What changed in this filing

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Item 1A. Risk Factors

2020-11-12 compared with 2020-05-08 · 60 added, 41 removed, 281 unchanged (26% of the section changed)

17 unchanged sentences

Amounts under the Trading Credit Facility bear interest based on one-month LIBOR plus (i) 2.50% for revolving credit line loans and (ii) 4.50% for loans extended in excess of the then-available revolving credit line.

The LIBOR was approximately 0.99% as of March 31, 2020.

The LIBOR was approximately 0.15% as of September 30, 2020.

Uncertainty about the future of LIBOR may adversely affect our business.

6 unchanged sentences

The Company utilizes its Trading Credit Facility to purchase and finance precious metals and for operating cash flow purposes.

Effective as of March 27 , 2020 , the Trading Credit Facility was amended to include contingency provisions for the discontinuatio n of LIBOR.

Under these provisions, the Company and the administrative agent for the facility may jointly select an alternative benchmark rate, giving due consideration to recommendations of replacement rates by governmental bodies and prevailing market c onventions.

Although alternative reference rates have been proposed, it is unknown whether these alternative reference rates will attain market acceptance as replacements of LIBOR.

If LIBOR ceases to exist, the method and rate used to calculate our variable-rate debt in the future, particularly under our Trading Credit facility, may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate.

As such, the potential effect of any such event on our cost of capital, financial results, and cash flows cannot yet be determined.

Effective as of March 27 , 2020 , the Trading Credit Facility was amended to include contingency provisions for the discontinuation of LIBOR.

Under these provisions, the Company and the administrative agent for the facilit y may jointly select an alternative benchmark rate, giving due consideration to recommendations of replacement rates by governmental bodies and prevailing market conventions.

Although alternative reference rates have been proposed, it is unknown whether th ese alternative reference rates will attain market acceptance as replacements of LIBOR.

If, as currently anticipated, LIBOR is replaced by alternative rates, the method and rate used to calculate our variable-rate debt in the future, particularly under our Trading Credit facility, may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

Because arrangements for the anticipated replacement of LIBOR have not yet been finalized, the potential effect of the replacement of LIBOR on our cost of capital, financial results, and cash flows cannot yet be determined.

We could suffer losses with our financing operations.

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our loan underwriting and other credit policies and controls designed to assure repayment, which may prove inadequate to prevent losses;

our ability to sell collateral upon customer defaults for amounts sufficient to offset credit losses, which can be affected by a number of factors outside of our control, including (i) changes in economic conditions, (ii) increases in market rates of interest and (iii) changes in the condition or value of the collateral;

our ability to sell collateral upon customer defaults for amounts sufficient to offset credit losses, which can be affected by a number of factors outside of our control, including (i) changes in economic conditions, including as a consequence of the current COVID-19 pandemic, (ii) increases in market rates of interest and (iii) changes in the condition or value of the collateral;

the reserves we establish for loan losses, which may prove inadequate.

5 unchanged sentences

If CFC were to default on its repurchase obligations, this could materially adversely affect the business of CFC, and could adversely affect the Company’s future ability to access the credit markets.

CFC and the Company have exposure to the performanc e of AM Capital Funding.

CFC and the Company have exposure to the performance of AM Capital Funding.

Regulation RR of the SEC requires the sponsor of an asset-backed securitization transaction, or certain of its affiliates, to retain an economic interest in the transaction.

10 unchanged sentences

This customer base provides deep distribution of product and makes A-Mark a desirable trading partner for precious metals product manufacturers, including sovereign mints seeking to distribute precious metals coinage or large refiners seeking to sell large volumes of physical precious metals.

Three customers represented 34.7% of A-Mark's revenues for the nine months ended March 31, 2020.

The same three customers represented 32.3% of A-Mark's revenues for the nine months ended March 31, 2019.

One customer represented 20.6% of A-Mark's revenues for the three months ended September 30, 2020.

The same customer represented 4.8% of A-Mark's revenues for the three months ended September 30, 2019.

If our relationships with these customers deteriorated, or if we were to lose these customers, our business would be materially adversely affected.

31 unchanged sentences

We maintain facilities for our clients’ and our own precious metal and numismatic inventories, where we receive and store these products and from which we make shipments for physical settlement in our trading activity.

