the prices of precious metals may retreat. Because our business is dependent on the volatility and pricing of precious metals, we are likely to be influenced by world events more than businesses in other economic sectors.
We have significant operations outside the United States.
We derive about 5% to 15% of our revenues from business outside the United States, including from customers in developing countries. Business operations outside the U.S. are subject to political, economic and other risks inherent in operating in foreign countries. These include risks of general applicability, such as the need to comply with multiple regulatory regimes; trade protection measures and import or export licensing requirements; and fluctuations in equity, revenues and profits due to changes in foreign currency exchange rates. Currently, we do not conduct substantial business with customers in developing countries. However, if our business in these areas of the world were to increase, we would also face risks that are particular to developing countries, including the difficulty of enforcing agreements, collecting receivables, protecting inventory and other assets through foreign legal systems, limitations on the repatriation of earnings, currency devaluation and manipulation of exchange rates, and high levels of inflation.
We try to manage these risks by monitoring current and anticipated political, economic, legal and regulatory developments in the countries outside the United States in which we operate or have customers and adjusting operations as appropriate, but there can be no assurance that the measures we adopt will be successful in protecting the Company’s business interests.

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We are dependent on our key management personnel and our trading experts.
Our performance is dependent on our senior management and certain other key employees. We have employment agreements with Greg Roberts, our CEO, and Thor Gjerdrum, our President, which expire on June 30, 2020 and June 30, 2019, respectively. These and other employees have expertise in the trading markets, have industry-wide reputations, and perform critical functions for our business. We cannot offer assurance that we will be able to negotiate acceptable terms for the renewal of the employment agreements or otherwise retain our key employees. Also, there is significant competition for skilled precious metals traders and other industry professionals. The loss of our current key officers and employees, without the ability to replace them, would have a materially adverse effect on our business.
We are focused on growing our business, but there is no assurance that we will be successful.
We expect to grow both organically and through opportunistic acquisitions. We have devoted considerable time, resources and efforts over the past few years to our growth strategy. We may not be successful in implementing our growth initiatives, which could adversely affect our business.
Liquidity constraints may limit our ability to grow our business.
To accomplish our growth strategy, we will require adequate sources of liquidity to fund both our existing business and our expansion activity. Currently, our main sources of liquidity are the cash that we generate from operations, our borrowing availability under the Trading Credit Facility and the proceeds from our securitization transaction through AMCF. There can be no assurance that these sources will be adequate to support the growth that we are hoping to achieve or that additional sources of financing for this purpose, in the form of additional debt or equity financing, will be available to us, on satisfactory terms or at all. Also, the Trading Credit Facility contains, and any future debt financing is likely to contain, various financial and other restrictive covenants. The need to comply with these covenants may limit our ability to implement our growth initiatives.
We expect to grow in part through acquisitions, but an acquisition strategy entails risks.
We expect to grow in part through acquisitions. We will consider potential acquisitions of varying sizes and may, on a selective basis, pursue acquisitions or consolidation opportunities involving other public companies or privately held companies. However, it is possible that we will not realize the expected benefits from our acquisitions or that our existing operations will be adversely affected as a result of acquisitions. Acquisitions entail certain risks, including: unrecorded liabilities of acquired companies that we fail to discover during our due diligence investigations; difficulty in assimilating the operations and personnel of the acquired company within our existing operations or in maintaining uniform standards; loss of key employees of the acquired company; and strains on management and other personnel time and resources both to research and integrate acquisitions.
We expect to pay for future acquisitions using cash, capital stock, notes and/or assumption of indebtedness. To the extent that our existing sources of cash are not sufficient to fund future acquisitions, we will require additional debt or equity financing and, consequently, our indebtedness may increase or shareholders may be diluted as we implement our growth strategy.
Our Logistics depository is subject to authorization.
Our Trading Credit Lenders have approved our Logistics facility as an authorized depository. If that approval were to be withdrawn for any reason, we would no longer be able to keep inventory at that location, which would substantially limit our ability to conduct business from that facility.
We are subject to laws and regulations.
We are subject to various laws, litigation, regulatory matters and ethical standards, and our failure to comply with or adequately address developments as they arise could adversely affect our reputation and operations. Our policies, procedures and practices and the technology we implement are designed to comply with federal, state, local and foreign laws, rules and regulations, including those imposed by the SEC and other regulatory agencies, the marketplace, the banking industry and foreign countries, as well as responsible business, social and environmental practices, all of which may change from time to time. Significant legislative changes, including those that relate to employment matters and health care reform, could impact our relationship with our workforce, which could increase our expenses and adversely affect our operations. In addition, if we fail to comply with applicable laws and regulations or implement responsible business, social and environmental practices, we could be subject to damage to our reputation, class action lawsuits, legal and settlement costs, civil and criminal liability, increased cost of regulatory compliance, restatements of our financial statements, disruption of our business and loss of customers. Any required changes to our employment practices could result in the loss of employees, reduced sales, increased employment costs, low employee morale and harm to our business and results of operations. In addition, political and economic factors could lead to unfavorable changes in federal and state tax laws, which may increase our tax liabilities. An increase in our tax liabilities could adversely affect our results of operations. We are also regularly involved in various litigation matters that arise in the ordinary course of business. Litigation or regulatory developments could adversely affect our business and financial condition.

