Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies |
COMMITMENTS AND CONTINGENCIES
Leases
The Company leases approximately 9,000 square feet of office space in El Segundo, California at a cost of $3.82 per square foot per month. The term of this lease expires on March 31, 2026 and contains annual base rent increases of 3%.
The Company leases approximately 17,600 square feet of warehouse space in Las Vegas, Nevada at a cost of approximately $1.69 per square foot per month. The term of this lease expires on April 30, 2025 and contains annual base rent increases of 3%.
The Company leases approximately 21,500 square feet of office space in Los Angeles, California at a cost of $2.76 per square foot per month. The term of this lease expires on February 28, 2022 with annual base rent increases of 3% and the Company has the option to renew the lease term for an additional five years at the then current market rate. The lease requires the payment of related property taxes, insurance, maintenance and other cost related to the leased property. In addition, the Company provided the landlord of the office space in Los Angeles, California a standby letter of credit for $300,000 in value in lieu of a security deposit. This letter of credit is renewed annually and reduces each lease anniversary date as provided in the lease agreement.
Expenses related to operating leases (including lease expense for the common space rental) were $1.6 million, and $1.3 million, respectively, for the three months ended September 30, 2019 and 2018. Future minimum lease payments under the Company's lease arrangements with noncancellable lease terms in excess of one year as of September 30, 2019 are as follows:
(in thousands)
Employment and Non-Compete Agreements
At June 30, 2019, the Company was a party to various employment agreements and non-compete and/or non-solicitation agreements with its employees, including an employment agreement with Greg Roberts, its CEO, which expires on June 30, 2020, and an employment agreement with Thor Gjerdrum, its President, which expired on June 30, 2019. (See Note 19.) The employment agreements provide for minimum salary levels, incentive compensation and severance benefits, among other items.
Employee Benefit Plan
The Company maintains an employee savings plan for United States employees under the Internal Revenue Code section 401(k). Employees are eligible to participate in the plan after three complete calendar months of service and all contributions are immediately vested. Employees' contributions are discretionary to a maximum of 90% of compensation. For all plan members, the Company contributes 30% of the eligible employees' contributions on the first 60% of the participants' compensation to the IRS maximum annual contribution. The Company's matching 401(k) contributions totaled $263,000 and $180,000 for the three months ended September 30, 2019 and 2018, respectively.
Litigation, Claims and Contingencies
In the ordinary course of our business, we are party to various legal actions, which we believe are incidental to the operation of our business. The outcome of such legal actions and the timing of ultimate resolution are inherently difficult to predict. In the opinion of management, based upon information currently available to us, any resulting liability, would not have a material adverse effect on the Company's financial position, cash flows, or operations.
SGI IRS and State Tax Audits
SGI and the Company filed consolidated tax returns when the Company was a subsidiary of SGI and SGI's consolidated tax returns remain under exam with the State of Utah for the years ended June 30, 2011 through 2013. Additionally, the Company's separately filed Utah State Franchise and Income tax return remain under exam for the period ended June 30, 2014 through 2017. We are unable to determine the outcome of this exam at this time.
In general, the U.S Federal and the majority of state and local examinations have been completed by the tax authorities for the respective jurisdictions or the statute of limitations have expired through the year ended June 30, 2014.
Operational Contingencies
In connection with the closing of the SilverTowne transaction, AMST entered into an exclusive distribution agreement with the Company with respect to the silver products produced by AMST which, among other things, set weekly minimum order quantities by A-Mark. The agreement has a three-year term, with two automatic two-year renewals (unless terminated prior thereto.) The Company was initially required to order no less than 300,000 ounces of silver products per week on average during any consecutive four week period during the term of the agreement. This initial commitment has been periodically reduced, and as of June 30, 2020, per mutual agreement of the parties, the Company is required to order no less than 175,000 ounces of silver products per week. The parties will re-evaluate production needs every 60 days. The price paid per ounce is mutually determined by both parties, and is subject to adjustments every six months during the term.
Additionally, in connection with the SilverTowne transaction, AMST entered into an exclusive supplier agreement, dated August 31, 2016, with Asahi, whereby Asahi agreed to supply all of AMST's requirements for refined silver used for producing the silver products as to which A-Mark has the exclusive right to distribute. The term of the agreement was initially for three years, with two automatic two-year term renewals (unless terminated prior thereto). Pricing under the agreement is subject to adjustments every six months.
A-Mark has also guaranteed AMST's obligations under its agreement with Asahi to lease 100,000 ounces of refined silver. The lease term is for one year with an automatic one year renewal (unless terminated prior thereto), and the lease fees are subject to adjustments every six months.
Escrow Balance related to Purchase of Goldline
In connection with the acquisition of assets of Goldline LLC, the Company held back and deposited a portion of the original purchase price into escrow to serve as security for the seller’s indemnification obligations. At June 30, 2019, $750,000 remained in escrow. In addition, the parties are still negotiating certain post-closing adjustments to the original purchase price.
COMMITMENTS AND CONTINGENCIES
Refer to Note 15 of the Notes to Consolidated Financial Statements in the 2019 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 2019 Annual Report, other than as summarized below.
Contingencies related to Purchase of Goldline
In connection with the acquisition of assets of Goldline LLC, the Company held back and deposited a portion of the original purchase price into escrow to serve as security for the seller’s indemnification obligations. At June 30, 2019, $750,000 remained in escrow. In October 2019, the Company entered into a settlement agreement and mutual release with Goldline LLC, pursuant to which the Company received $460,000 from the escrow account and released Goldline from any further obligations relating to the acquisition. The costs associated with the settlement of our purchase of Goldline were recorded as other income (loss), net in the condensed consolidated statements of operations.
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