What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-12 compared with 2020-05-08 · 240 added, 502 removed, 494 unchanged (60% of the section changed)

13 unchanged sentences

In addition to the risks and uncertainties that may ordinarily influence our business, the Company is exposed to the effects of the COVID-19 pandemic.

The extent to which this outbreak impacts our results of operations, cash flows and financial condition will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity and duration of this outbreak and the actions taken by governmental authorities and us to contain it or treat its impact.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and notes contained elsewhere in this Form 10-Q.This discussion contains forward-looking statements that reflect our plans, estimates and beliefs.

The extent to which this outbreak ultimately impacts our results of operations, cash flows, and financial condition will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity and duration of this outbreak and the actions taken by governmental authorities and us to contain it or treat its impact.

This discussion contains forward-looking statements that reflect our plans, estimates and beliefs.

Our actual results could differ materially from those discussed in these forward-looking statements.

14 unchanged sentences

Liquidity and financial condition .

This section provides an analysis of our cash flows, as well as a discussion of our outstanding debt as of March 31, 2020.

This section provides an analysis of our cash flows, as well as a discussion of our outstanding debt as of September 30, 2020.

Included in this section is a discussion of our:

1 unchanged sentence

Critical accounting policies .

This section discusses critical accounting policies that are considered both important to our financial condition and results of operations, and require management to make significant judgment and estimates.

All of our significant accounting policies, including the critical accounting policies are also summarized in Note 2 of the notes to the condensed cons olidated financial statements.

This section discusses critical accounting policies that are considered both important to our financial condition and results of op erations, and require management to make significant judgment and estimates.

All of our significant accounting policies, including the critical accounting policies are also summarized in Note 2 of the notes to the condensed consolidated financial statements.

Recent accounting pronouncements .

2 unchanged sentences

We conduct our operations in three reportable segments:

(1) Wholesale Trading & Ancillary Services, (2) Secured Lending and (3) Direct Sales.

(i) Wholesale Trading & Ancillary Services, (ii) Secured Lending and (iii) Direct Sales.

Wholesale Trading & Ancillary Services Segment

The Company operates its Wholesale Trading & Ancillary Services segment through A-Mark Precious Metals, Inc., and its wholly-owned subsidiaries, A-Mark Trading AG (“AMTAG”), Transcontinental Depository Services ("TDS"), and A-M Global Logistics, LLC.

("Logistics"), and its partially-owned subsidiary, AM&ST Associates, LLC.

(“AMGL” or "Logistics"), and its partially-owned subsidiary, AM&ST Associates, LLC.

("AMST" or "SilverTowne" or the "Mint").

11 unchanged sentences

Our storage business generated less than 1% of total revenues for each of the periods presented.

The Company's wholly-owned subsidiary, A-M Global Logistics, LLC, referred to as Logistics, is based in Las Vegas, Nevada, and provides our customers an array of complementary services, including receiving, handling, inventorying, processing, packing, and shipping of precious metals and custom coins on a secure basis.

The Company's wholly owned subsidiary, AMGL, is based in Las Vegas, Nevada, and provides our customers an array of complementary services, including receiving, handling, inventorying, processing, packing, and shipping of precious metals and custom coins on a secure basis.

Our logistics business generated less than 1% of the total revenues for each of the periods presented.

3 unchanged sentences

own 69% and 31%, respectively, of AMST.

AMST acquired the entire minting operations (referred to as SilverTowne Mint) of SilverTowne, L.P., with the goal of providing greater product selection to our customers and greater pricing stability within the supply chain, as well as to gain increased access to silver during volatile market environments, which have historically resulted in higher demand for precious metals products.

AMST acquired the entire minting operations (referred to as SilverTowne Mint) of SilverTowne, L.P., with the goal of providing greater product selection to our customers and greater pricing stability within the supply chain, as well as to gain increased access to silver during volatile market environments, which have historically created higher demand for precious metals products.

Secured Lending Segment

3 unchanged sentences

CFC's customers include coin and precious metal dealers, investors, and collectors.

As of March 31, 2020, CFC and AMCF had, in aggregate, approximately $49.6 million in secured loans outstanding, of which approximately 13.6% were acquired from third-parties (some of which may be customers of A-Mark) and approximately 86.4% were originated by CFC.

As of September 30, 2020, CFC and AMCF had, in aggregate, approximately $84.2 million in secured loans outstanding, of which approximately 61.5% were acquired from third-parties (some of which may be customers of A-Mark) and approximately 38.5% were originated by CFC.

AMCF, a wholly owned subsidiary of CFC, was formed for the purpose of securitizing eligible secured loans of CFC.

AMCF issued, administers, and owns Secured Senior Term Notes:

Series 2018-1, Class A, with an aggregate principal amount of $72.0 mill ion and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million.

AMCF is sued, administers, and owns Secured Senior Term Notes:

Series 2018-1, Class A, with an aggregate principal amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal amount of $28.0 million.

The Class A Notes bear interest at a rate of 4.98%, and the Class B Notes bear interest at a rate of 5.98% (collectively referred to as the "Notes").

The Notes have a maturity date of December 15, 2023.

For additional information regarding this securitization.

(See Note 14 of the notes to condensed consolidated financial statements .

For additional informa tion s ee Note 14 of the notes to condensed consolidated financial statements .

Direct Sales Segment

6 unchanged sentences

Goldline is a direct retailer of precious metals to the investor community.

Goldline markets its precious metal products primarily on radio and the internet, as well as through telephonic sales efforts.

Goldline markets its precious metal products on television, radio, and the internet, as well as through telephonic sales efforts.

Goldline's business has enhanced the Company’s distribution capabilities by adding a direct-to-client distribution channel that has diversified the product and services offered to Goldline's customers, through access to the Company’s wider assortment of precious metal coins and bars, including TDS’s storage and asset protection services.

AMIP, a wholly owned subsidiary of Goldline, manages its intellectual property.

In fiscal 2019, the Company formed and capitalized PMPP, a 50%-owned subsidiary of Goldline, pursuant to terms of a joint venture agreement, for the purpose of purchasing precious metals from the partners' retail customers, and then reselling the acquired products back to affiliates of the partners.

In fiscal 2020, PMPP commenced its operations.

PMPP commenced its operations in fiscal 2020.

The Company was formed in 1965 and has grown into a significant participant in the bullion and coin markets, with approximately $5.5 billion in revenues for fiscal year 2020.

2 unchanged sentences

the depth of our customer relationships;

our access to market makers, suppliers and government mints and other mints;

our access to market makers, suppliers, and sovereign and private mints;

our trading systems in the U.S.

9 unchanged sentences

This diverse base of customers purchases a variety of products from the Company in a multitude of grades, primarily in the form of coins and bars.

Factors Affecting Revenues, Gross Profits, Interest Income, and Interest Expense

Factors Affecting Revenues, Gross Profits, Interest Income, and Interest Expen se

The Company enters into transactions to sell and deliver gold, silver, platinum, and palladium to industrial and commercial users, coin and bullion dealers, mints, and financial institutions.

23 unchanged sentences

Volatility also affects our gross profit.

Greater volatility typically causes the trading spreads to widen resulting in an increase in the gross profit.

Product supply constraints during extended periods of higher volatility have historically resulted in a heightening of wider trading spreads resulting in further improvement in the gross profit.

Greater volatility typically causes the premium spreads to widen resulting in an increase in the gross profit.

Product supply constraints during extended periods of higher volatility have historically resulted in a heightening of wider premium spreads resulting in further improvement in the gross profit.

Interest Income .

10 unchanged sentences

We look at the number of ounces of gold and silver sold and delivered to our customers (excluding ounces recorded on forward contracts).

These metrics reflect our business volume without regard to changes in commodity pricing, which also impacts revenue and can mask actual business trends.

These metrics reflect our business volume without regard to changes in commodity pricing, which also impacts revenue but can mask actual business trends.

The primary purpose of entering into forward sales transactions is to hedge commodity price risk.

22 unchanged sentences

Number of Secured Loans .

Finally, as a measure of the size of our secured lending segment, we look at the number of outstanding secured loans to customers that are primarily collateralized by precious metals at the end of the fiscal quarter.

Typically, the number of loans increases during periods of increasing precious metal pricing and decrease during periods of declining precious metal prices.

Typically, the number of loans increases during periods of increasing precious metal pricing and decreases during periods of declining precious metal prices.

The Company calculates its loan-to-value ("LTV") ratio as the principal amount of the loan divided by the liquidation value of the collateral, which is based on daily spot market prices of precious metal bullion.

6 unchanged sentences

It is challenging to predict how long the COVID-19 pandemic will continue, the extent to which the effects that the Company has experienced from the pandemic thus far will persist, or whether other effects on the Company and its businesses will materialize in the short or long term.

Macroeconomic events positively affected the Company’s trading revenues and gross profit as the volatility of the price of precious metals and numismatics resulted in a material increase the spread between bid and ask prices on these products.

Macroeconomic events have positively affected the Company’s trading revenues and gross profit as the volatility of the price of precious metals and numismatics resulted in a material increase in the spread between bid and ask prices on these products.

We also experienced substantially increased demand for products in each of our coin and bar, industrial and retail (Goldline) businesses, which we attribute to certain customers seeking to assure a supply of precious metals necessary for the operation of their businesses, and other customers’ seeking the safety of investments in precious metals.

2 unchanged sentences

Through our CFC finance subsidiary, we make loans to our customers secured by coins and precious metals.

