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

Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

Related Party Transactions

3 Months Ended

Sep. 30, 2018

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"), 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 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 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 September 30, 2018 and June 30, 2018, the Company had related party receivables and payables balances as set forth below:



in thousands
	September 30, 2018						June 30, 2018
	Receivables			Payables			Receivables		Payables
Former Parent/Stack's Bowers	$	6,226	⁽¹⁾	$	—		$	13,240	$	—
Equity method investee	—			1,265		⁽²⁾	—		920
SilverTowne	—			332		⁽³⁾	—		242
Goldline Lenders	—			7,712		⁽⁴⁾	—		7,710
	$	6,226		$	9,309		13,240		$	8,872

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(1) Balance principally includes two secured lines of credit with a balance of $3.7 million and $2.0 million (shown as a component of secured loans receivables). See "Secured Lines of Credit with Stack's Bowers", below.
(2) Balance represents primarily open trade payables.
(3) Balance (net) includes (a) a trade receivables of $0.3 million (shown as a component of receivables), and (b) a contingent earn-out liability of $0.6 million (shown as a component of other long-term liabilities).
(4) Balance includes the face value of the Goldline Credit Facility of $7.5 million, and the associated estimated debt funding fees payable of $0.2 million (shown as debt obligation - related party). The Goldline Credit facility and the debt funding fee are payable in August 2020.

Secured Lines of Credit with Stack's Bowers

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 of $5.3 million. The loan is secured by precious metals and numismatic products. As of September 30, 2018 and June 30, 2018, the aggregate carrying value of this loan was $3.7 million and $3.0 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 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 September 30, 2018 and June 30, 2018, the aggregate carrying value of this loan was $2.0 million and $9.5 million, respectively.

Long Term Debt Obligation with Goldline Lenders

As of September 30, 2018, the carrying value of the long term debt obligation payable to Goldline Lenders totaled $7.3 million, and is shown in the condensed consolidated balance sheets as debt obligation (related party). The face value of this debt obligation is $7.5 million and the related unamortized loan funding fee, a contra-liability, totaled $243,000 as of September 30, 2018 (see Note 14). The estimated loan funding fee payable to Goldline Lenders as of September 30, 2018 totaled $212,000 and is shown on the condensed consolidated balance sheets as component of other long-term liabilities.

Activity with Affiliated Companies or Persons

Sales and Purchases Made to Affiliated Companies

During the three months ended September 30, 2018 and 2017, the Company made sales and purchases to various companies, which have been deemed to be related parties, as follows:



in thousands
Three Months Ended September 30,	2018				2017
	Sales		Purchases		Sales		Purchases
Former Parent/Stack's Bowers	$	17,475	$	16,772	$	4,432	$	2,389
Equity method investee	100,564		2,362		81,971		358
SilverTowne	4,138		461		3,150		99
	$	122,177	$	19,595	$	89,553	$	2,846

Interest Income Earned from Affiliated Companies

During the three months ended September 30, 2018 and 2017, the Company earned interest income related to loans made to Stack's Bowers and related to financing arrangements (including repurchase agreements) with affiliated companies, as set forth below:



in thousands
Three Months Ended September 30,	2018		2017
Interest income from secured loans receivables	$	214	$	2
Interest income from finance products and repurchase arrangements	1,723		544
	$	1,937	$	546

Interest Expense Incurred Related to Notes Payable and Long-Term Debt Obligation

During the three months ended September 30, 2018 and 2017, 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 September 30,	2018		2017
Interest expense incurred related to notes payable	$	—	$	2
Interest expense incurred related to long-term debt obligation	$	195	$	73
	$	195	$	75

Other Income Earned from Equity Method Investee

During the three months ended September 30, 2018 and 2017, the Company recorded its proportional share of its equity method investee's net income as other income that total $248,000 and $57,000, respectively. As of September 30, 2018 and June 30, 2018, the carrying balance of the equity method investment was $8.1 million and $7.9 million, respectively.