We have implemented strict procedures at these facilities to insure social distancing and minimize the risk of infected personnel.

We have implemented strict procedures at these facilities to ensure social distancing and minimize the risk of infected personnel.

Nonetheless, there can be no assurance that we will not experience an outbreak of infection at these facilities, which could necessitate their closure or the curtailment of their activity.

We rely on specialized, armored vehicles provided by third party commercial services to transport precious metals and numismatics to and from our customers and from the mints and our other suppliers.

If these vehicles were deemed essential to other customers in the current crisis, such that we were unable to obtain adequate use of the vehicles, our ability to make physical settlement of our trading activity, to provide storage services to our customer, and to obtain necessary inventory would be curtailed and could be suspended entirely.

We engage in transactions with numerous financial counterparties.

If these parties were to experience significant financial reversals, for example as a result of investments in sectors that have suffered severe downturns as a result of the COVID-19 pandemic, these parties may be unable to comply with their financial obligations to us, may cease transacting business with us or could curtail or terminate the credit that they extend to us.

While we deal with a significant number of counterparties, we nonetheless have concentration in our customer base, with 34.7% of our revenues in the nine months ended March 31, 2020 being attributable to three customers.

While we deal with a significant number of counterparties, we nonetheless have concentration in our customer base, with 20.6% of our revenues in the three months ended September 30, 2020 being attributable to one customer.

To the extent that the COVID-19 pandemic were to materially and adversely affect the financial condition of customers responsible for a material portion of our revenues, our business could be correspondingly impaired.

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We are also dependent on the production of gold and silver mints around the world for the supply of the majority of our product requirements.

A number of mints, and refineries that supply gold and silver for the mints, have suspended operations during the COVID-19 crisis, and as a result we have recently experienced periods when numismatics products were unavailable to us.

A number of mints, and refineries that supply gold and silver for the mints, reduced the capacity of their operations during the COVID-19 crisis, and as a result we have recently experienced periods when precious metals products were unavailable to us.

The uncertainty regarding the availability of coin and other products could make it difficult for us to commit to future delivery, could make it more difficult for us to forecast and plan for our coin and bar operations and could otherwise adversely impact this aspect of our business.

We rely on specialized, armored vehicles provided by third party commercial services to transport precious metals and numismatics to and from our customers and from the mints and our other suppliers.

We have significant operations outside the United States.

We derive about 5% to 25% of our revenues from business outside the United States, including from customers in developing countries.

We derive a significant portion of our revenues from business outside the United States, including from customers in developing countries.

Business operations outside the U.S.

5 unchanged sentences

However, if our business in these areas of the world were to increase, we would also face risks that are particular to developing countries, including the difficulty of enforcing agreements, collecting receivables, protecting inventory and other assets through foreign legal systems, limitations on the repatriation of earnings, currency devaluation and manipulation of exchange rates, and high levels of inflation.

We try to manage these risks by monitoring current and anticipated political, economic, legal and regulatory developments in the countries outside the United States in which we operate or have customers and adjusting operations as appropriate, but ther e can be no assurance that the measures we adopt will be successful in protecting the Company’s business interests.

We try to manage these risks by monitoring current and anticipated political, economic, legal and regulatory developments in the countries outside the United States in which we operate or have customers and adjusting operations as appropriate, b ut there can be no assurance that the measures we adopt will be successful in protecting the Company’s business interests.

We are dependent on our key management personnel and our trading experts.

Our performance is dependent on our senior management and certain other key employees.

We have employment agreements with Greg Roberts, our CEO and Thor Gjerdrum, our President, which expires on June 30, 2023 and June 30, 2022, respectively.

We have employment agreements with Greg Roberts, our CEO, and Brian Aquilino, our COO, which both expire on June 30, 2023, and with Thor Gjerdrum, our President, which expires on June 30, 2022.

These and other employees have expertise in the trading markets, have industry-wide reputations, and perform critical functions for our business.

31 unchanged sentences

In addition, if we fail to comply with applicable laws and regulations or implement responsible business, social and environmental practices, we could be subject to damage to our reputation, class action

lawsuits, legal and settlement costs, civil and criminal liability, increased cost of regulatory compliance, restatements of our financial statements, disruption of our business and loss of customers.