Numerous CFC loans were paid off when the market experienced a temporary drop in precious metal prices, reducing collateral coverage.

This has had the effect of decreasing the size of our loan portfolio and the interest earned on the portfolio.

It has also required us to substitute cash and our own precious metals inventory as collateral under our AMCF securitization program, as the pool of loans securing the program has declined.

Numerous CFC loans were paid off in March 2020 when the market experienced a temporary drop in precious metal prices, which reduced collateral coverage.

This had the effect of decreasing the size of our loan portfolio and the interest earned on the portfolio.

It also required us to substitute cash and our own precious metals inventory as collateral under our AMCF securitization program, as the pool of loans securing the program declined.

While we did not experience any related losses, there is no assurance that this might not occur in the future.

In the two successive quarters, as silver prices rebounded, the Company has experienced growth in its loan portfolio.

Our fiscal year end is June 30 each year.

Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years.

RESULTS OF OPERATIONS

Overview of Results of Operations for the Three Months Ended March 31, 2020 and 2019

Condensed Consolidated Results of Operations

The operating results of our business for the three months ended March 31, 2020 and 2019 are as follows:

in thousands, except per share data and performance metrics

Three Months Ended March 31,

Selling, general, and administrative expenses

Interest income

Interest expense

Other income, net

Unrealized loss on foreign exchange

Net income before provision for income taxes

Income tax expense

Net income (loss) attributable to non-controlling interests

Net income attributable to the Company

Basic and diluted net income per share attributable to

A-Mark Precious Metals, Inc.:

Per Share Data:

Performance Metrics:

Gold ounces sold (2)

Silver ounces sold (3)

Inventory turnover ratio (4)

Number of secured loans at period end (5)

See "Results of Segments" for ticket count volume by segment.

Gold ounces sold represents the ounces of gold product sold and delivered to the customer during the period, excluding ounces of gold recorded on forward contracts.

Silver ounces sold represents the ounces of silver product sold and delivered to the customer during the period, excluding ounces of silver recorded on forward contracts.

Inventory turnover ratio is the cost of sales divided by average inventory for the period presented above.

This calculation excludes precious metals held under financing arrangements, which are not classified as inventory on the consolidated balance sheets.

Number of outstanding secured loans to customers at the end of the period.

Overview of Results of Operations for the Nine Months Ended March 31, 2020 and 2019

RESULTS OF OPERA TIONS

Overview of Results of Operations for the Three Months Ended September 30, 2020 and 2019

Condensed Consolidated Results of Operations

The operating results of our business for the nine months ended March 31, 2020 and 2019 are as follows:

The operating results of our business for the three months ended September 30, 2020 and 2019 are as follows:

in thousands, except per share data and performance metrics

Nine Months Ended March 31,

Three Months Ended September 30,

Selling, general, and administrative expenses

1 unchanged sentence

Interest expense

Other income, net

Unrealized loss on foreign exchange

Other income (expense), net

Unrealized losses on foreign exchange

Net income before provision for income taxes

15 unchanged sentences

This calculation excludes precious metals held under financing arrangements, which are not classified as inventory on the consolidated balance sheets.

Number of outstanding secured loans to customers that are primarily collateralized by precious metals at the end of the period.

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

in thousands, except performance metrics

Three Months Ended March 31,

Performance Metrics

Gold ounces sold

Silver ounces sold

Revenues for the three months ended March 31, 2020 decreased $8.3 million, or 0.7%, to $1.259 billion from $1.267 billion in 2019.

Our revenues decreased primarily due to lower forward sales ($314.7 million of the aggregate change), offset by an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

Gold ounces sold for the three months ended March 31, 2020 increased 34,000 ounces, or 7.2%, to 508,000 ounces from 474,000 ounces in 2019.

Silver ounces sold for the three months ended March 31, 2020 increased 8,977,000 ounces, or 53.6%, to 25,728,000 ounces from 16,751,000 ounces in 2019.

On average, the selling prices for gold increased by 21.3% and selling prices for silver increased by 2.4% during the three months ended March 31, 2020 as compared to 2019.

A key factor that contributed to the increase in demand for precious metals was the recent volatility in precious metals caused by macroeconomic and other events.

In addition to the increased demand for our products, a combination of volatile metal prices and supply constraints led to a significant expansion in premium spreads in the precious metals market during the quarter ended March 31, 2020.

These conditions are not representative of normal market conditions, and we are uncertain of the duration of these conditions.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Number of outstanding secured loans to customers at the end of the period.

in thousands, except performance metrics

Nine Months Ended March 31,

Three Months Ended September 30,

Performance Metrics

1 unchanged sentence

Silver ounces sold

Revenues for the nine months ended March 31, 2020 decreased $137.7 million, or 3.5% to $3.795 billion from $3.933 billion in 2019.

Our revenues decreased primarily due to lower forward sales ($925.7 million of the aggregate change), offset by an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

Gold ounces sold for the nine months ended March 31, 2020 increased 63,000 ounces, or 4.3%, to 1,512,000 ounces from 1,449,000 ounces in 2019.

Silver ounces sold for the nine months ended March 31, 2020 increased 5,669,000 ounces, or 10.3%, to 60,740,000 ounces from 55,071,000 ounces in 2019.

On average, the selling prices for gold increased by 21.0% and selling prices for silver increased by 10.4% during the nine months ended March 31, 2020 as compared to 2019.

A key factor that contributed to the increase in demand for precious metals was the recent volatility in precious metals caused by macroeconomic and other events.

Revenues for the three months ended September 30, 2020 increased $385.1 million, or 26.0%, to $1.866 billion from $1.481 billion in 2019.

Excluding a decrease of $111.2 million of forward sales, our revenues increased $496.3 million or 40.5% attributable to an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

Gold ounces sold for the three months ended September 30, 2020 increased 145,000 ounces, or 25.2%, to 721,000 ounces from 576,000 ounces in 2019.

Silver ounces sold for the three months ended September 30, 2020 increased 3,337,000 ounces, or 16.0%, to

24,248,000 ounces from 20,911,000 ounces in 2019 .

On average, selling prices for gold increased by 29.9% and selling prices for silver increased by 35.2% during the three months ended September 30, 2020 as compared to 2019 .

A combination of price volatility, increased demand, and supply constraints led to a significant expansion in premium spreads in the precious metals market during the quarter.

These factors were brought on by the volatility in precious metal prices caused by macroeconomic and other events.

These conditions are not representative of normal market conditions, and we are uncertain of the duration of these conditions.

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

in thousands, except performance metric

Three Months Ended March 31,

Performance Metric

Inventory turnover ratio

Gross profit for the three months ended March 31, 2020 increased by $13.8 million, or 157.9%, to $22.5 million from $8.7 million in 2019.

The overall gross profit increase was primarily due to higher gross profits earned by the Wholesale Trading & Ancillary Services and Direct Sales segments.

The Company’s overall gross margin percentage increased by 159.6% to 1.786% from 0.688% in 2019.

The increase in gross margin percentage was mainly attributable to significantly wider trading spreads due to increased demand, higher trading profits, and lower forward sales (approximately $314.7 million of the aggregate change), which increase revenues but are associated with negligible gross margins.

The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.

Our inventory turnover rate for the three months ended March 31, 2020 decreased by 19.6%, to 3.7 from 4.6 in 2019.

The decrease in our inventory turnover rate was primarily due to the lower volume of ounces sold on forward contracts during the three months ended March 31, 2020 as compared to 2019.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

in thousands, except performance metric

Nine Months Ended March 31,

Three Months Ended September 30,

Performance Metric

Inventory turnover ratio

Gross profit for the nine months ended March 31, 2020 increased by $13.4 million, or 52.7%, to $38.9 million from $25.5 million in 2019.

The overall gross profit increase was due to higher gross profits from the Wholesale Trading & Ancillary segment and Direct Sales segments.

The Company’s overall gross margin percentage increased by 58.1% to 1.026% from 0.649% in 2019.

The increase in gross margin percentage was mainly attributable to significantly wider trading spreads due to increased demand, higher trading profits, and lower forward sales (approximately $925.7 million of the aggregate change), which increase revenues but are associated with negligible gross margins that can significantly affect the gross margin percentage, and by higher trading profits.

Gross profit for the three months ended September 30, 2020 increased by $27.8 million, or 333.4%, to $36.1 million from $8.3 million in 2019.

The overall gross profit increase was due to higher gross profits from the Wholesale Trading & Ancillary Services and Direct Sales segments.

The Company’s overall gross margin percentage increased by 137.4 basis points or 244.0% to 1.937% from 0.563% in 2019.

The increase in gross margin percentage was mainly attributable to significantly wider premium spreads due to increased demand, higher trading profits due to higher volatility, and lower forward sales.

Forward sales increase revenues but are associated with negligible gross margins.

The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.

Our inventory turnover rate for the nine months ended March 31, 2020 decreased by 25.9%, to 10.6 from 14.3 in 2019.

The decrease in our inventory turnover rate was primarily due to the lower volume of ounces sold on forward contracts during the nine months ended March 31, 2020 as compared to 2019.

Our inventory turnover rate for the three months ended September 30, 2020 increased by 13.6%, to 5.0 from 4.4 in 2019.

The increase in our inventory turnover ratio was primarily due to higher volume of ounces sold of precious metals, partially offset by lower volume of ounces sold on forward contracts as well as higher average inventory balances during the three months ended September 30, 2020 as compared to 2019.