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There are various federal, state, local and foreign laws, ordinances and regulations that affect our trading business. For example, we are required to comply with the Foreign Corrupt Practices Act and a variety of anti-money laundering and know-your-customer rules in response to the USA Patriot Act.
The SEC has promulgated rules mandated by the Dodd-Frank Act regarding disclosure, on an annual basis, of the use of tin, tantalum, tungsten and gold, known as conflict minerals, in products manufactured by public companies. These rules require due diligence to determine whether such minerals originated from the Democratic Republic of Congo (the "DRC") or an adjoining country and whether such minerals helped finance the armed conflict in the DRC.
The Company has concluded that it is not currently subject to the conflict minerals rules because it is not a manufacturer of conflict minerals under the definitions set forth in the rules. Depending on developments in the Company’s business, it could become subject to the rules at some point in the future. In that event, there will be costs associated with complying with these disclosure requirements, including costs to determine the origin of gold used in our products. In addition, the implementation of these rules could adversely affect the sourcing, supply and pricing of gold used in our products. Also, we may face disqualification as a supplier for customers and reputational challenges if the due diligence procedures we implement do not enable us to verify the origins for the gold used in our products or to determine that the gold is conflict free.
CFC operates under a California Finance Lenders License issued by the California Department of Corporations. CFC is required to submit a finance lender law annual report to the state which summarizes certain loan portfolio and financial information regarding CFC. The Department of Corporations may audit the books and records of CFC to determine whether CFC is in compliance with the terms of its lending license.
There can be no assurance that the regulation of our trading and lending businesses will not increase or that compliance with the applicable regulations will not become more costly or require us to modify our business practices.
The Company faces uncertainty associated with the Tax Cuts and Jobs Act.
The Company has adopted the applicable provisions of the Tax Cuts and Jobs Act which have had a significant impact to date.  In particular, the Company is now experiencing a substantially lower federal corporate tax rate and has predominately incurred all required adjustments related to its deferred tax assets. The U.S. Department of the Treasury, the Internal Revenue Service and other standard-setting bodies will continue to issue proposed regulations and interpretive guidance on how the provisions of the Tax Cuts and Jobs Act will be applied or otherwise administered, and final regulations or interpretive guidance may be issued in the future that are different from our current interpretation and application thereof.

We operate in a highly competitive industry.
The business of buying and selling precious metals is global and highly competitive. The Company competes with precious metals trading firms and banks throughout North America, Europe and elsewhere in the world, some of whom have greater financial and other resources, and greater name recognition, than the Company. We believe that, as a full service firm devoted exclusively to precious metals trading, we offer pricing, product availability, execution, financing alternatives and storage options that are attractive to our customers and allow us to compete effectively. We also believe that our purchaser/distributorship arrangements with various governmental mints give us a competitive advantage in our coin distribution business. However, given the global reach of the precious metals trading business, the absence of intellectual property protections and the availability of numerous, evolving platforms for trading in precious metals, we cannot assure you that A-Mark will be able to continue to compete successfully or that future developments in the industry will not create additional competitive challenges.
We rely extensively on computer systems to execute trades and process transactions, and we could suffer substantial damages if the operation of these systems were interrupted.
We rely on our computer and communications hardware and software systems to execute a large volume of trading transactions each year. It is therefore critical that we maintain uninterrupted operation of these systems, and we have invested considerable resources to protect our systems from physical compromise and security breaches and to maintain backup and redundancy. Nevertheless, our systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, including breaches of our transaction processing or other systems, catastrophic events such as fires, tornadoes and hurricanes, and usage errors by our employees. If our systems are breached, damaged or cease to function properly, we may have to make a significant investment to fix or replace them, we may suffer interruptions in our ability to provide quotations or trading services in the interim, and we may face costly litigation.
If our customer data were breached, we could suffer damages and loss of reputation.
By the nature of our business, we maintain significant amounts of customer data on our systems. Moreover, certain third party providers have access to confidential data concerning the Company in the ordinary course of their business relationships