Any required changes to our employment pra ctices could result in the loss of employees, reduced sales, increased employment costs, low employee morale and harm to our business and results of operations.

In addition, political and economic factors could lead to unfavorable changes in federal and st ate tax laws, which may increase our tax liabilities.

Any required changes to our employment practices could result in the loss of employees, reduced sales, increased employment costs, low employee morale and harm to our business and results of operations.

In addition, political and economic factors cou ld lead to unfavorable changes in federal and state tax laws, which may increase our tax liabilities.

An increase in our tax liabilities could adversely affect our results of operations.

We are also regularly involved in various litigation matters that arise in the ordinary course of business.

Litigatio n or regulatory developments could adversely affect our business and financial condition.

We are also regularly involved in various litigation matters that ari se in the ordinary course of business.

Litigation or regulatory developments could adversely affect our business and financial condition.

There are various federal, state, local and foreign laws, ordinances and regulations that affect our trading business.

7 unchanged sentences

Also, we may face disqualification as a supplier for customers and reputational challenges if the due diligence procedures we implement do not enable us to verify the origins for the gold used in our products or to determine that the gold is conflict free.

CFC operates under a California Finance Lenders License issued by the California Department of Corporations.

CFC operates under a California Finance Lenders License issued by the California Department of Business Oversight.

CFC is required to submit a finance lender law annual report to the state which summarizes certain loan portfolio and financial information regarding CFC.

The Department of Corporations may audit the books and records of CFC to determine whether CFC is in compliance with the terms of its lending license.

The Department of Business Oversight may audit the books and records of CFC to determine whether CFC is in compliance with the terms of its lending license.

In addition, the Commodity Futures Trading Commission and other federal and state agencies may assert oversight over aspects of CFC's operations.

There can be no assurance that the regulation of our trading and lending businesses will not increase or that compliance with the applicable regulations will not become more costly or require us to modify our business practices.

One or more states could assert that the Company is liable for sales and use or similar taxes, which could adversely affect our business.

Changes in U.S.

tax law could adversely affect our business and financial condition.

The laws, rules, and regulations dealing with U.S.

federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S.

Treasury Department.

Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock.

In recent years, many changes have been made to applicable tax laws and changes are likely to continue to occur in the future.

It cannot be predicted whether, when, in what form, or with what effective dates, new tax laws may be enacted, or regulations and rulings may be enacted, promulgated or issued under existing or new tax laws, which could result in an increase in our tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax law or in the interpretation thereof.

One or more states or municipalities could assert that the Company is liable for sales and use, commerce, or similar type of taxes, which could adversely affect our business.

In South Dakota v.

3 unchanged sentences

The effect of Wayfair was to uphold economic nexus principles in determining sales and use tax nexus.

As a result of the decision, most states have adopted laws that require an out-of-state retailer to register and collect sales and use taxes upon meeting certain economic nexus standards regardless of whether the company has physical presence in the state.

As a result of the decision, most states have adopted laws that require an out-of-state retailer to register and collect sales and use or other non-income type taxes upon meeting certain economic nexus standards regardless of whether the company has physical presence in the state.

Although the Company believes it is complying with these new requirements, our interpretation and application of the newly enacted legislation may differ from the states, which could result in the states' attempt to impose additional tax liabilities, including potential penalties and interest.

22 unchanged sentences

Although the GDPR will apply across the EU without a need for local implementing legislation, EU member states have the ability to interpret the GDPR opening clauses, which permit region-specific data protection legislation and have the potential to create inconsistencies on a country-by-country basis.

The Company has an office in Vienna, Austria that markets to international (including EU) customers.

The Company has an office in Vienna, Austria that provides marketing support services for our international (including EU) customers.

Although our international operations are currently modest compared to our business in the United States, our international business could grow over time.

5 unchanged sentences

The “personal information” regulated by CCPA is broadly defined to include identification or association with a California consumer or household, including demographics, usage, transactions and inquiries, preferences, inferences drawn to create a profile about a consumer, and education information.