Selling, General and Administrative Expense

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Selling, general, and administrative expenses

Selling, general and administrative expenses for the three months ended March 31, 2020 in creased $2.1 million , or 25.8% , to $10.4 million from $8.3 million in 2019 .

The change was primarily due to increases in performance-based compensation accruals of $2.3 million and $0.3 million of depreciation expense , which were partially offset by decrea ses in operating expenses of $0.5 million associated with our Direct Sales segment and consulting expenses of $0.1 million .

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Selling, general, and administrative expenses

Selling, general and administrative expenses for the nine months ended March 31, 2020 increased $2.4 million, or 10.2%, to $26.5 million from $24.1 million in 2019.

The change was primarily due to increases in performance-based compensation accruals of $2.8 million and $0.3 million of depreciation expense, which were partially offset by decreases in operating expenses of $0.6 million associated with our Direct Sales segment.

Interest Income

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

in thousands, except performance metric

Three Months Ended March 31,

Selling, general and administrative expenses for the three months ended September 30, 2020 increased $1.7 million, or 21.0%, to $10.0 million from $8.3 million in 2019.

The change was primarily due to increases in compensation expense (including performance-based accruals) of $1.8 million and computer software expense of $0.2 million, which were partially offset by decreases in operating expenses of $0.2 million associated with our Direct Sales segment, and depreciation and amortization expense of $0.1 million.

Interest Income

Performance Metric

Number of secured loans at period-end

Interest income for the three months ended March 31, 2020 increased $1.2 million, or 24.2%, to $6.0 million from $4.8 million in 2019.

The aggregate increase in interest income was primarily due to higher interest income earned by our Secured Lending segment and other finance product income.

Interest income from our Secured Lending segment increased by $0.8 million in comparison to the same year-ago period, which represents approximately 72.1% of the aggregate increase.

The increase in interest income earned from the segment’s secured loan portfolio was primarily due to higher average loan balances during the current period as compared to the average loan balances for the comparable three month period.

The number of secured loans outstanding decreased by 83.3% to 429 from 2,568 in 2019.

Typically, the number of loans increases during periods of increasing precious metal prices and decrease during periods of declining precious metal prices.

Silver prices declined significantly in the quarter ended March 31, 2020, resulting in an increase in the margin calls and borrower loan liquidations due to a decline in the value of the precious metals collateral.

The Company did not incur loan losses related to the margin calls or borrower loan liquidations during this or the comparable period.

The interest income from our other finance product income increased by $0.3 million in comparison to the same year-ago period.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

in thousands, except performance metric

Nine Months Ended March 31,

Three Months Ended September 30,

Interest income

1 unchanged sentence

Number of secured loans at period-end

Interest income for the nine months ended March 31, 2020 increased $4.0 million, or 28.3%, to $17,968 from $14.0 million in 2019.

The aggregate increase in interest income was primarily due to interest income earned by our Secured Lending Segment and other finance product income.

The interest income from our Secured Lending segment increased by $3.5 million or by 47.0% in comparison to the same year-ago period, which represents approximately 89.7% of the aggregate increase.

Interest income for the three months ended September 30, 2020 decreased $1.8 millio n , or 30.9% , to $4.0 million from $5.8 million in 2019 .

The aggregate decrease in interest income was primarily due to low er interest income earned by our Secured Lending segment , partially offset by higher other finance product income.

The interest income from our Secured Lending segment decreased by $2.0 million or by 55.9%, which represents the majority of the aggregate decrease in interest income compared with the prior year.

The decrease in interest income earned from the segment’s secured loan portfolio was primarily due to lower average monthly loan balances during the current period as compared to the average monthly loan balances for the comparable period.

The number of secured loans outstanding decreased by 68.5% to 1,125 from 3,571 in 2019.

Typically, the number of loans increases during periods of increasing precious metal prices and decrease during periods of declining precious metal prices.

Typically, the number of loans increases during periods of increasing precious metal prices and decreases during periods of declining precious metal prices.

Silver prices declined significantly in the quarter ended March 31, 2020, resulting in an increase in margin calls and borrower loan liquidations due to a decline in the value of the precious metals collateral.

The Company did not incur loan losses related to the margin calls or borrower loan liquidations during this or the comparable period.

The interest income from our other finance product income increased by $0.4 million in comparison to the same year-ago period.

Interest Expense

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

The Company did not incur loan losses related to these margin calls or borrower loan liquidations.

In the two successive quarters, as silver prices rebounded, the Company experienced growth in the number of loans in the portfolio.

The Company did not incur loan losses related to the margin calls or borrower loan liquidations during the three months ended September 30, 2020 or the comparable period.

The interest income from our finance products increased by $0.2 million in comparison to the same year-ago period.

Interest Expense

Interest expense for the three months ended March 31, 2020 increased $0.8 million, or 19.2% to $5.1 million from $4.2 million in 2019.

The increase in interest expense was primarily related to our loan servicing fees, notes payable, liabilities on borrowed metals, product financing arrangements, and, partially offset by a reduction in interest expense related to our Trading Credit Facility.

As compared to the same year-ago period, the amount of interest expense that increased by component included:

(i) $0.3 million of loan servicing fees, (ii) $0.3 million of notes payable, (iii) $0.2 million of liabilities on borrowed metals, and (iv) $0.1 million of product financing arrangements, which were offset by a reduction of $0.1 million related to the Trading Credit Facility (including debt amortization costs).

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Interest expense

Interest expense for the nine months ended March 31, 2020 increased $2.8 million , or 22.7 % to $15.3 million from $12.4 million in 2019 .

The increase in interest expense was related primarily to our notes payable (which was issued in September of 2018) , loan servicing fees, product financing arrangements, liabilities on borrowed metals , and Trading Credit Facility, partially offset by a reduction in interest expense related to the Goldline Credit Facility .

As compared to the same year-ago period, the amount of interest expense that increased by component included:

(i) $1.4 million notes payab le (in cluding debt amortization costs), (ii) $0.9 million of loan servicing costs (iii) $0.4 million of product financing arrangements , (iv) $0.3 million of lia bilities on borrowed metals, and (v) $0.1 million of Trading Credit Facility (including debt amo rtization costs) expenses, which were offset by a reduction of $0.3 million related to the Goldline Credit Facility (including debt amortization costs).

The Goldline Credit Facility was paid off in full during second quarter of fiscal year 2019.

Other income, net

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Other income, net

Other income, net for the three months ended March 31, 2020 increased $0.1 million, or 24.1% to $0.5 million from $0.4 million in 2019.

The aggregate increase was primarily due to (i) an increase of $0.2 million in royalties earned, offset by (ii) a decrease in the Company’s proportionate share of our equity-method investees' earnings by $0.1 million compared to the prior comparable quarter.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Other income, net

Other (expense) income, net for the nine months ended March 31, 2020 decreased $0.9 million, or 65.7% to $0.4 million (other expense, net) from $1.3 million (other income, net) in 2019.

The aggregate decrease was primarily due to:

(i) a decrease in the Company’s proportionate share of our equity-method investees' earnings by $0.5 million compared to the prior comparable year-to-date period, (ii) an earn-out revaluation adjustment of $0.5 million that was recorded as other income and recognized during the nine months ended March 31, 2019, and (iii) $0.2 million of costs recorded as other expense associated with the settlement of our purchase of Goldline that was recognized during the nine months ended March 31, 2020, partially offset by:

(iv) an increase of $0.3 million in royalties earned, and (v) $0.2 million of fees related to the payoff of the Goldline Credit Facility that was recorded as other expense during the nine months ended March 31, 2019

Interest expense for the three months ended September 30, 2020 decreased $0.8 million, or 16.5% to $4.3 million from $5.1 million in 2019.

The decrease was primarily due to reductions in interest expense related to our Trading Credit Facility and loan servicing fees, partially offset by increases in interest expense related to our liabilities on borrowed metals, and product financing arrangements.

As compared to the same year-ago period, the interest expense decrease by component included:

(i) $0.8 million related to the Trading Credit Facility (including debt amortization costs), (ii) $0.3 million of loan servicing fees, which were offset by increases of (iii) $0.1 million of liabilities on borrowed metals, and (iv) $0.1 million of product financing arrangements.

Interest expense primarily decreased due to lower interest rates and lower loan servicing fees due to lower average monthly loan balances, as compared to the prior comparable period.

Other income (expense), net

Three Months Ended September 30,

Other income (expense), net

Other income (expense), net for the three months ended September 30, 2020 increased $4.7 million, or 2801.8% to $4.5 million from $(0.2) million in 2019.

The aggregate increase was primarily due to (i) an increase in the Company’s proportionate share of our equity-method investees' earnings by $4.1 million, (ii) an increase of $0.3 million in royalties earned, and (iii) a decrease of $0.2 million of costs associated with the settlement of the purchase price of Goldline, compared to the prior comparable period.

Provision for Income Taxes

Three Months Ended March 31 , 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Income tax expense

Our income tax expense was $1.8 million and $0.4 million for the three months ended March 31, 2020 and 2019, respectively.

Our effective tax rate was approximately 13.5% and 29.5% for the three months ended March 31, 2020 and 2019, respectively.