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with the Company. In recent years, various companies, including companies that are significantly larger than us, have reported breaches of their computer systems that have resulted in the compromise of customer data. Any compromise or breach of customer or company data held or maintained by either the Company or our third party providers could significantly damage our reputation and result in costs, lost trades, fines and lawsuits. The regulatory environment related to information security and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs. There is no guarantee that the procedures that we have implemented to protect against unauthorized access to secured data are adequate to safeguard against all data security breaches.
Compliance with the new General Data Protection Regulation in the EU could increase our costs and expose the Company to possible sanctions for violation.
In 2016, the EU adopted a comprehensive overhaul of its data protection regime from the current national legislative approach to a single European Economic Area Privacy Regulation, the General Data Protection Regulation (“GDPR”), which went into effect in May 2018. The EU data protection regime expands the scope of the EU data protection law to all foreign companies processing personal data of EU residents, imposes a strict data protection compliance regime with severe penalties of up to the greater of 4% of worldwide turnover or €20 million, and includes new rights such as the “portability” of personal data. Although the GDPR will apply across the EU without a need for local implementing legislation, EU member states have the ability to interpret the GDPR opening clauses, which permit region-specific data protection legislation and have the potential to create inconsistencies on a country-by-country basis.
The Company has a trading office in Vienna, Austria and also markets to customers in the EU. Although our European operations are currently modest compared to our business in the United States, our European business could grow over time. We have evaluated the new regulation and its requirements, and believe we are currently in compliance with the GDPR in all material respects. Going forward, however, the expansion of our European operations could require us to change our business practices and may increase the costs and complexity of compliance. Also, a violation by the Company of the new regulation could expose us to penalties and sanctions under the regulation.
Our implementation of a new enterprise resource planning (“ERP”) system may adversely affect our business and results of operations or the effectiveness of internal controls over financial reporting.
We are currently implementing a new ERP system. ERP implementations are complex and time-consuming projects that involve substantial expenditures on system software and implementation activities over a significant period of time. If we do not effectively implement the ERP system or if the system does not operate as intended, it could adversely affect our financial reporting systems and our ability to produce financial reports, the effectiveness of internal controls over financial reporting, and our business, financial condition, results of operations and cash flows.
We have in the past engaged, and continue to engage, in transactions with Stack’s Bowers, an affiliate of the Company, which could be perceived as not being made at arms-length.
Stack’s-Bowers Numismatics LLC ("Stack's Bowers Galleries"), which is primarily engaged in the business of auctions of high-value and rare coins and in coin retailing, is a wholly-owned subsidiary of SGI, our former parent. We have engaged in the past, and continue to engage, in transactions with Stack’s Bowers, some of which are presently on-going. These transactions include secured lending transactions in which Stack’s Bowers is the borrower, and other transactions involving the purchase and sale of rare coins. The Company and SGI have two officers and a director in common. In addition, a majority of the board of directors of the Company has retained an ownership interest in SGI that in the aggregate represents a controlling interest in SGI. All transactions between the Company and Stack’s Bowers are approved by our Audit Committee, and we believe that all such transactions are on terms no less favorable to the Company than would be obtained from an unaffiliated third party. Nonetheless, these transactions could be perceived as being conflicted.
Risks Relating to Commodities
A-Mark’s business is heavily influenced by volatility in commodities prices.
A primary driver of A-Mark’s profitability is volatility in commodities prices, which leads to wider bid and ask spreads. Among the factors that can impact the price of precious metals are supply and demand of precious metals; political, economic, and global financial events; movement of the U.S. dollar versus other currencies; and the activity of large speculators such as hedge funds. If commodity prices were to stagnate, there would likely be a reduction in trading activity, resulting in less demand for the services A-Mark provides, which could materially adversely affect our business, liquidity and results of operations.
