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

6 Months Ended

Dec. 31, 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 December 31, 2018 and June 30, 2018, the Company had related party receivables and payables balances as set forth below:



in thousands
	December 31, 2018						June 30, 2018
	Receivables			Payables			Receivables		Payables
Former Parent/Stack's Bowers	$	17,264	⁽¹⁾	$	—		$	13,240	$	—
Equity method investee	—			693		⁽²⁾	—		920
SilverTowne	266		⁽³⁾	—			—		242
Goldline Lenders⁽⁴⁾	—			—			—		7,710
	$	17,530		$	693		13,240		$	8,872

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(1) Balance principally includes two secured lines of credit with a balance of $11.0 million and $6.0 million (shown as a component of secured loans receivables). See "Secured Lines of Credit with Stack's Bowers", below.
(2) Balance primarily represents open trade payables, net (shown as a component of accounts payable).
(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 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 (subject to temporary increases) of $5.3 million. The loan is secured by precious metals and numismatic products. As of December 31, 2018 and June 30, 2018, the aggregate carrying value of this loan was $6.0 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 (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 December 31, 2018 and June 30, 2018, the aggregate carrying value of this loan was $11.0 million and $9.5 million, respectively.

Long Term Debt Obligation with Goldline Lenders

On December 7, 2018, the Company repaid the $7.5 million principal amount outstanding under the Goldline Credit Facility to the Goldline Lenders. 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 Affiliated Companies or Persons

Sales and Purchases Made to Affiliated Companies

During the three and six months ended December 31, 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								Six Months Ended
	December 31, 2018				December 31, 2017				December 31, 2018				December 31, 2017
	Sales		Purchases		Sales		Purchases		Sales		Purchases		Sales		Purchases
Former Parent/Stack's Bowers	$	1,613	$	1,187	$	8,065	$	1,152	$	19,088	$	17,959	$	12,497	$	3,541
Equity method investee	97,531		1,787		112,316		670		198,095		4,149		194,287		1,028
SilverTowne	4,543		876		4,133		6,280		8,681		1,337		7,283		6,379
	$	103,687	$	3,850	$	124,514	$	8,102	$	225,864	$	23,445	$	214,067	$	10,948

Interest Income Earned from Affiliated Companies

During the three and six months ended December 31, 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				Six Months Ended
	December 31, 2018		December 31, 2017		December 31, 2018		December 31, 2017
Interest income from secured loans receivables	$	275	$	51	$	489	$	53
Interest income from finance products and repurchase arrangements	1,539		576		3,262		1,120
	$	1,814	$	627	$	3,751	$	1,173

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

During the three and six months ended December 31, 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				Six Months Ended
	December 31, 2018		December 31, 2017		December 31, 2018		December 31, 2017
Interest expense incurred related to notes payable	$	—	$	1	$	—	$	1
Interest expense incurred related to long-term debt obligation	147		201		$	342	$	279
	$	147	$	202	$	342	$	280

Other Income Earned from Equity Method Investee

During the three months ended December 31, 2018 and 2017, the Company recorded its proportional share of its equity method investee's net income as other income that total $311,000 and $122,000, respectively. During the six months ended December 31, 2018 and 2017, the Company recorded its proportional share of its equity method investee's net income as other income that totalled $559,000 and $179,000, respectively. As of December 31, 2018 and June 30, 2018, the carrying balance of the equity method investment was $8.4 million and $7.9 million, respectively.

Other Expense Incurred with Goldline Lenders

On December 7, 2018, in connection $7.5 million payment of principal under the Goldline Credit Facility, the Goldline Lenders received a 2% ($150,000) premium (see Note 14).