For the three months ended March 31, 2020, our effective tax rate differs from the federal statutory rate primarily due to state taxes (net of federal tax benefit), Section 162(m) executive compensation disallowance, offset by the exclusion of profits related to the Company's minority interests and the income tax rate benefit from the carryback of the Company’s fiscal years 2019 and 2018 NOLs to prior years under the CARES Act, which allows the NOLs to be availed at the higher corporate tax rate of 35% versus 21%.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Income tax expense

Our income tax expense was $2.4 million and $1.1 million for the nine months ended March 31, 2020 and 2019, respectively.

Our effective tax rate was approximately 15.2% and 27.0% for the nine months ended March 31, 2020 and 2019, respectively.

For the nine months ended March 31, 2020, our effective tax rate differs from the federal statutory rate primarily due to state taxes (net of federal tax benefit), Section 162(m) executive compensation disallowance, offset by the exclusion of profits related to the Company's minority interests and income tax rate benefit of the carryback of the Company’s fiscal years 2019 and 2018 NOLs to prior years under the CARES Act, which allows the NOLs to be availed at the higher corporate tax rate of 35% versus 21%.

Our income tax expense was $6.5 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively.

Our effective tax rate was approximately 21.5% and 25.7% for the three months ended September 30, 2020 and 2019, respectively.

For the three months ended September 30, 2020, our effective tax rate differs from the federal statutory rate primarily due to state taxes (net of federal tax benefit), Section 162(m) executive compensation disallowance, offset by the exclusion of profits related to the Company's minority interests, special deduction relating to foreign-derived intangible income, and stock-based - compensation.

SEGMENT RESULTS OF OPERATIONS

The Company conducts its operations in three reportable segments:

(1) Wholesale Trading & Ancillary Services, (2) Secured Lending and (3) Direct Sales.

(i) Wholesale Trading & Ancillary Services, (ii) Secured Lending and (iii) Direct Sales.

Each of these reportable segments represents an aggregation of operating segments that meets the aggregation criteria set forth in the Segment Reporting Topic 280 of the FASB Accounting Standards Codification (“ASC”).

4 unchanged sentences

Also, the Wholesale Trading & Ancillary Services segment includes the consolidating eliminations of inter-segment transactions.

Overview of Results of Operations for the Three Months Ended March 31, 2020 and 2019

— Wholesale Trading & Ancillary Services Segment

The operating results of our Wholesale Trading & Ancillary Services segment for the three months ended March 31, 2020 and 2019 are as follows:

in thousands, except per share data and performance metrics

Three Months Ended March 31,

Selling, general, and administrative expenses

Interest income

Interest expense

Other income, net

Unrealized loss on foreign exchange

Net income before provision for income taxes

Performance Metrics:

Gold ounces sold (1)

Silver ounces sold (2)

Wholesale Trading ticket volume (3)

Gold ounces sold represents the ounces of gold product sold and delivered to the customer during the period, excluding ounces of gold recorded on forward contracts.

Silver ounces sold represents the ounces of silver product sold and delivered to the customer during the period, excluding ounces of silver recorded on forward contracts.

Trading ticket volume represents the total number of product orders processed by A-Mark.

Overview of Results of Operations for the Nine Months Ended March 31, 2020 and 2019

Overview of Results of Operations for the Three Months Ended September 30, 2020 and 2019

— Wholesale Trading & Ancillary Services Segment

The operating results of our Wholesale Trading & Ancillary Services segment for the nine months ended March 31, 2020 and 2019 are as follows:

The operating results of our Wholesale Trading & Ancillary Services segment for the three months ended September 30, 2020 and 2019 are as follows:

in thousands, except performance metrics

Nine Months Ended March 31,

Three Months Ended September 30,

Selling, general, and administrative expenses

2 unchanged sentences

Other income, net

Unrealized loss on foreign exchange

Unrealized losses on foreign exchange

Net income before provision for income taxes

7 unchanged sentences

Revenues — Wholesale Trading & Ancillary Services

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

in thousands, except performance metrics

Three Months Ended March 31,

Performance Metrics

Gold ounces sold

Silver ounces sold

Revenues for the three months ended March 31, 2020 decreased $17.2 million, or 1.4%, to $1.234 billion from $1.251 billion in 2019.

Gold ounces sold for the three months ended March 31, 2020 increased 27,000 ounces, or 5.8%, to 496,000 ounces from 469,000 ounces in 2019.

Silver ounces sold for the three months ended March 31, 2020 increased 9,154,000 ounces, or 55.8%, to 25,546,000 ounces from 16,392,000 ounces in 2019.

On average, the selling prices for gold increased by 21.4% and selling prices for silver increased by 2.8% during the three months ended March 31, 2020 as compared to 2019.

A key factor that contributed to the increase in demand for precious metals was the recent volatility in precious metals caused by macroeconomic and other events.

These conditions are not representative of normal market conditions, and we are uncertain of the duration of these conditions.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

in thousands, except performance metrics

Nine Months Ended March 31,

Three Months Ended September 30,

Performance Metrics

1 unchanged sentence

Silver ounces sold

Revenues for the nine months ended March 31, 2020 decreased $0.161 billion, or 4.1%, to $3.733 billion from $3.894 billion in 2019.

Our revenues decreased due to lower forward sales ($925.7 million of the aggregate change) offset by an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

Gold ounces sold for the nine months ended March 31, 2020 increased 45,000 ounces, or 3.1%, to 1,482,000 ounces from 1,437,000 ounces in 2019.

Silver ounces sold for the nine months ended March 31, 2020 increased 6,062,000 ounces, or 11.2%, to 60,241,000 ounces from 54,179,000 ounces in 2019.

On average, the selling prices for gold increased by 21.0% and selling prices for silver increased by 10.8% during the nine months ended March 31, 2020 as compared to 2019.

A key factor that contributed to the increase in demand for precious metals was the recent volatility in precious metals caused by macroeconomic and other events.

Revenues for the three months ended September 30, 2020 increased $352.8 million, or 24.1%, to $1.814 billion from $1.461 billion in 2019.

Excluding a decrease of $111.2 million of forwards sales, our revenues increased $464.0 million or 38.5% due to an increase in the total amount of gold and silver ounces sold and higher selling prices of gold and silver.

Gold ounces sold for the three months ended September 30, 2020 increased 138,000 ounces, or 24.4%, to 704,000 ounces from 566,000 ounces in 2019.

Silver ounces sold for the three months ended September 30, 2020 increased 3,198,000 ounces, or 15.4%, to 23,918,000 ounces from 20,720,000 ounces in 2019.

On average, selling prices for gold increased by 29.5% and selling prices for silver increased by 34.9% during the three months ended September 30, 2020 as compared to 2019.

A combination of price volatility, increased demand, and supply constraints led to a significant expansion in premium spreads in the precious metals market during the quarter.

These factors were brought on by the volatility in precious metal prices caused by macroeconomic and other events.

These conditions are not representative of normal market conditions, and we are uncertain of the duration of these conditions.

Gross Profit — Wholesale Trading & Ancillary Servi ces

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

in thousands, except performance metric

Three Months Ended March 31,

Performance Metric

Wholesale trading ticket volume

Gross profit for the three months ended March 31, 2020 increased by $12.8 million, or 184.8%, to $19.7 million from $6.9 million in 2019.

The o verall gross profit increase was primarily due to higher sales volumes and increased spreads.

This segment’s profit margin percentage increased by 188.8% to 1.600% from 0.554% in 2019.

The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.

The wholesale trading ticket volume for the three months ended March 31, 2020 increased by 17,723 tickets, or 57.2%, to 48,689 tickets from 30,966 tickets in 2019.

The increase in our trading ticket volume is indicative of increased trading activity due to higher demand as compared to 2019.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Gross Profit — Wholesale Trading & Ancillary Services

in thousands, except performance metric

Nine Months Ended March 31,

Three Months Ended September 30,

Performance Metric

Wholesale trading ticket volume

Gross profit for the nine months ended March 31, 2020 increased by $12.0 million, or 56.5%, to $33.1 million from $21.2 million in 2019.

The overall gross profit increase was primarily due to higher sales volumes and increased spreads.

This segment’s profit margin percentage increased by 63.3% to 0.887% from 0.543% in 2019.

The increase in gross margin percentage was mainly attributable to significantly wider trading spreads due to increased demand, higher trading profits, and lower forward sales (approximately $925.7 million of the aggregate change), which increase revenues but are associated with negligible gross margins.

Gross profit for the three months ended September 30, 2020 increased by $23.9 million, or 353.0%, to $30.6 million from $6.8 million in 2019.

The o verall gross profit increase was primarily due to higher sales volumes and increased premium spreads.

This segment’s profit margin percentage increased by 122.5 basis points or 264.6% to 1.688% from 0.463% in 2019.

Forward sales increase revenues but are associated with negligible gross margins.

The Company enters into forward contracts to hedge its precious metals price risk exposure and not for speculative purposes.

The wholesale trading ticket volume for the nine months ended March 31, 2020 increased by 19,505 tickets, or 20.3%, to 115,491 tickets from 95,986 tickets in 2019.

The increase in our trading ticket volume is indicative of increased trading activity due to higher demand as compared to 2019.

The wholesale trading ticket volume for the three months ended September 30, 2020 decreased by 907 tickets, or 2.5%, to 35,341 tickets from 36,248 tickets in 2019.

The decrease in our trading ticket volume was primarily due to fewer online sales orders, which are typically for smaller orders, as compared to 2019.