Compliance with CCPA requires the implementation of a series of operational measures such as preparing data maps, inventory, or other records of all personal information pertaining to California residents, households and devices, as well as information sources, usage, storage, and sharing, maintaining and updating detailed disclosures in privacy policies, establishing mechanisms (including, at a minimum, a toll-free telephone number and an online channel) to respond to consumers’ data access, deletion, portability, and opt-out requests, providing a clear and conspicuous “Do Not Sell My Personal Information” link on the home page of the business’ website, etc.

Comp liance with CCPA requires the implementation of a series of operational measures such as preparing data maps, inventory, or other records of all personal information pertaining to California residents, households and devices, as well as information sources , usage, storage, and sharing, maintaining and updating detailed disclosures in privacy policies, establishing mechanisms (including, at a minimum, a toll-free telephone number and an online channel) to respond to consumers’ data access, deletion, portabil ity, and opt-out requests, providing a clear and conspicuous “Do Not Sell My Personal Information” link on the home page of the business’ website, etc.

CCPA prohibits businesses from discriminating against consumers who have opted out of the sale of their personal information, subject to a narrow exception.

It allows companies to provide financial incentives to California consumers in order to obtain their consent to the collection and use of their personal information.

Violations of CCPA will result in civil penalties up to $7,500 per violation.

Violations of CCPA will result in civ il penalties up to $7,500 per violation.

CCPA further allows consumers to file lawsuits against a business if a data breach has occurred and the California Attorney General does not prosecute the business.

In addition, on May 29, 2019, Nevada’s governor approved a bill (the “Ame ndment Bill”), effective on October 1, 2019.

In addition, on May 29, 2019, Nevada’s governor approved a bill (the “Amendment Bill”), effective on October 1, 2019.

The Amendment Bill provides amendments to an existing law that requires operators of websites and online services to post a notice on their websites regarding their privacy practices.

The Amendment Bill requires operators of internet websites or online services to establish a designated request address through which a consumer may submit a verified request directing such operators not to make any sale of covered information collected about the consumer.

The “cove red information” regulated by the Amendment Bill is defined to include an enumerated list of items of personally identifiable information (including names, addresses, email addresses, phone numbers, social security numbers and identifiers that allow a spec ific person to be contacted).

The “covered information” regulated by the Amendment Bill is defined to include an enumerated list of items of personally identifiable information (including names, addresses, email addresses, phone numbers, social security numbers and identifiers that allow a specific person to be contacted).

The changes introduced by the CCPA and the Amendment Bill, and any similar regulations enacted by other jurisdictions, will subject the Company to additional costs and complexity of compliance, by requiring, among other things, changes to the Company’s security systems, policies, procedures and practices.

6 unchanged sentences

Stack’s-Bowers Numismatics LLC.

("Stack's Bowers Galleries"), which is primarily engaged in the business of auctions of high-value and rare coins and in coin retailing, is a wholly-owned subsidiary of SGI, our former parent and a related party.

("Stack's Bowers"), which is primarily engaged in the business of auctions of high-value and rare coins and in coin retailing, is a wholly owned subsidiary of SGI, our former parent and a related party.

We have engaged in the past, and continue to engage, in transactions with Stack’s Bowers, some of which are presently on-going.

4 unchanged sentences

Nonetheless, these transactions could be perceived as being conflicted.

The Company’s direct-to-client sales business could be subject to accusations of improper sales practices .

Through its Goldine subsidiary, the Company sells precious metals and numismatics directly to the retail investor community.

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

Prior to its acquisition by the Company, Goldline had been accused of improper sales practices, and was the subject of a state enforcement action that was subsequently settled.

Other retailers of precious metal products have similarly been the subject of accusations regarding their sales practices, including claims of misrepresentation, excessive product markups, pressured sales tactics and product switching.

The Company believes that the sales practices of its Goldline subsidiary conform to applicable legal and ethical standards, and that there is no material basis for claims against Goldline in this regard.

Nevertheless, given the nature of the retail precious metals business, the possibility that investors in precious metals may lose a substantial portion of their investment as a result of adverse market trends and the vulnerability of certain retail precious metal investors to economic loss, there can be no assurance that claims will not be made regarding Goldline’s business practices or that, if made, such claims will not attract the attention of governmental and private sector consumer advocates.