This volatility may drive fluctuation of our revenues, as a consequence of which our results for any one period may not be indicative of the results to be expected for any other period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Our business is exposed to commodity price risks, and our hedging activity to protect our inventory is subject to risks of default by our counterparties.
A-Mark’s precious metals inventories are subject to market value changes created by change in the underlying commodity price, as well as supply and demand of the individual products the Company trades. In addition, open sale and purchase commitments are subject to changes in value between the date the purchase or sale is fixed (the trade date) and the date metal is delivered or received (the settlement date). A-Mark seeks to minimize the effect of price changes of the underlying commodity through the use of financial derivative instruments, such as forward and futures contracts. A-Mark’s policy is to remain substantially hedged as to its inventory position and its individual sale and purchase commitments. A-Mark’s management monitors its hedged exposure daily. However, there can be no assurance that these hedging activities will be adequate to protect the Company against commodity price risks associated with A-Mark’s business activities.
Furthermore, even if we are fully hedged as to any given position, there is the risk of default by our counterparties to the hedge. Any such default could have a material adverse effect on our financial position and results of operations.
Increased commodity pricing could limit the inventory that we are able to carry.
We maintain a large and varied inventory of precious metal products, including bullion and coins, in order to support our trading activities and provide our customers with superior service. The amount of inventory that we are able to carry is constrained by the borrowing limitations and working capital covenants under the Trading Credit Facility. If commodity prices were to rise substantially, and we were unable to modify the terms of the Trading Credit Facility to compensate for the increase, the quantity of product that we could finance, and hence maintain in our inventory, would fall. This would likely have a material adverse effect on our operations.
We rely on the efficient functioning of commodity exchanges around the world, and disruptions on these exchanges could adversely affect our business.
The Company buys and sells precious metals contracts on commodity exchanges around the world, both in support of its customer operations and to hedge its inventory and transactional exposure against fluctuations in commodity prices. The Company’s ability to engage in these activities would be compromised if the exchanges on which the Company trades or any of their clearinghouses were to discontinue operations or to experience disruptions in trading, due to computer problems, unsettled markets or other factors. The Company may also experience risk of loss if futures commission merchants or commodity brokers with whom the Company deals were to become insolvent or bankrupt.
Risks Relating to Our Common Stock
Failure to achieve and maintain effective internal controls in accordance with Section 404 of Sarbanes-Oxley could have a material adverse effect on our business.
As a public company, we are required to document and test our internal control over financial reporting in order to satisfy the requirements of Section 404 of Sarbanes-Oxley, which requires annual management assessments of the effectiveness of our internal control over financial reporting.
We are required to implement standalone policies and procedures to comply with the requirements of Section 404. During the course of our testing of our internal controls and procedures, we may identify deficiencies which we may not be able to remediate in time to comply with Section 404. Testing and maintaining internal controls can divert our management’s attention from other matters that are also important to the operation of our business. We may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. If we are unable to conclude that we have effective internal controls over financial reporting, then investors could lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common stock. In addition, if we do not maintain effective internal controls, we may not be able to accurately report our financial information on a timely basis, which could harm the trading price of our common stock, impair our ability to raise additional capital, or jeopardize our continued listing on the NASDAQ Global Select Market or any other stock exchange on which common stock may be listed.
We are not currently paying dividends and may not pay dividends in the future.
Effective March 2, 2015, the Board of Directors approved a cash dividend policy calling for the payment of a quarterly cash dividend of $0.05 per common share. The policy was amended on February 2, 2016 to provide for a quarterly cash dividend of $0.07 per common share, and then on January 26, 2017 to provide for a quarterly cash dividend of $0.08 per common share. 
The declaration of cash dividends is subject to the determination each quarter by the Board of Directors, based on its assessment of a number of factors, including the Company’s financial performance, available cash resources, cash requirements, bank covenants, and alternative uses of cash that the Board of Directors may conclude would represent an opportunity to generate