Selling, General and Administrative Expenses — Wholesale Trading & Ancillary Services

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Selling, general, and administrative expenses

Selling, general and administrative expenses for the three months ended March 31, 2020 increased $2.4 million , or 41.9% , to $8.0 million from $5.6 million in 2019 .

The change was primarily due to increases in performance-based compensation accruals of $2.3 million .

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Selling, general, and administrative expenses

Selling, general and administrative expenses for the nine months ended March 31, 2020 increased $2.7 million, or 16.5%, to $19.3 million from $16.5 million in 2019.

The change was primarily due to increases in performance-based compensation accruals of $2.8 million.

Selling, general and administrative expenses for the three months ended September 30, 2020 increased $1.8 million , or 31.1% , to $7.6 million from $5.8 million in 2019 .

The change was primarily due to increases in compensation accruals (including performanc e-based accruals) of $ 1 .

Interest Income — Wholesale Trading & Ancillary Services

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Interest income

Interest income for the three months ended March 31, 2020 increased $0.3 million, or 15.8%, to $2.4 million from $2.1 million in 2019.

The overall increase is primarily due to $0.2 million of product financing arrangements and $0.1 million of interest income earned from a note receivable issued in the current year.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Interest income

Interest income for the nine months ended March 31, 2020 increased $0.4 million, or 6.3%, to $6.9 million from $6.5 million in 2019.

The overall increase is primarily due to $0.3 million of product financing arrangements and $0.2 million of interest income earned from a note receivable issued in the current year.

Interest income for the three months ended September 30, 2020 increased $0.2 million, or 7.8%, to $2.4 million from $2.3 million in 2019.

The overall increase is primarily due to $0.2 million of finance product income and $0.1 million of interest income earned from a note receivable, partially offset by a $0.1 million decrease in margin interest income.

Interest Expense — Wholesale Trading & Ancillary Services

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Interest expense

Interest expense for the three months ended March 31, 2020 increased $0.5 million, or 22.7% to $2.9 million from $2.4 million in 2019.

The increase was primarily due to our notes payable, and the increase in our liability on borrowed metals.

As compared to the same year-ago period, the following interest expense components increased by:

(i) $0.2 million related to our notes payable, (ii) $0.2 million related to our liability on borrowed metals, and (iii) $0.1 million related to our product financing arrangements.

Nine Months Ended M arch 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Interest expense

Interest expense for the nine months ended March 31, 2020 increased $1.0 million, or 13.2% to $8.2 million from $7.3 million in 2019.

The increase was primarily due to our Trading Credit Facility, product financing arrangements, and the increase in our liability on borrowed metals, partially offset by a decrease in interest expense related to our notes payable.

As compared to the same year-ago period, the following interest expense components increased by:

(i) $0.8 million related to Trading Credit Facility, (ii) $0.4 million related to product financing arrangements, and (iii) $0.3 million related to our liability on borrowed metals, partially offset by a decrease of (iv) $0.6 million related to our notes payable.

Interest expense for the three months ended September 30, 2020 increased $0.1 million, or 4.3% to $2.9 million from $2.8 million in 2019.

The net increase of $0.1 million was primarily related to our liability on borrowed metals transactions.

Other income, net — Wholesale Trading & Ancillary Services

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Other income, net

Other income, net for the three months ended March 31, 2020 decreased $0.1 million or 25.5% to $0.3 million from $0.4 million in 2019.

The aggregate decrease was primarily due to a decrease in the Company’s proportionate share of our equity-method investees' earnings by $0.1 million compared to the prior comparable quarter.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Other income, net

Other income, net for the nine months ended March 31, 2020 decreased $1.0 million, or 72.7% to $0.4 million from $1.4 million in 2019.

The aggregate decrease was primarily related to a decrease in the Company’s proportionate share of our equity-method investees' earnings by $0.5 million compared to the prior comparable year-to-date period and an earn-out revaluation adjustment of $0.5 million that was recognized during the nine months ended March 31, 2019.

Other income, net for the three months ended September 30, 2020 increased $4.1 million or 34283.3% to $4.1 million from $0.0 million in 2019.

The aggregate increase was primarily due the Company’s proportionate share of our equity-method investees' earnings.

Results of Operations — Secured Lending Segment

2 unchanged sentences

AMCF was formed in September 2018, and its financial activity was incorporated into the Secured Lending segment's results thereafter.

Overview of Results of Operations for the Three Months Ended March 31, 2020 and 2019

— Secured Lending Segment

The operating results of our Secured Lending segment for the three months ended March 31, 2020 and 2019 are as follows:

in thousands, except performance metrics

Three Months Ended March 31,

Interest income

Interest expense

Selling, general and administrative expenses

Other income, net

Net income before provision for income taxes

Performance Metric:

Number of secured loans at period end (1)

Number of outstanding secured loans to customers at the end of the period.

Overview of Results of Operations for the Nine Months Ended March 31, 2020 and 2019

Overview of Results of Operations for the Three Months Ended September 30, 2020 and 2019

— Secured Lending Segment

The operating results of our Secured Lending segment for the nine months ended March 31, 2020 and 2019 are as follows:

The operating results of our Secured Lending segment for the three months ended September 30, 2020 and 2019 are as follows:

in thousands, except performance metrics

Nine Months Ended March 31,

Three Months Ended September 30,

Interest income

7 unchanged sentences

Interest Income — Secured Lending

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

in thousands, except performance metric

Three Months Ended March 31,

Interest income

Performance Metric

Number of secured loans at period-end

Interest income for the three months ended March 31, 2020 increased $0.8 million, or 30.3%, to $3.6 million from $2.8 million in 2019.

The number of secured loans outstanding decreased by 83.3% to 429 from 2,568 in 2019.

Typically, the number of loans increases during periods of increasing precious metal prices and decrease during periods of declining precious metal prices.

The Company did not incur loan losses related to the margin calls or borrower loan liquidations during this or the comparable period.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

in thousands, except performance metric

Nine Months Ended March 31,

Three Months Ended September 30,

Interest income

1 unchanged sentence

Number of secured loans at period-end

Interest income for the nine months ended March 31, 2020 increased $3.5 million, or 47.0%, to $11.1 million from $7.6 million in 2019.

Interest income for the three months ended September 30, 2020 decreased $2.0 million, or 55.9%, to $1.5 million from $3.5 million in 2019.

The number of secured loans outstanding decreased by 68.5% to 1,125 from 3,571 in 2019.

Typically, the number of loans increases during periods of increasing precious metal prices and decrease during periods of declining precious metal prices.

Typically, the number of loans increases during periods of increasing precious metal prices and decreases during periods of declining precious metal prices.

The Company did not incur loan losses related to the margin calls or borrower loan liquidations during the nine months ended March 31, 2020 or the comparable period.

The Company did not incur loan losses related to these margin calls or borrower loan liquidations.

In the two successive quarters, as silver prices rebounded, the Company experienced growth in the number of loans in the portfolio.

The Company did not incur loan losses related to the margin calls or borrower loan liquidations during the three months ended September 30, 2020 or the comparable period.

Interest Expense — Secured Lending

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Interest expense

Interest expense for the three months ended March 31, 2020 increased $0.3 million, or 14.5% to $2.1 million from $1.8 million in 2019.

The change in interest expense is driven by the growth of our secured loan portfolio, which is primarily financed through our notes payable and Trading Credit Facility.

As compared to the same year-ago period, interest expense increased by the following components:

(i) an increase of $0.3 million related to loan servicing, and (ii) an increase of $0.1 million related to our notes payable, partially offset by (iii) a decrease of $0.2 million related to our Trading Credit Facility.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Interest expense

Interest expense for the nine months ended March 31, 2020 increased $2.2 million, or 45.5% to $7.1 million from $4.9 million in 2019.

The change in interest expense is driven by the growth of our secured loan portfolio, which is primarily financed through our notes payable and Trading Credit Facility.

As compared to the same year-ago period, interest expense increased by the following components:

(i) an increase of $2.0 million related to our notes payable (which was issued in September 2018), and (ii) an increase of $0.9 million related to loan servicing, partially offset by (iii) a decrease of $0.7 million related to our Trading Credit Facility.

Interest expense for the three months ended September 30, 2020 decreased $1.0 million, or 41.9% to $1.3 million from $2.3 million in 2019.

The change in interest expense is driven by the value of our secured loan portfolio, which is primarily financed through our notes payable and Trading Credit Facility.

As compared to the same year-ago period, interest expense related to notes payable and Trading Credit Facility decreased by $0.7 million and loan servicing costs decreased by $0.3 million.

Selling, General and Administrative Expenses — Secured Lending

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Selling, general, and administrative expenses

Selling, general and administrative expenses for the three months ended March 31, 2020 increased $0.3 million, or 69.0%, to $0.7 million from $0.4 million in 2019.

The increase was primarily due to an increase in depreciation expense.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Selling, general, and administrative expenses

Selling, general and administrative expenses for the nine months ended March 31, 2020 increased $0.3 million, or 29.1%, to $1.4 million from $1.1 million in 2019.

The increase was primarily due to an increase in depreciation expense.

Selling, general and administrative expenses for the three months ended September 30, 2020 increased $0.1 million, or 42.5%, to $0.5 million from $0.4 million in 2019.

The increase was primarily due to an increase in amortization and depreciation expense.

Other Income — Secured Lending

Three Months Ended September 30,

Other income, net

Other income, net for the three months ended September 30, 2020 increased $0.3 million, or 754.8%, to $0.4 million from $0.1 million in 2019.