Were this to occur, the Company could suffer adverse publicity, be subject to governmental enforcements actions or be forced to modify the sales and marketing practices of its direct-to-client sales business.

The Company’s joint venture, Precious Metals Purchasing Partners LLC, is subject to risks which may affect our ability to successfully operate the joint venture.

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Each of these risks could have a material adverse impact on the viability of PMPP, which could have a material adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition.

Risks relating to AMST

In addition, because PMPP engages in transaction with retail customers, it could be subject to risks and accusations similar to those discussed above with respect to the Company’s direct-to-client sales business.

The Company is subject to risks relating to its AMST operations.

In August 2016, the Company formed a joint venture, AM&ST Associates, LLC.

1 unchanged sentence

The Company owns a majority interest in AMST.

AMST depends on critical pieces of equipment which may be out of service occasionally for scheduled upgrades or maintenance or as a r esult of unanticipated failures or business interruptions.

AMST depends on critical pieces of equipment which may be out of service occasionally for scheduled upgrades or maintenance or as a result of unanticipated failures or business interruptions.

AMST’s facilities are subject to equipment failures and the risk of catastrophic loss due to unanticipated events such as fires, earthquakes, accidents or violent weather conditions.

AMST has insur ance to cover certain of the risks associated with equipment damage and resulting business interruption, but there are certain events that would not be covered by insurance and there can be no assurance that insurance will continue to be available on accep table terms.

AMST has insurance to cover certain of the risks associated with equipment damage and resulting business interruption, but there are certain events that would not be covered by insurance and there can be no assurance that insurance will continue to be available on acceptable terms.

Interruptions in AMST’s processing and production capabilities and shutdowns resulting from unanticipated events could have a material adverse effect on our financial condition, results of operations and cash flows.

The Company is a party to an exclusive distribution agreement with AMST with respect to the silver products produced by AMST.

Under this agreement, which terminates in August 2021 unless automatically renewed for an additional two years (subject to early termination under certain circumstances) the Company is currently required to order no less than 175,000 ounces of silver products per week (which amount is subject to re-evaluation every 60 days.) The price paid per ounce is mutually determined by the parties, and is subject to adjustments every six months during the term.

Under this agreement, which terminates in August 2021 unless automatically renewed for an additional two years (subject to early termination under certain circumstances) the Company is currently required, through November 2020, to order no less than 500,000 ounces of silver products per week (which amount is subject to re-evaluation every 60 days.) The price paid per ounce is mutually determined by the parties and is subject to adjustments every six months during the term.

The market for fabricated silver products and refined silver is highly competitive and fragmented.

14 unchanged sentences

See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations .”

Our business is exposed to commodity price risks, and our hedging activity to protect our inventory is subject to risks of default by our counterparties.

Our business is exposed to commodity price risks, and our hedging activity to protect our inventory is subje ct to risks of default by our counterparties.

A-Mark’s precious metals inventory is subject to market value changes created by change in the underlying commodity price, as well as supply and demand of the individual products the Company trades.

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In addition, if we do not maintain effective internal controls, we may not be able to accurately report our financial information on a timely basis, which could harm the trading price of our common stock, impair our ability to raise additional capital, or jeopardize our continued listing on the NASDAQ Global Select Market or any other stock exchange on which common stock may be listed.

We are not currently paying dividends and may not pay dividends in the future.

The Company has not made a dividend payment since January 2018.

We are not currently paying regular dividends and may not pay any dividends in the future.

The Company suspended its regular dividend policy in the third quarter of fiscal 2019.

The declaration of cash dividends is subject to the determination each quarter by the Board of Directors, based on its assessment of a number of factors, including the Company’s financial performance, available cash resources, cash requirements, bank covenants, and alternative uses of cash that the Board of Directors may conclude would represent an opportunity to generate a greater return on investment for the Company.

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, which was paid on September 2 5, 2020.

See Note 19 for information about a non-recurring special dividend declared by the Board of Directors in the second quarter of fiscal 2021.

There can be no assurance that the Company will resume paying dividends on a regular basis.

17 unchanged sentences

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 1A. Risk Factors