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a greater return on investment for the Company. Based on those assessments, and in order to increase its financial flexibility and strengthen its balance sheet, the Company has not made a dividend payment since January 2018.

Going forward, there can be no assurance that the Company will resume paying dividends on a regular basis.  If the Board of Directors were to determine not to pay dividends in the future, shareholders would not receive any further return on an investment in our capital stock in the form of dividends, and may obtain an economic benefit from the common stock only after an increase in its trading price and only by selling the common stock.
Provisions in our Certificate of Incorporation and Bylaws and of Delaware law may prevent or delay an acquisition of the Company, which could decrease the trading price of our common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law contain certain anti-takeover provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company without negotiating with our board of directors. Such provisions could limit the price that certain investors might be willing to pay in the future for the Company’s securities. Certain of such provisions allow the Company to issue preferred stock with rights senior to those of the common stock, impose various procedural and other requirements which could make it more difficult for Shareholders to effect certain corporate actions and set forth rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings.
We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal. However, these provisions apply even if an acquisition offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of our Company and our Shareholders. Accordingly, in the event that our board determines that a potential business combination transaction is not in the best interests of our Company and our Shareholders, but certain shareholders believe that such a transaction would be beneficial to the Company and its Shareholders, such Shareholders may elect to sell their shares in the Company and the trading price of our common stock could decrease.
Your percentage ownership in the Company could be diluted in the future.
Your percentage ownership in A-Mark potentially could be diluted in the future because of additional equity awards that we expect will be granted to our directors, officers and employees. We have established an equity incentive plan that provides for the grant of common stock-based equity awards to our directors, officers and other employees. In addition, we may issue equity in order to raise capital or in connection with future acquisitions and strategic investments, which could dilute your percentage ownership.
Our board and management beneficially own a sizeable percentage of our common stock and therefore have the ability to exert substantial influence as shareholders.
Members of our board and management beneficially own approximately 40% of our outstanding common stock. Acting together in their capacity as shareholders, the board members and management could exert substantial influence over matters on which a shareholder vote is required, such as the approval of business combination transactions. Also because of the size of their beneficial ownership, the board members and management may be in a position effectively to determine the outcome of the election of directors and the vote on shareholder proposals. The concentration of beneficial ownership in the hands of our board and management may therefore limit the ability of our public shareholders to influence the affairs of the Company.
If the Company's spinoff from SGI is determined to be taxable for U.S. federal income tax purposes, our shareholders could incur significant U.S. federal income tax liabilities.
In connection with the spinoff, SGI received the written opinion of Kramer Levin Naftalis & Frankel LLP ("Kramer Levin") to the effect that the spinoff qualified as a tax-free transaction under Section 355 of the Internal Revenue Code, and that for U.S. federal income tax purposes (i) no gain or loss was recognized by SGI upon the distribution of our common stock in the spinoff, and (ii) no gain or loss was recognized by, and no amount was included in the income of, holders of SGI common stock upon the receipt of shares of our common stock in the spinoff. The opinion of tax counsel is not binding on the Internal Revenue Service or the courts, and there is no assurance that the IRS or a court will not take a contrary position. In addition, the opinion of Kramer Levin relied on certain representations and covenants delivered by SGI and us. If, notwithstanding the conclusions included in the opinion, it is ultimately determined that the distribution does not qualify as tax-free for U.S. federal income tax purposes, each SGI shareholder that is subject to U.S. federal income tax and that received shares of our common stock in the distribution could be treated as receiving a taxable distribution in an amount equal to the fair market value of such shares. In addition, if the distribution were not to qualify as tax-free for U.S. federal income tax purposes, then SGI would recognize a gain in an amount equal to the excess of the fair market value of our common stock distributed to SGI shareholders on the date of the distribution over SGI’s tax basis in such shares. Also, we could have an indemnification obligation to SGI related to its tax liability.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Share Repurchase Program
In April 2018, the Company's Board of Directors approved a share repurchase program which authorized the Company to purchase up to 500,000 shares of its common stock from time to time, either in the open market or in block purchase transactions. The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors.  As of March 31, 2019, no shares had been repurchased under the program.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Regulation S-K
Exhibit Table
Item No.
 
Description of Exhibit
31
.1
 *
 
31
.2
 *
 
32
.1
 *
 
32
.2
 *
 
101
.INS
 *
 
XBRL Instance Document.
101
.SCH
 *
 
XBRL Taxonomy Extension Calculation Schema Document.
101
.CAL
 *
 
XBRL Taxonomy Extension Calculation Linkbase Document.
101
.DEF
 *
 
XBRL Taxonomy Extension Definition Linkbase Document.
101
.LAB
 *
 
XBRL Taxonomy Extension Label Linkbase Document.
101
.PRE
 *
 
XBRL Taxonomy Extension Presentation Linkbase Document.
_________________________________
 
*
 
Filed herewith
 



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SIGNATURES
 
 
 
 
 
 
                Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
 
 
 
A-MARK PRECIOUS METALS, INC.
 
Date:
May 10, 2019
By:  
/s/ Gregory N. Roberts  
 
 
 
 
Name:  
Gregory N. Roberts 
 
 
 
 
Title:  
Chief Executive Officer 
 
 
 
 
 
(Principal Executive Officer)
 
 
 
 
 
 
 
 
 
A-MARK PRECIOUS METALS, INC.
 
Date:
May 10, 2019
By:  
/s/ Cary Dickson
 
 
 
 
Name:  
Cary Dickson
 
 
 
 
Title:  
Chief Financial Officer
 
 
 
 
 
(Principal Financial Officer)
 
    
    
 
 
 
 
 
                Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 
 
 
 
 
Signatures
 
Title(s)
 
Date
 
 
 
 
 
/s/ Gregory N. Roberts
 
Chief Executive Officer and Director
 
May 10, 2019
Gregory N. Roberts
 
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/ Cary Dickson
 
Chief Financial Officer
 
May 10, 2019
Cary Dickson
 
(Principal Financial Officer)
 
 
 
 
 
 
 
 
 
 
 
 

    


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