The increase of $0.3 million was due to royalty income earned from a related party.

(See Note 13 of the notes to condensed consolidated financial statements.)

Results of Operations — Direct Sales Segment

4 unchanged sentences

In connection with our formation of AMIP in May 2018, the financial activity of AMIP was incorporated into the Direct Sales segment's fiscal 2019 results.

In connection with the commencement PMPP operation in July 2019, the financial activity of PMPP was incorporated into the fiscal 2020 Direct Sales segment's results.

Overview of Results of Operations for the Three Months Ended March 31, 2020 and 2019

In connection with the commencement of PMPP’s operations in July 2019, the financial activity of PMPP was incorporated into the Direct Sales segment's results.

Overview of Results of Operations for the Three Months Ended September 30, 2020 and 2019

— Direct Sales Segment

The operating results of our Direct Sales segment for the three months ended March 31, 2020 and 2019 are as follows:

The operating results of our Direct Sales segment for the three months ended September 30, 2020 and 2019 are as follows:

in thousands, except performance metrics

Three Months Ended March 31,

Selling, general and administrative

Three Months Ended September 30,

Selling, general and administrative expenses

Other expense

Net income (loss) before provision for income taxes

10 unchanged sentences

Direct Sales segment trading ticket volume represents the total number of product orders processed by Goldline and PMPP.

Overview of Results of Operations for the Nine Months Ended March 31, 2020 and 2019

— Direct Sales Segment

The operating results of our Direct Sales segment for the nine months ended March 31, 2020 and 2019 are as follows:

in thousands, except performance metrics

Nine Months Ended March 31,

Selling, general and administrative

Interest expense

Other expense, net

Net loss before provision for income taxes

Performance Metrics:

Gold ounces sold (1)

Silver ounces sold (2)

Direct Sales ticket volume (3)

Includes $22.8 million of inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.

Gross profit percentage, excluding inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, is 13.294% for the period.

Includes $0.6 million of inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.

Gross profit percentage, excluding inter-segment company sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, is 11.342% for the period.

Gold ounces sold represents the ounces of gold product sold during the period.

Silver ounces sold represents the ounces of silver product sold during the period.

Direct Sales segment trading ticket volume represents the total number of product orders processed by Goldline and PMPP.

Segment Results — Direct Sales

Revenues — Direct Sales

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

in thousands, except performance metrics

Three Months Ended March 31,

Performance Metrics:

Gold ounces sold

Silver ounces sold

Revenues for the three months ended March 31, 2020 increased $9.0 million, or 57.4%, to $24.6 million from $15.6 million in 2019.

Excluding inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, revenues were $14.9 million for the three months ended March 31, 2020 and $15.3 million for the three months ended March 31, 2019.

Gold ounces sold for the three months ended March 31, 2020 increased 7,000 ounces, or 140.0%, to 12,000 ounces from 5,000 ounces in 2019.

Silver ounces sold for the three months ended March 31, 2020 decreased 177,000 ounces, or 49.3%, to 182,000 ounces from 359,000 ounces in 2019.

On average, the selling prices for gold increased by 5.3% and selling prices for silver decreased by 2.8% during the three months ended March 31, 2020 as compared to 2019.

A key factor that contributed to the increase in demand for precious metals was the recent volatility in precious metals caused by macroeconomic and other events.

These conditions are not representative of normal market conditions, and we are uncertain of the duration of these conditions.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

in thousands, except performance metrics

Nine Months Ended March 31,

Three Months Ended September 30,

Performance Metrics:

1 unchanged sentence

Silver ounces sold

Revenues for the nine months ended March 31, 2020 increased $23.0 million, or 58.7%, to $62.1 million from $39.1 million in 2019.

Excluding inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, revenues for the nine months ended March 31, 2020 increased $0.7 million or 1.9% to $39.2 million from $38.5 million in 2019.

Gold ounces sold for the nine months ended March 31, 2020 increased 18,000 ounces, or 150.0%, to 30,000 ounces from 12,000 ounces in 2019.

Silver ounces sold for the nine months ended March 31, 2020 decreased 393,000 ounces, or 44.1%, to 499,000 ounces from 892,000 ounces in 2019.

On average, the selling prices for gold increased by 10.3% and selling prices for silver increased by 1.2% during the nine months ended March 31, 2020 as compared to 2019.

A key factor that contributed to the increase in demand for precious metals was the recent volatility in precious metals caused by macroeconomic and other events.

Revenues for the three months ended September 30, 2020 increased $32.3 million, or 161.0%, to $52.4 million from $20.1 million in 2019.

Excluding inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, revenues were $47.7 million for the three months ended September 30, 2020 and $11.5 million for the three months ended September 30, 2019.

Gold ounces sold for the three months ended September 30, 2020 increased 7,000 ounces, or 70.0%, to 17,000 ounces from 10,000 ounces in 2019.

Silver ounces sold for the three months ended September 30, 2020 increased 139,000 ounces, or 72.8%, to 330,000 ounces from 191,000 ounces in 2019.

On average, the selling prices for gold increased by 44.1% and selling prices for silver increased by 46.1% during the three months ended September 30, 2020 as compared to 2019.

A combination of price volatility, increased demand, and supply constraints led to a significant expansion in premium spreads in the precious metals market during the last three successive quarters .

These factors were brought on by the recent volatility in precious metal prices caused by macroeconomic and other events.

These conditions are not representative of normal market conditions, and we are uncertain of the duration of these conditions.

Gross Profit — Direct Sales

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

in thousands, except performance metric

Three Months Ended March 31,

Performance Metric:

Direct Sales ticket volume

Gross profit for the three months ended March 31, 2020 increased by $0.9 million, or 53.0%, to $2.7 million from $1.8 million in 2019.

The Company’s profit margin percentage decreased by 2.8% to 11.101% from 11.422% in 2019.

Excluding the impact of inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment, the Direct Sales segment's gross profit margin percentage increased by 78.3% to 20.787% from 11.660% in 2019.

The Direct Sales ticket volume for the three months ended March 31, 2020 decreased by 903 tickets, or 17.7%, to 4,190 tickets from 5,093 tickets in 2019.

The decrease in trading ticket volume was primarily due to higher premiums causing supply constraints as compared to 2019.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

in thousands, except performance metric

Nine Months Ended March 31,

Three Months Ended September 30,

Performance Metric:

Direct Sales ticket volume

Gross profit for the nine months ended March 31, 2020 increased by $1.5 million, or 34.0%, to $5.8 million from $4.4 million in 2019.

For the nine months ended March 31, 2020, the Company’s profit margin percentage decreased by 15.6% to 9.408% from 11.145% in 2019.

The Direct Sales ticket volume for the nine months ended March 31, 2020 decreased by 476 tickets, or 3.6%, to 12,569 tickets from 13,045 tickets in 2019.

The decrease in trading ticket volume was primarily due to higher premiums causing supply constraints as compared to 2019.

Gross profit for the three months ended September 30, 2020 increased by $3.9 million, or 249.6%, to $5.5 million from $1.6 million in 2019.

The Company’s profit margin percentage increased by 267.0 basis points or by 33.9% to 10.538% from 7.868% in 2019.

The Direct Sales ticket volume for the three months ended September 30, 2020 increased by 1,131 tickets, or 32.5%, to 4,607 tickets from 3,476 tickets in 2019.

The increase in trading ticket volume was primarily due to higher demand as compared to 2019.

Selling, General and Administrative Expense — Direct Sales

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Three Months Ended March 31,

Selling, general and administrative

Selling, general and administrative expenses for the three months ended March 31, 2020 decreased $0.5 million, or 22.1%, to $1.7 million from $2.2 million in 2019.

The decrease in selling, general and administrative expenses was primarily due to cost reduction efforts implemented at Goldline, resulting in reduced advertising and personnel costs, which were offset by an increase in the costs of operating PMPP.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Three Months Ended September 30,

Selling, general and administrative

Selling, general and administrative expenses for the nine months ended March 31, 2020 decreased $0.6 million, or 9.2%, to $5.9 million from $6.5 million in 2019.

Interest expense — Direct Sales

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

There was no activity for the current or comparable quarterly period.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Interest expense

Interest expense for the nine months ended March 31, 2020 decreased $0.3 million, or 100.0% to $0.0 million from $0.3 million in 2019.

The decrease primarily relates to the extinguishment of the Goldline Credit Facility in the second quarter of fiscal 2019.

Other income (expense) — Direct Sales

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

There was no activity for the current or comparable quarterly period.

Nine Months Ended March 31, 2020 Compared to Nine Months Ended March 31, 2019

Nine Months Ended March 31,

Selling, general and administrative expenses for the three months ended September 30, 2020 decreased $0.2 million, or 10.2%, to $1.9 million from $2.1 million in 2019.

The decrease in selling, general and administrative expenses was primarily due to cost reduction efforts implemented at Goldline, resulting in reductions of legal costs of $0.2 million, computer consulting costs of $0.1 million, and personnel costs of $0.1 million, which were partially offset by increases in advertising costs of $0.2 million.

Other expense — Direct Sales

Three Months Ended September 30,

Other expense, net

For the nine months ended March 31, 2020, the other expense activity of $0.2 million related to a one-time charge in connection with the settlement of the purchase price related to the acquisition of Goldline.

For the nine months ended March 31, 2019, the other expense activity of $0.2 million related to a premium associated with the extinguishment Goldline Credit Facility before its maturity date.

