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

Annual report pursuant to Section 13 and 15(d)

Related Party Transactions

Related Party Transactions

12 Months Ended

Jun. 30, 2020

13. RELATED PARTY TRANSACTIONS

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

Stack’s Bowers Numismatics LLC. ("Stack's Bowers"). Stack's Bowers is a wholly-owned subsidiary of Spectrum Group International, Inc. ("SGI"). In March 2014, SGI distributed all of the shares of common stock of A-Mark to its stockholders, effecting a spinoff of A-Mark from SGI. As a result of this distribution the Company became a publicly traded company independent from SGI. Also, SGI and the Company have a common chief executive officer.

SilverTowne, L.P. SilverTowne L.P. is a non-controlling owner of AMST (i.e., the Company's minting operations).

Equity method investees. 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: (i) 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; (ii) a product fulfillment services and storage agreement; and (iii) the right to appoint a director to the entity's board of directors (which has been exercised in each case).

Goldline Lenders. In connection with the acquisition of Goldline, the Company entered into a privately placed credit facility with various lenders, which included some members of the Company's board of directors.

Our related party transactions include (i) sales and purchases of precious metals (ii) financing activities (iii) repurchase arrangements, and (iv) hedging transactions.

Below is a summary of our related party transactions. Reported transactions from the comparable prior period have been updated, as needed, to include the balances and activity according to our current list of related parties.

Balances with Related Parties

Receivables and Payables, Net

As of June 30, 2020 and June 30, 2019, the Company had related party receivables and payables balances as set forth below:

in thousands
	June 30, 2020						June 30, 2019
	Receivables			Payables			Receivables		Payables
Stack's Bowers Galleries	$	7,981	⁽¹⁾	$	—		$	17,630	$	—
Equity method investees		1,828	⁽²⁾		3,421	⁽³⁾		4,978		163
SilverTowne		77	⁽²⁾		—			241		—
	$	9,886		$	3,421		$	22,849	$	163

(1)	Balance principally includes two secured lines of credit with a balance of $8.0 million and $0.7 million (shown as a component of secured loans receivable); offset by $0.7 million of trade payables. See "Secured Lines of Credit", below.

(2)	Balance primarily represents trade receivables, net (shown as a component of receivables).

(3)	Balance primarily represents trade payables, net (shown as a component of accounts payable and other current liabilities).

Long-term Investments

As of June 30, 2020 and June 30, 2019, the aggregate carrying balance of the equity method investments was $16.8 million and $11.9 million, respectively (see Note 9).

Secured Lines of Credit

On September 19, 2017, CFC entered into a loan agreement with Stack's Bowers 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 June 30, 2020 and June 30, 2019, the outstanding principal balance of this loan was $0.7 million and $6.4 million, respectively.

On March 1, 2018, CFC entered into a loan agreement with Stack's Bowers 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 on the ultimate sale of the products. As of June 30, 2020 and June 30, 2019, the outstanding principal balance of this loan was $8.0 million and $7.5 million, respectively.

Long Term Debt Obligation

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 Related Parties

Sales and Purchases

During the years ended June 30, 2020 and 2019, the Company made sales and purchases to various companies, which have been deemed to be related parties, as follows:

in thousands
	Years Ended
	June 30, 2020				June 30, 2019
	Sales		Purchases		Sales		Purchases
Stack's Bowers Galleries	$	53,783	$	47,765	$	30,418	$	36,946
Equity method investees		828,765		30,989		508,552		16,679
SilverTowne L.P.		8,061		748		12,914		1,611
	$	890,609	$	79,502	$	551,884	$	55,236

Interest Income

During the years ended June 30, 2020 and 2019, the Company earned interest income related to loans made to Stack's Bowers and to financing arrangements (including repurchase agreements) with affiliated companies, as set forth below:

in thousands
	Years Ended
	June 30, 2020		June 30, 2019
Interest income from secured loans receivables	$	917	$	1,058
Interest income from finance products and repurchase arrangements		6,341		6,275
	$	7,258	$	7,333

Interest Expense

During the years ended June 30, 2020 and 2019, the Company incurred interest expense (including debt amortization costs) related to the debt payable to the Goldline Lenders that totaled $0 and $0.3 million, respectively.

Other Income

During the years ended June 30, 2020 and 2019, the Company recorded its proportional share of its equity method investee's net income as other income that totaled $4.9 million and $1.2 million, respectively.

During the years ended June 30, 2020 and 2019, the Company earned royalty income related to one of CFC's secured lending agreements with Stack's Bowers that totaled $0.6 million and $0.1 million, respectively.

During the years ended June 30, 2020 and 2019 the Company recorded an earn-out revaluation adjustment of $0 and $588,000, respectively, which was related to a contingent payable due to SilverTowne L.P.

Other Expense

During the year ended June 30, 2019, the Company incurred $0.2 million of fees related to the payoff of the Goldline Credit Facility that was payable to the Goldline Lenders.