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, 2019

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 or 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 significant transactions:

Stack’s Bowers Numismatics LLC. ("Stack's Bowers Galleries"). Stack's Bowers Galleries 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.


2)	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: 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).


4)	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 activity (iii) repurchase arrangements, and (iv) hedging transactions. Below is a summary of our related party transactions.

Balances with Related Parties

As of June 30, 2019 and June 30, 2018, the Company had related party receivables and payables balances as set forth below:



in thousands
	June 30, 2019					June 30, 2018
	Receivables			Payables		Receivables		Payables
Stack's Bowers Galleries	$	17,630	⁽¹⁾	$	—	$	13,240	$	—
Equity method investees	4,978		⁽²⁾	163		899		920
SilverTowne	241		⁽³⁾	—		—		242
Goldline Lenders⁽⁴⁾	—			—		—		7,710
	$	22,849		$	163	14,139		$	8,872

_________________________________
(1) Balance principally includes two secured lines of credit with a balance of $7.5 million and $6.4 million (shown as a component of secured loans receivables) and trade receivables of $3.6 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

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 June 30, 2019 and June 30, 2018, the outstanding principal balance of this loan was $6.4 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 June 30, 2019 and June 30, 2018, the outstanding principal balance this loan was $7.5 million and $9.5 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, 2019 and 2018, 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,	2019				2018
	Sales		Purchases		Sales		Purchases
Stack's Bowers Galleries	$	30,418	$	36,946	$	50,512	$	344,348
Equity method investees	508,552		16,679		468,200		10,790
SilverTowne	12,914		1,611		14,921		7,696
	$	551,884	$	55,236	$	533,633	$	362,834

Interest Income

During the years ended June 30, 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
Years Ended June 30,	2019		2018
Interest income from secured loans receivables	$	1,058	$	290
Interest income from finance products and repurchase arrangements	6,275		4,246
	$	7,333	$	4,536

Interest Expense

During the years ended June 30, 2019 and 2018, the Company incurred interest expense (including debt amortization costs) related to the debt payable to the Goldline Lenders that totaled $0.3 million and $0.6 million, respectively.

Other Income

During the years ended June 30, 2019 and 2018, the Company recorded its proportional share of its equity method investee's net income as other income that totaled $1,198,000 and $421,000, respectively. As of June 30, 2019 and June 30, 2018, the aggregate carrying balance of the equity method investments was $11.9 million and $8.4 million, respectively.

During the years ended June 30, 2019 and 2018, the Company earned profit sharing income related to one of CFC's secured lending agreements with Stack's Bowers Galleries that totaled $105,000 and $0, respectively.

Other Expense

On December 7, 2018, in connection with the $7.5 million payoff of the outstanding principal under the Goldline Credit Facility, the Goldline Lenders received a 2% (i.e.$150,000) premium. (See Note 14.)