LIQUIDITY AND FINANCIAL CONDITION

For the three months ended September 30, 2019, other expense of $0.2 million related to a one-time charge in connection with the settlement of the purchase price of Goldline.

There was no activity for the current comparable quarter.

LIQUIDITY AND FIN ANCIAL CONDITION

Primary Sources and Uses of Cash

2 unchanged sentences

A substantial portion of our assets are liquid.

As of March 31, 2020 , approximately 95.1% of our asse ts consisted of cash, receivables, derivative assets, secured loans receivables, precious metals held under financing arrangements and inventories, measured at fair value.

As of September 30, 2020, approximately 94.5% of our assets consisted of cash, receivables, derivative assets, secured loans receivables, precious metals held under financing arrangements and inventories, measured at fair value.

Cash generated from the sales of our precious metals products is our primary source of operating liquidity.

Typically, the Company acquires its inventory by:

(1) purchasing inventory from our suppliers by utilizing our own capital and lines of credit;

(2) borrowing precious metals from our suppliers under short-term arrangements which may bear interest at a designated rate, and (3) repurchasing inventory at an agreed-upon price based on the spot price on the specified repurchase date.

(i) purchasing inventory from our suppliers by utilizing its own capital and lines of credit;

(ii) borrowing precious metals from its suppliers under short-term arrangements which may bear interest at a designated rate, and (iii) repurchasing inventory at an agreed-upon price based on the spot price on the specified repurchase date.

In addition to selling inventory, the Company generates cash from earning interest income.

6 unchanged sentences

The Company also continually monitors its current and forecasted cash requirements and draws upon and pays down its lines of credit so as to minimize interest expense.

The Company believes that the Trading Credit Facility (as defined below), the notes payable, liabilities on borrowed metals, and product financing arrangements provides adequate means to capital for its operations.

The Company believes that the Trading Credit Facility (as defined below), the notes payable, liabilities on borrowed metals, and product financing arrangements provide adequate means to capital for its operations.

(See Note 14 of the notes to condensed consolidated financial statements.)

Lines of Credit

September 30,

Lines of credit

2 unchanged sentences

acts as joint lead lender and administrative agent and Natixis acts as joint lead arranger and syndication agent for the syndicate.

As of March 31, 2020, the Trading Credit Facility provided the Company with access up to $270.0 million, featuring a $220.0 million base, with a $50.0 million accordion option.

As of September 30, 2020, the Trading Credit Facility provided the Company with access up to $270.0 million, featuring a $257.5 million base, with a $12.5 million accordion option.

The maturity date of the credit facility is March 26, 2021.

The Trading Credit Facility was formed on March 31, 2016, and the Company has successfully amended and extended the terms of the Trading Credit Facility each year since its inception.

A-Mark routinely uses funds drawn under the Trading Credit Facility to purchase metals from its suppliers and for other operating cash flow purposes.

Our CFC subsidiary also uses the funds drawn under the Trading Credit Facility to finance its lending activities.

The cash generated from our operations typically increases during periods of high demand for our products, market supply constraints, and increased volatility of the price of precious metals.

Notes Payable

September 30,

Notes payable

3 unchanged sentences

The Notes have a maturity date of December 15, 2023.

As of March 31, 2020 , the consolidated aggregate carryin g balance of the Notes was $92.3 million (which excludes the $5.0 million Note that the Company retained), and the remaining unamortized loan cost balance was appro ximately $2.7 million , which is amortized ratably through the maturity date.

As of September 30, 2020, the consolidated aggregate carrying balance of the Notes was $92.7 million (which excludes the $5.0 million Note that the Company retained), and the remaining unamortized loan cost balance was approximately $2.3 million, which is amortized using the effective interest method through the maturity date.

(See Note 14 of the notes to condensed consolidated financial statements.)

Liabilities on Borrowed Metals

September 30,

Liabilities on borrowed metals

4 unchanged sentences

Product Financing Arrangements

September 30,

Product financing arrangements

7 unchanged sentences

Secured Loans Receivable

September 30,

Secured loans receivable

2 unchanged sentences

(See Note 14 of the notes to condensed consolidated financial statements.) Most of the Company's secured loans are short-term in nature.

The renewal of these instruments is at the discretion of the Company and, as such, provides us with some flexibility in regards to our capital deployment strategies.

The Company did not incur loan losses related to the margin calls and borrower loan liquidations.

The renewal of these instruments is at the discretion of the Company and, as such, provides us with some flexibility in regard to our capital deployment strategies.

On September 3, 2020, the Company's Board of Directors declared a non-recurring special dividend of $1.50 per share to common stock shareholders of record at the close of business on September 21, 2020, payable on or about September 25, 2020.

The dividends paid totaled $10.6 million.

The majority of the Company’s trading activities involve two-day value trades under which payment is received in advance of delivery or product is received in advance of payment.

2 unchanged sentences

The Company uses various short-term financial instruments to manage the rapid cycle of our trading activities from customer purchase order to cash collections and product delivery, which can cause material changes in the amount of cash used in or provided by financing activities on a daily basis.

The following summarizes components of our condensed consolidated statements of cash flows for the nine months ended March 31, 2020 and 2019:

Nine Months Ended

Net cash (used in) provided by operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

The following summarizes components of our condensed consolidated statements of cash flows for the three months ended September 30, 2020 and 2019:

September 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Our principal capital requirements have been to fund (i) working capital and (ii) investing activity.

Our working capital requirements fluctuate with market conditions, the availability of precious metals and the volatility of precious metals commodity pricing.

Net cash provided by operating activities

Operating activities used $13.8 million and provided $20.4 million in cash for the nine months ended March 31, 2020 and 2019, respectively, representing a $34.1 million decrease in the source of cash compared to the nine months ended March 31, 2019.

This period over period decrease in the source of cash was primarily due to changes in the balances of:

inventories, receivables, and derivative assets;

offset by changes in the balances of:

accounts payable and other current liabilities, derivative liabilities, and liabilities on borrowed metals.

Net cash (used in) provided by investing activities

Investing activities provided $66.0 million and used $5.7 million in cash for the nine months ended March 31, 2020 and 2019, respectively, representing a $71.7 million increase in the source of cash compared to the nine months ended March 31, 2019.

This period over period increase was due to the change in the balance of secured loans of $73.4 million compared to the comparable prior period, as a higher number of loans were liquidated in the current period due to price volatility, partially offset by cash used in providing loans of $3.5 million to customers.

Net cash used in financing activities

Financing activities provided $34.9 million and used $16.2 million in cash for the nine months ended March 31, 2020 and 2019, respectively, representing a $51.2 million increase in the source of cash compared to the nine months ended March 31, 2019.

This period over period increase was primarily due to changes in the balance of product financing arrangements of $75.8 million, the change in the balance of the Trading Credit Facility of $59.0 million, change in repayments on notes payable to a related party of $7.5 million and the change in debt issuance costs of $3.1 million;

offset by the change in proceeds from issuance of notes payable of $90.0 million received in the prior fiscal year and the change in proceeds received from an unsecured advance of $4.2 million in the prior fiscal year.

Net cash used in operating activities

Operating activities used $98.1 million and $62.5 million in cash for the three months ended September 30, 2020 and 2019, respectively, representing a $35.6 million increase in the use of cash compared to the three months ended September 30, 2019.

This increase in cash used is mainly due to higher usage of working capital balances, offset by higher net income generated from increased demand for precious metal products.

The use of cash due to changes in working capital balances included:

derivative assets, receivables, inventories, and liabilities on borrowed metals, partially offset by an increase in cash due to changes in working capital balances of:

accounts payable and other current liabilities and precious metals held under financing arrangements.

Net cash used in investing activities

Investing activities used $25.3 million and $35.0 million in cash for the three months ended September 30, 2020 and 2019, respectively, representing a $9.7 million decrease in the use of cash compared to the three months ended September 30, 2019.

This period over period decrease was due to the change in the use of cash for secured loans and other notes receivables of $7.1 million and $3.0 million respectively.

Net cash provided by financing activities

Financing activities provided $95.4 million and $101.6 million in cash for the three months ended September 30, 2020 and 2019, respectively, representing a $6.2 million decrease in the source of cash compared to the three months ended September 30, 2019.

This period over period decrease was primarily due to a decrease in the source of cash from product financing arrangements of $37.7 million and dividends paid of $10.6 million;

offset by an increase in the source of cash from the Trading Credit Facility of $42.0 million.

CAPITAL RESOURCES

7 unchanged sentences

We use a variety of strategies to manage our risk including fluctuations in commodity prices for precious metals.

Our inventory consist of, and our trading activities involve, precious metals and precious metal products, whose prices are linked to the corresponding precious metal commodity prices.

Our inventory consists of, and our trading activities involve, precious metals and precious metal products, whose prices are linked to the corresponding precious metal commodity prices.

Inventory purchased or borrowed by us are subject to price changes.

7 unchanged sentences

However, we also maintain relationships with major market makers in every major precious metals dealing center, which allows us to enter into contracts with market makers.

Our forwards contracts open at March 31, 2020 are scheduled to settle within 60 days.

Futures positions do not have settlement dates, although the Company typically closes its future positions within a week.

Our forwards contracts open at September 30, 2020 are scheduled to settle within 60 days.

Futures positions do not have settlement dates.

The Company typically uses futures contracts for its shorter-term hedge positions and forward contracts for longer term hedge positions.

