A-Mark Precious Metals, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

Stockholders' Equity

12 Months Ended

Jun. 30, 2016

Equity [Abstract]

Stockholders' Equity

STOCKHOLDERS’ EQUITY

Payment of Dividends

In fiscal 2015, the Board of Directors of the Company initiated a cash dividend policy that calls for the payment of quarterly dividends. The table below summarizes the quarterly dividends declared pursuant to this policy:

Dividend
Declaration Date

Record Date

(at close of Business)

Type of Dividend

Basis of Payment

Payment Date

February 6, 2015

March 12, 2015

Cash

0.05

per common share

March 20, 2015

May 1, 2015

May 14, 2015

Cash

0.05

per common share

May 25, 2015

September 11, 2015

September 24, 2015

Cash

0.05

per common share

October 5, 2015

October 30, 2015

November 13, 2015

Cash

0.05

per common share

November 25, 2015

February 2, 2016

February 15, 2016

Cash

0.07

per common share

February 29, 2016

April 29, 2016

May 13, 2016

Cash

0.07

per common share

May 27, 2016

On September 7, 2016, the Board of Directors of the Company declared a quarterly cash dividend of $0.07 per common share to stockholders of record at the close of business on September 19, 2016, which is scheduled to be paid on or about October 7, 2016.

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 ("2014 Plan"). Under the 2014 Plan, the Company may grant options and other equity awards as a means of attracting and retaining officers, employees, non-employee directors and consultants, to provide incentives to such persons, and to align the interests of such persons with the interests of stockholders by providing compensation based on the value of the Company's stock. Awards under the 2014 Plan may be granted in the form of incentive or non-qualified stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units, 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 may be set at the discretion of the Compensation Committee, but 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 June 30, 2016, 273,600 shares were available for grant under the 2014 Plan.

Equity Awards Assumed in Connection with the Spinoff

Prior to the Distribution Date (March 14, 2014), the SGI Board of Directors and the Compensation Committee of the SGI Board of Directors, and the Board of Directors of A-Mark, had taken action to provide that the holders of share-based awards, outstanding as of March 14, 2014, denominated in and settleable by delivery of shares of SGI common stock, would have their SGI share-based awards canceled upon the effectiveness of the Distribution, and in place of the canceled awards would become entitled to receive share-based awards denominated in and settleable by delivery of shares of the Company's common stock. As a result, the Company granted, on March 19, 2014 (the date as of which the exchange ratio became determinable based on the average closing market price of A-Mark common stock), 130,646 RSUs, 8,990 SARs and options to purchase 249,846 shares of common stock. These awards are deemed to be granted under the original plans and arrangements of SGI that have been assumed by the Company, not under the 2014 Plan. The Company does not recognize compensation cost for financial reporting purposes relating to the awards replaced by A-Mark following the Distribution which are held by persons who remained employees of SGI. As of June 30, 2016, there are no remaining outstanding equity awards that were issued to SGI employees; all remaining outstanding awards issued in connection with the spinoff relate to A-Mark employees or directors.

Valuation and Significant Assumptions of Equity Awards Issued After Spinoff

The Company uses Black-Scholes option pricing model, which has 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. The Company also records share-based compensation expense net of expected forfeitures. Valuation models and significant assumptions for share-based compensation are as follows:


•	Determining Fair Values. For all equity grants granted, the primary factor in the valuation of equity awards was the fair value of the underlying common stock at the time of grant.

•

Expected Volatility. The Company has limited data regarding company-specific historical or implied volatility of its share price. Consequently, the Company estimates its volatility based on the average of the historical volatilities of peer group companies from publicly available data for sequential periods approximately equal to the expected terms of its option grants. Management considers factors such as stage of life cycle, competitors, size, market capitalization and financial leverage in the selection of similar entities.

•

Expected Term. The expected term represents the period of time in which the options granted are expected to be outstanding. The Company estimates the expected term of options granted based on the midpoint between the vesting date and the end of the contractual term under the “short-cut” or simplified method permitted by the SEC implementation guidance for “plain vanilla” options. The Company will continue to use the short-cut method, as permitted, until we have developed sufficient historical data for employee exercise and post-vesting employment termination behavior after our common stock has been publicly traded for a reasonable period of time.

•

Forfeitures. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual experience differs from those estimates. For the years ended June 30, 2016 and 2015, the Company estimated an average overall forfeiture rate of 0%. Share-based compensation is recorded net of expected forfeitures. The Company will periodically assess the forfeiture rate and the amount of expense recognized based on estimated historical forfeitures as compared to actual forfeitures. Changes in estimates are recorded in the period they are identified.


•	Risk-Free Rate. The risk-free interest rate is selected based upon the implied yields in effect at the time of the option grant on U.S. Treasury zero-coupon issues with a term approximately equal to the expected life of the option being valued.


•	Dividends. The Company anticipates on paying quarterly cash dividends $0.07 per outstanding shares of common stock for the foreseeable future.The Company estimates dividend yield based upon expectations of future dividends as of the grant date.

The weighted-averages for key assumptions used in determining the fair value of options granted during the years ended June 30, 2016 and 2015 follows:



Years Ended June 30,	2016		2015
Average volatility	41.3	%	33.4	%
Risk-free interest rate	1.5	%	1.5	%
Weighted-average expected life in years	6.27		6.43
Dividend yield rate	0.4	%	0.5	%

There are no awards with performance conditions nor awards with market conditions.

Stock Options

During the years ended June 30, 2016 and 2015, the Company incurred $0.4 million and $0.2 million of compensation expense related to stock options, respectively. As of June 30, 2016, there was total remaining compensation expense of $2.3 million related to employee stock options, which will be recorded over a weighted average period of approximately 3.2 years.

The following table summarizes the stock option activity for the years ended June 30, 2016 and 2015.



		Options		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value (in thousands)		Weighted Average Grant Date Fair Value Per Award⁽¹⁾
Outstanding at June 30, 2014		230,787		$	10.00	$	407	$	5.98
Granted		3,000		$	10.08
Cancellations, expirations and forfeitures		(660	)	$	48.02
Outstanding at June 30, 2015		233,127		$	9.89	$	283	$	5.96
Granted		349,400		22.67
Cancellations, expirations and forfeitures		(1,000	)	20.48
Outstanding at June 30, 2016		581,527		17.55		$	1,466	$	6.32

Exercisable at June 30, 2016		183,184		10.30		$	1,078	$	5.91
_________________________________
(1)	For awards held by A-Mark employees, the fair value of the awards assumed in Distribution was based on the awards' fair value at grant date, which were determined by SGI prior to the Distribution. Since the Company does not recognize compensation costs for the awards assumed in the Distribution held by employees of SGI, the calculation of the weighted average fair value per share price at grant date was based on the awards' fair value at grant date that were awarded to employees of A-Mark. As of June 30, 2016 there were no stock options outstanding that were issued to employees of SGI.

Following is a summary of the status of stock options outstanding at June 30, 2016:



				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		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
$	—	$	10.00	134,239	6.35	$	8.39	86,296	6.37	$	8.41
10.01		15.00		98,888	6.28	11.94		96,888	6.23	11.98
15.01		25.00		248,400	9.68	21.54		—	0.00	—
25.01		60.00		100,000	9.65	25.50		—	0.00	—
				581,527	8.33	17.55		183,184	6.30	10.30

Restricted Stock Units

During the years ended June 30, 2016 and 2015, the Company incurred $61,360 and $99,493 of compensation expense related to RSUs, respectively. The following table summarizes the RSU activity for the years ended June 30, 2016 and 2015:



	Shares		Weighted Average Share Price at Grant Date⁽¹⁾
Outstanding at June 30, 2014	106,674		$	2.72
Shares released	(10,806	)	$	4.31
Shares surrendered to cover employee minimum withholding taxes ⁽²⁾	(9,570	)	$	4.31
Outstanding at June 30, 2015	86,298		$	2.34
Shares released	(47,901	)	$	2.34
Shares surrendered to cover employee minimum withholding taxes ⁽³⁾	(38,397	)	$	2.34
Outstanding at June 30, 2016	—		$	—



_________________________________
(1)	For awards held by A-Mark employees, the fair value of the awards assumed in Distribution was based on the awards' fair value at grant date, which were determined by SGI prior to the Distribution. Since, the Company does not recognize compensation costs for the awards assumed in the Distribution held by employees of SGI, the calculation of the weighted average share price at grant date was based on the awards' fair value at grant date that were awarded to employees of A-Mark.
(2)	The value of the shared surrendered totaled	$	100,198	.
(3)	The value of the shared surrendered totaled	$	680,936	.

No tax benefit was recognized in the consolidated statements of income related to share-based compensation for the years ended June 30, 2016 and 2015. No share-based compensation was capitalized for the years ended June 30, 2016 and 2015.

Stock Appreciation Rights

The Company, from time to time, may grant SARs to certain key employees and executive officers. The number of shares to be received under these awards ultimately depends on the appreciation in the Company’s common stock over a specified period of time, generally 3.0 years. At the end of the stated appreciation period, the number of shares of common stock issued will be equal in value to the appreciation in the shares of the Company’s common stock, as measured from the stock's closing price on the date of grant to the average price in the last month of the third year of vesting. As of June 30, 2016 and June 30, 2015, the Company had zero and 8,990 SARs issued and outstanding, respectively. The Company did not recognize any compensation expense related to these awards during the years ended June 30, 2016 and 2015.

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.