The Company enters into these derivative transactions solely for the purpose of hedging our inventory holding risk, and not for speculative market purposes.

1 unchanged sentence

The Company adjusts the derivatives to fair value on a daily basis until the transactions are settled.

When these contracts are net settled, the unrealized gains and losses are reversed and the realized gains and losses for forward contracts are recorded in revenue and cost of sales and the net realized gains and losses for futures and option contracts are recorded in cost of sales.

The Company’s net gains on derivative instruments for the three months ended March 31, 2020 and 2019, totaled $13.2 million and $28.2 million, respectively.

The Company’s net gains on derivative instruments for the nine months ended March 31, 2020 and 2019, totaled $10.8 million and $20.2 million, respectively.

These net gains on derivative instruments were substantially offset by the changes in fair market value of the underlying precious metals inventory and open sale and purchase commitments, which is also recorded in cost of sales in the condensed consolidated statements of income.

The Company’s net gains on derivative instruments for the three months ended September 30, 2020 and 2019 , totaled $ 78 .

3 million and $2 5 .

1 million , respectively.

The purpose of the Company's hedging policy is to substantially match the change in the value of the derivative financial instrument to the change in the value of the underlying hedged item.

The following table summarizes the results of our hedging activities, showing the precious metal commodity inventory position, net of open sale and purchase commitments, which is subject to price risk, compared to change in the value of the derivati ve instruments as of March 31, 2020 and June 30, 2019:

The following table summarizes the results of our hedging activities, showing the precious metal commodity inventory position, net of open sale and purchase commitments, which is subject to price risk, compared to change in the value of the derivative instruments as of September 30, 2020 and June 30, 2020:

September 30,

Precious metals held under financing arrangements

22 unchanged sentences

We regularly review the creditworthiness of our major counterparties and monitor our exposure to concentrations.

At March 31, 2020, we believe our risk of counterparty default is mitigated based on our evaluation of the creditworthiness of our major counterparties, the strong financial condition of our counterparties, and the short-term duration of these arrangements.

At September 30, 2020, we believe our risk of counterparty default is mitigated based on our evaluation of the creditworthiness of our major counterparties, the strong financial condition of our counterparties, and the short-term duration of these arrangements.

Commitments and Contingencies

1 unchanged sentence

OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2020 and June 30, 2019, we had the following outstanding sale and purchase commitments and open forward and future contracts, which are normal and recurring, in nature:

As of September 30, 2020 and June 30, 2020, we had the following outstanding sale and purchase commitments and open forward and future contracts, which are normal and recurring, in nature:

September 30,

Purchase commitments

5 unchanged sentences

The notional amounts of the commodity forward and futures contracts and the open sales and purchase orders, as shown in the table above, are not reflected at the notional amounts in the condensed consolidated balance sheets.

The Company records commodity forward and futures contracts at the fair value, which is the difference between the market price of the underlying metal or contract measured on the reporting date and the trade amount measured on the date the contrac t was transacted.

The fair value of the open derivative contracts are shown as a component of derivative assets or derivative liabilities in the accompanying condensed consolidated balance sheets.

20 unchanged sentences

When these contracts are settled, the unrealized gains and losses are reversed, and revenue is recognized for contracts that are physically settled.

For contracts that are net settled, the realized gains and losses are recorded in cost of sales, with the exception of forward contracts, where their associated realized gain and losses are recorded in revenue and cost of sales, respectively.

Also, the Company recognizes its storage, logistics, licensing, and other services revenues in accordance with the FASB's release ASU 2014-09 Revenue From Contracts With Customers Topic 606 ("ASC 606"), which follows five basic steps to determine whether revenue can be recognized:

For contracts that are net settled, the realized gains and losses are recorded in cost of sales, with the exception of forward contracts, where their associated realized gains and losses are recorded in revenue and cost of sales, respectively.

Also, the Company recognizes its storage, logistics, licensing, and other services revenues in accordance with the FASB's release ASU 2014-09 Revenue From Contracts With Customers Topic 606 and subsequent related amendments ("ASC 606"), which follows five basic steps to determine whether revenue can be recognized:

(i) identify the contract with a customer;

1 unchanged sentence

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company's inventory primarily includes bullion and bullion coins, which are initially recorded at fair market value.

(iv) allocate the transaction price to the perfor mance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company's inventory primarily includes bullion and bullion coins, which is acquired and initially recorded at cost and then marked to fair market value.

The fair market value of the bullion and bullion coins is comprised of two components:

(1) published market values attributable to the cost of the raw precious metal, and (2) a published premium paid at acquisition of the metal.

(i) published market values attributable to the cost of the raw precious metal, and (ii) a published premium paid at acquisition of the metal.

The premium is attributable to the additional value of the product in its finished goods form and the market value attributable solely to the premium may be readily determined, as it is published by multiple reputable sources.

1 unchanged sentence

The precious metal component of the inventory may be hedged through the use of precious metal commodity positions, while the premium component of our inventory is not a commodity that may be hedged.

The Company’s inventory, except for cer tain lower of cost or net realizable value basis products (as described below), is subsequently recorded at their fair market values.

The daily changes in the fair market value of our inventory are offset by daily changes in the fair market value of hedg ing derivatives that are taken with respect to our inventory positions;

both the change in the fair market value of the inventory and the change in the fair market value of these derivative instruments are recorded in cost of sales in the condensed conso li dated statements of income .

The Company’s inventory, except for certain lower of cost or net realizable value basis products (as described below), is subsequently recorded at their fair market values.

The daily changes in the fair market value of our inventory are offset by daily changes in the fair market value of hedging derivatives that are taken with respect to our inventory positions;

While the premium component included in inventory is marked-to-market, our commemorative coin inventory, including its premium component, is held at the lower of cost or net realizable value, because the value of commemorative coins is influenced more by supply and demand determinants than on the underlying spot price of the precious metal content of the commemorative coins.

19 unchanged sentences

Upon termination the customer’s rights to repurchase any remaining inventory is forfeited.

Goodwill and Other Purchased Intangible Assets

Goodwill and Other P urchased Intangible Assets

We evaluate goodwill and other indefinite-lived intangibles for impairment annually in the fourth quarter of the fiscal year (or more frequently if indicators of potential impairment exist) in accordance with the Intangibles - Goodwill and Other Topic 350 of the ASC.

5 unchanged sentences

If the Company concludes that the fair value of the reporting unit is less than its carrying value, a goodwill impairment will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

The Company also performs impairment reviews on its indefinite-lived intangible assets (i.e., trademarks and trade-names).

The Company also performs impairment reviews on its indefinite-lived intangible assets (i.e., trade names and trademarks).

In assessing its indefinite-lived intangible assets for impairment, the Company has the option to first perform a qualitative assessment to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount.

If the Company determines that it is not more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the Company is not required to perform any additional

tests in assessing the asset for impairment.

However, if the Company concludes otherwise or elects not to perform the qualitative assessment, then it is required to perform a quantitative analysis to determine if the fair value of an indefinite-lived intangible asset is less than its carrying value.

If through a qu antitative analysis the Company determines the fair value of an indefinite-lived intangible asset exceeds its carrying amount, the indefinite-lived intangible asset is considered not to be impaired.

If the Company concludes that the fair value of an indefi nite-lived intangible asset is less than its carrying value, an impairment will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value.

If through a quantitative analysis the Company determines the fair value of an indefinite-lived intangible asset exceeds its carrying amount, the indefinite-lived intangible asset is considered not to be impaired.

If the Company concludes that the fair value of an indefinite-lived intangible asset is less than its carrying value, an impairment will be recognized for the amount by which the carrying amount exceeds the indefinite-lived intangible asset’s fair value.

As part of the process of preparing its condensed consolidated financial statements, the Company is required to estimate its provision for income taxes in each of the tax jurisdictions in which it conducts business, in accordance with the Income Taxes Topic 740 of the ASC ("ASC 740").

12 unchanged sentences

Based on our assessment, it appears more likely than not that all of the net deferred tax assets will be realized through future taxable income.

The Company's condensed consolidated financial statements recognizes the current and deferred income taxes consequences that result from the Company's activities during the current and preceding periods, as if the Company were a separate taxpayer prior to the date of the spinoff of the Company when it was a member of the consolidated income tax return group of Spectrum Group International, Inc.

Following its spin-off, the Company separately files its federal and state income tax filings.

The Company recognizes current and deferred income taxes as a separate taxpayer for periods ending after the date of the spinoff.

RECENT ACCOUNTING PRONOUNCEMENTS

For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial position or results of operations, see Note 2 of the notes to condensed consolidated financial statements.

QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATI VE DI SCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

CONTR OLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We have not experienced any material impact to our internal control over financial reporting during the COVID-19 pandemic.

Many of our employees worked remotely during the period in which we prepared these financial statements and, accordingly, we ensured ongoing related oversight and monitoring procedures continued during the financial close and reporting process.

We did not compromise our disclosure controls and procedures.

We are continually monitoring and assessing our disclosure controls to ensure disclosure controls and procedures continue to be effective.

Although our newly formed joint venture PMPP began its operations during the quarter ended September 30, 2019, its total assets only comprised 0.17% of the Company's total assets as of March 31, 2020, and 0.83% of the Company's total revenues for the nine months ended March 31, 2020.

Internal controls over financial reporting related to PMPP is subject to evaluation in accordance with the requirements of Section 404(a) of Sarbanes-Oxley.

PART II — OTHE R INFORMATION

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis