What changed in this filing

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Item 1. Financial Statements

2021-02-10 compared with 2020-11-12 · 281 added, 252 removed, 1063 unchanged (33% of the section changed)

1 unchanged sentence

Index to the Condensed Consolidated Financial Statements and Notes thereof

Condensed Consolidated Balance Sheets as of September 30, 2020 and June 30, 2020

Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2020 and 2019

Condensed Consolidated Statements of Stockholders' Equity for the Three Months Ended September 30, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2020 and 2019

Notes to Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets as of December 31, 2020 and June 30, 2020

Condensed Consolidated Statements of Income for the Three and Six Months Ended December 31, 2020 and 2019

Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended December 31, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2020 and 2019

Notes to Consolidated Financial Statements

Description of Business

18 unchanged sentences

(amounts in thousands, except for share data) (unaudited)

September 30,

Current assets:

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and outstanding:

none as of September 30, 2020 and June 30, 2020

none as of December 31, 2020 and June 30, 2020

Common stock, par value $0.01;

40,000,000 shares authorized;

and 7,031,500 shares issued and outstanding as of September 30, 2020

and 7,031,500 shares issued and outstanding as of December 31, 2020

and June 30, 2020, respectively

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Includes amounts of the consolidated variable interest entity, which is presented separately in the table below.

See accompanying Notes to Condensed Consolidated Financial Statements

See accompanying

Notes to Condensed Consolidated Financial Statements

A-MARK PRECIOUS METALS, INC.

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See Note 14 for additional information.

September 30,

ASSETS OF THE CONSOLIDATED VIE

Receivables, net

Derivative assets

Secured loans receivable

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Total liabilities of the consolidated variable interest entity

This is an intercompany balance, which is eliminated in consolidation and hence not shown on the condensed consolidated balance sheets.

This is an intercompany balance, which is eliminated in consolidation and hence it is not shown on the condensed consolidated balance sheets.

$5.0 million of the Notes are held by A-Mark, which is eliminated in consolidation and hence not shown on the condensed consolidated balance sheets.

5 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Cost of sales

3 unchanged sentences

Other income (expense), net

Unrealized losses on foreign exchange

Unrealized gains (losses) on foreign exchange

Net income before provision for income taxes

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Balance, September 30, 2019

Share-based compensation

Balance, December 31, 2019

Stockholders'

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Balance, September 30, 2020

Share-based compensation

Net settlement on issuance of common shares on exercise of options

Dividends declared ($1.50 per common share)

Balance, December 31, 2020

See accompanying Notes to Condensed Consolidated Financial Statements

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(amounts in thousands) (unaudited)

Three Months Ended September 30,

Six Months Ended December 31,

Cash flows from operating activities:

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Income tax payable

Net cash used in operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Capital expenditures for property, plant, and equipment

Purchase of long-term investments

Purchase of intangible assets

Secured loans receivable, net

Other loans originated

Other secured loans, net

Net cash used in investing activities

5 unchanged sentences

Net settlement on issuance of common shares on exercise of options

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net (decrease) increase in cash, cash equivalents, and restricted cash

7 unchanged sentences

Interest added to principal of secured loans

See accompanying Notes to Condensed Consolidated Financial Statements

See accompanying

Notes to Condensed Consolidated Financial Statements

A-MARK PRECIOUS METALS, INC.

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The Company conducts its operations in three reportable segments:

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

(i) Wholesale Sales & Ancillary Services (formerly known as Wholesale Trading & Ancillary Services segment), (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 Financial Accounting Standards Board’s ("FASB") Accounting Standards Codification (“ASC”).

(See Note 18 .)

Wholesale Trading & Ancillary Services

The Wholesale Trading & Ancillary Services segment operates as a full-service precious metals trading company.

The products that this segment sells include:

The Wholesale Sales & Ancillary Services segment name change was to the name only and had no impact on the Company's historical financial position, results of operations, cash flow or segment level results previously reported.

Wholesale Sales & Ancillary Services

The Wholesale Sales & Ancillary Services segment operates as a full-service precious metals company.

The products sold within this segment include:

gold, silver, platinum, and palladium primarily in the form of coins, rounds, bars, wafers, and grain.

1 unchanged sentence

consignment, storage, logistics, hedging, and various customized financial programs.

Through its wholly owned subsidiary, A-Mark Trading AG (“AMTAG”), the Company promotes A-Mark's products and services throughout the European continent.

Through its wholly owned subsidiary, A-Mark Trading AG (“AMTAG”), the Company promotes A-Mark's goods and services to the international market.

Transcontinental Depository Services (“TDS”), also a wholly owned subsidiary of the Company, offers worldwide storage solutions to institutions, dealers, and consumers.

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("Goldline"), is a direct retailer of precious metals to the investor community.

Goldline markets its precious metal products primarily on television, radio, and the internet.

Goldline markets its precious metal products primarily on radio, television, and the internet.

Goldline sells gold and silver bullion in the form of coins, rounds, and bars.

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PPMP acquires precious metals from retail customers and resells the metals to partners or affiliates of the joint venture.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFIC ANT ACCOUNTING POLICIES

Principles of Consolidation

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The Company consolidates its subsidiaries that are wholly owned, majority owned, and entities that are variable interest entities where the Company is determined to be the primary beneficiary.

Our condensed consolidated financial statements include the accounts of:

A-Mark, AMTAG, TDS, AMGL, AMST, CFC, AMCF, Goldline, AMIP, and PMPP (collectively the “Company”).

Our condensed consolidated financial statements include the accounts of A-Mark, AMTAG, TDS, AMGL, AMST, CFC, AMCF, Goldline, AMIP, and PMPP (collectively the “Company”).

Intercompany accounts and transactions are eliminated.

Comprehensive Income

For the three months ended September 30, 2020 and 2019, there were no items that gave rise to other comprehensive income or loss, and, as a result net income equaled comprehensive income.

For the six months ended December 31, 2020 and 2019, there were no items that gave rise to other comprehensive income or loss, and, as a result net income equaled comprehensive income.

Use of Estimates

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The accompanying interim condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting.

These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the condensed consolidated balance sheets, condensed consolidated statements of income, condensed consolidated statement of stockholders’ equity, and condensed consolidated statements of cash flows for the periods presented in accordance with U.S.

Operating results for the three months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021 or for any other interim period during such fiscal year.

These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the condensed consolidated balance sheets, condensed consolidated statements of income, condensed consolidated statements of stockholders’ equity, and condensed consolidated statements of cash flows for the periods presented in accordance with U.S.

Operating results for the six months ended December 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021 or for any other interim period during such fiscal year.

Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S.

GAAP have been omitted in accordance with the rules and regulations of the SEC.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (the “2020 Annual Report”), as filed with the SEC.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended 2020 (the “2020 Annual Report”), as filed with the SEC.

Amounts related to disclosure of June 30, 2020 balances within these interim condensed consolidated financial statements were derived from the aforementioned audited consolidated financial statements and notes thereto included in the 2020 Annual Report.

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Credit risk with respect to loans of inventory to customers is minimal.

The Company enters into inventory hedging transactions, principally utilizing metals commodity futures contracts traded on national futures exchanges or forward contracts with credit worthy financial institutions.

The Company enters into inventory hedging

transactions, principally utilizing metals commodity futures contracts traded on national futures exchanges or forward contracts with credit worthy financial institutions.

All of our commodity derivative contracts are under master netting arrangements and include both asset and liability positions.

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A variable interest entity ("VIE") is a legal entity that has either i) a total equity investment that is insufficient to finance its activities without additional subordinated financial support or ii) whose equity investors as a group lack the ability to control the entity’s activities or lack the ability to receive expected benefits or absorb obligations in a manner that is consistent with their investment in the entity.

A VIE is consolidated for accounting purposes by its primary beneficiary, which is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

A VIE is consolidated for accounting purposes by its primary beneficiary, which is the party that has both the power to direct the activities that most significantly impact the VIEs economic performance, and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE.

The Company consolidates VIEs when it is deemed to be the primary beneficiary.

Management regularly reviews and reconsiders its previous conclusions regarding whether it holds a variable interest in potential VIEs, the status of an entity as a VIE, and whether the Company is required to consolidate such VIE's in the consolidated financial statements.

AMCF, a wholly owned subsidiary of CFC, is a special purpose entity ("SPE") formed as part of a securitization transaction in order to isolate certain assets and distribute the cash flows from those assets to investors.

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AMCF is required to maintain separate books and records.

The assets and liabilities of this VIE, as of September 30, 2020 and June 30, 2020, are indicated on the table that follows the condensed consolidated balance sheets.

The assets and liabilities of this VIE, as of December 31, 2020 and June 30, 2020, are indicated on the table that follows the condensed consolidated balance sheets .

AMCF is a VIE because its initial equity investment may be insufficient to maintain its ongoing collateral requirements without additional financial support from the Company.

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(See Note 14 .)

Cash and Cash E quivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents.

The Company does not have any cash equivalents as of September 30, 2020 and June 30, 2020.

As of September 30, 2020 and June 30, 2020, the Company has $0.2 million and $0.2 million, respectively, in a bank account that is restricted and serves as collateral against a standby letter of credit issued by the bank in favor of the landlord for our office space in Los Angeles, California.

The Company does not have any cash equivalents as of December 31, 2020 and June 30, 2020.

As of December 31, 2020 and June 30, 2020, the Company has $0.2 million and $0.2 million, respectively, in a bank account that is restricted and serves as collateral against a standby letter of credit issued by the bank in favor of the landlord for our office space in Los Angeles, California.

Precious Metals held under Financing Arrangements

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Upon termination, the customer’s right to repurchase any remaining precious metal is forfeited, and the related precious metals are reclassified as inventory held for sale.

As of September 30, 2020 and June 30, 2020, precious metals held under financing arrangements totaled $158.8 million and $178.6 million respectively.

As of December 31, 2020 and June 30, 2020 , precious metals held under financing arrangements totaled $ 160.3 million a nd $ 178.6 million respectively.

The Company’s precious metals held under financing arrangements are marked-to-market.

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

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

(i) published market values attributable to the costs 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.

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Finance lease cost is recognized as a combination of the amortization expense for the ROU assets and interest expense for the outstanding lease liabilities using the discount rate discussed above.

The de preciable life of ROU assets is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Our lease agreem ents do not contain any significant residual value guarantees or material restrictive covenants.

Income from subleases was not significant for any period presented.

During the three months ended September 30, 2020, we incurred lease costs of $0.5 million, which is primarily comprised of operating lease cost of $0.3 million.

The other costs are insignificant and relate to our finance leases, short-term leases, and variable lease payments.

For the three months ended September 30, 2020, we made cash payments of $0.4 million for operating lease obligations.

The depreciable life of ROU assets is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Our lease agreements do not contain any significant residual value guarantees or material restrictive covenants.

Components of operating lease expense for the three and six months ended December 31, 2020 and 2019 were as follows:

Three Months Ended

Six Months Ended

Operating lease costs

Short term and variable lease costs

Finance lease costs

Sublease income

Total lease costs, net

For the six months ended December 31, 2020 and 2019 , we made cash payments for operating lease obligations of $0.8 million and $0.7 million, respectively.

These payments are included in operating cash flows.

At September 30, 2020, the weighted-average remaining lease term under our capitalized operating leases was 4.3 years, while the weighted-average discount rate for our operating leases was approximately 4.9%.

The following represents our future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities, as of September 30, 2020:

At December 31, 2020 , the weighted-average remaining lease term under our capitalized operating leases was 4.2 years, while the weighted-average discount rate for our operating leases was approximately 4.9%.

The following represents our future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities, as of December 31, 2020 :

Years ending June 30,

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Operating lease liability - long-term

Represents the present value of the capitalized operating lease liabilities as of September 30, 2020.

Represents the present value of the capitalized operating lease liabilities as of December 31, 2020.

Current operating lease liabilities are presented within accrued liabilities on our condensed consolidated balance sheets.

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Depreciation and amortization are calculated using a straight line method based on the estimated useful lives of the related assets, ranging from three years to twenty-five years.

Depreciation and amortization commence when the related assets are placed into service.

Depreciation and amortization commences when the related assets are placed into service.

Internal-use software development costs are capitalized during the application development stage.

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Under the equity method, the carrying value of the investment is adjusted for the Company’s proportionate share of the investee’s earnings or losses, with the corresponding share of earnings or losses reported in other income, net.

carrying value of the investment is reduced by the amount of the dividends received from the equity-method investee, as they are considered a return of capital.

The carrying value of the investment is reduced by the amount of the dividends received from the equity-method investee, as they are considered a return of capital.

We evaluate our long-term investments for impairment quarterly or whenever events or changes in circumstances indicate that a decline in the fair value of these assets is determined to be other-than-temporary.

Additionally, the Company performs an on-going evaluation of its equity method investments with which the Company has variable interests to determine if any of these entities are VIEs that are required to be consolidated.

None of the Company’s long-term investments are VIEs as of September 30, 2020 and June 30, 2020.

None of the Company’s long-term investments are VIEs as of December 31, 2020 and June 30, 2020.

Other Long-Term Assets

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We charge off receivables at such time as it is determined collection will not occur.

On September 19, 2019, the Company, as lender, entered into a convertible revolving credit facility with one of its privately-held customers (the borrower) that provides the borrower an aggregate principal amount of up to $4.0 million, bearing interest at 12.0% per annum.

On September 19, 2019, the Company, as lender, entered into a convertible revolving credit facility with a privately-held supplier and counterparty (the borrower) that provides the borrower an aggregate principal amount of up to $4.0 million , bearing interest at 12.0% per annum.

The facility expires on September 18, 2022 .

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and (vi) deposit accounts, in each case subordinated to an unrelated third-party lender’s security interest.

Effective October 1, 2020, A-Mark exercised its right to convert $1.0 million of the $3.5 million outstanding convertible revolving credit facility balance and exercised our right to repay in full borrower’s third-party loan, which totaled $5.8 million at the exercise date.

As a result, the Company owns 31.2% of borrower’s outstanding common stock.

As of December 31, 2020 and June 30, 2020, the carrying value of the convertible revolving credit facility was $2.5 million and $3.5 million, respectively.

Revenue Recognition

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Orders that have been paid for and shipped, but not yet delivered to the customer are classified as deferred revenue.

Both customer advances and deferred revenue are components of accounts payable and other current liabilities in the condensed consolidated balance sheets.

Both customer advances and deferred revenue are components of accounts payable and other current liabilities in the condensed consolidated balance sheet s .

Hedging Activities

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Repayment is usually in the same form as the metals advanced, but may be settled in cash.

Other Income an d Expense, Net

Other Income and Expense, Net

The Company's other income and expense is derived from the Company's proportional interest in the reported net income or loss of our investees that are accounted for under the equity method of accounting (see Note 9 ), royalty income, and costs associated with the purchase of Goldline.

Advertising expense is recorded as incurred and was $0.7 million and $0.5 million, respectively, for the three months ended September 30, 2020 and 2019.

Advertising expense is recorded as incurred and was $0.6 million and $0.3 million, respectively, for the three months ended December 31, 2020 and 2019.

Advertising expense was $1.3 million and $0.8 million, respectively, for the six months ended December 31, 2020 and 2019.

Shipping and Handling Costs

Shipping and handling costs represent costs associated with shipping product to customers, and receiving product from vendors and are included in cost of sales in the condensed consolidated statements of income.

Shipping and handling costs incurred totaled $3.2 million and $1.4 million, respectively, for the three months ended September 30, 2020 and 2019.

Shipping and handling costs incurred totaled $1.8 million and $1.4 million, respectively, for the three months ended December 31, 2020 and 2019.

Shipping and handling costs incurred totaled $5.0 million and $2.8 million, respectively, for the six months ended December 31, 2020 and 2019.

Share-Based Compensation

22 unchanged sentences

Diluted EPS reflects the total potential dilution that could occur from outstanding equity awards, including unexercised stock options, utilizing the treasury stock method.

A reconciliation of shares used in calculating basic and diluted earnings per common shares for the three months ended September 30, 2020 and 2019 , is presented below.

A reconciliation of shares used in calculating basic and diluted earnings per common shares for the three and six months ended December 31, 2020 and 2019, is presented below.

Three Months Ended

September 30,

Six Months Ended

Basic weighted average shares outstanding

3 unchanged sentences

Dividends are recorded if and when they are declared by the Board of Directors.

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.

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

Recently Adopted Accounting Pronouncements

On October 29, 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 November 23, 2020.

In the aggregate, the Company paid $21.2 million in dividends for the six months ended December 31, 2020.

Recently Adopted Acco unting Pronouncements

From time to time, the Financial Accounting Standards Board ("FASB") or other standards setting bodies issue new accounting pronouncements.

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The standard will be effective for us beginning July 1, 2021, with early adoption permitted.

We are currently evaluating the impact of this standard on our consolidated financial statements, and do not expect it to be material.

The adoption of this guidance is not expected to have a material impact on our consolidated financial statements .

In June 2016, the FASB issued ASU No.

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We are currently evaluating the potential impact of this standard on our consolidated financial statements.

ASSETS AND LIABIL ITIES, AT FAIR VALUE

ASSETS AND LIABILITIES, AT FAIR VALUE

Fair Value of Financial Instruments

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The carrying amounts of lines of credit approximate fair value based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities.

The carrying amounts of the Company's other long-term assets, which include a note receivable due from a customer, approximate fair value as of September 30, 2020.

The carrying amounts of the Company's other long-term assets, which include a note receivable due from a customer, approximate fair value as of December 31, 2020.

The Company’s fixed-rate notes payable is reported at its aggregate principal amount less unamortized original issue discount and deferred financing costs on the accompanying consolidated balance sheets.

The fair value of the notes payable is based on the present value of the expected coupon and principal payments using an estimated discount rate based on current market rates for debt with similar credit risk.

The following table presents the carrying amounts and estimated fair values of the Company’s fixed rate notes payable of September 30, 2020 and June 30, 2020:

September 30, 2020

The following table presents the carrying amounts and estimated fair values of the Company’s fixed-rate notes payable of December 31, 2020 and June 30, 2020 :

December 31, 2020

June 30, 2020

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Except for commemorative coin inventory, which are included in inventory at the lower of cost or net realizable value, the Company’s inventory is subsequently recorded at their fair market values on a daily basis.

The fair value for commodities inventory (i.e., inventory excluding

commemorative coins) is determined using pricing data derived from the mar kets on which the underlying commodities are traded.

The fair value for commodities inventory (i.e., inventory excluding commemorative coins) is determined using pricing data derived from the markets on which the underlying commodities are traded.

Precious metals commodities inventory is classified in Level 1 of the valuation hierarchy.

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Derivatives .

Futures contracts and forward contracts and open sale and purchase commitments are valued at their fair values, based on the difference between the quoted market price and the contractual price (i.e., intrinsic value,) and are included within Level 1 of the valuation hierarchy.

Futures contracts, forward contracts, and open sale and purchase commitments are valued at their fair values, based on the difference between the quoted market price and the contractual price (i.e., intrinsic value,) and are included within Level 1 of the valuation hierarchy.

Margin and Borrowed Metals Liabilities .

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Product financing arrangements are classified in Level 1 of the valuation hierarchy.

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and June 30, 2020, aggregated by the level in the fair value hierarchy within which the measurements fall:

September 30, 2020

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and June 30, 2020, aggregated by the level in the fair value hierarchy within which the measurements fall:

December 31, 2020

Active Markets

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Derivative assets — open sale and purchase commitments, net

Derivative assets — futures contracts

Derivative assets — forward contracts

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Derivative liabilities — futures contracts

Derivative liabilities — forward contracts

Total liabilities, valued at fair value

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These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only under certain circumstances.

These include:

(i) equity method investments that are written down to fair value when a decline in the fair value is determined to be other-than-temporary, (ii) property, plant, and equipment and definite-lived intangibles, or (iii) goodwill and indefinite-lived intangibles, all of which are written down to fair value when they are held for sale or determined to be impaired.

These include:(i) equity method investments that are written down to fair value when a decline in the fair value is determined to be other-than-temporary, (ii) property, plant, and equipment and definite-lived intangibles, or (iii) goodwill and indefinite-lived intangibles, all of which are written down to fair value when they are held for sale or determined to be impaired.

The resulting fair value measurements of the assets are considered to be Level 3 measurements.

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In assessing the reasonableness of its determined fair values, the Company evaluates its results against other value indicators, such as comparable transactions and comparable public company trading values.

Receivables consist of the following as of September 30, 2020 and June 30, 2020:

September 30,

Receivables consist of the following as of December 31, 2020 and June 30, 2020:

Customer trade receivables

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SECURED LOANS RECEIVABLE

Below is a summary of the carrying value of our secured loans as of September 30, 2020 and June 30, 2020:

September 30,

Below is a summary of the carrying value of our secured loans as of December 31, 2020 and June 30, 2020:

Secured loans originated

1 unchanged sentence

Secured loans acquired

Includes $6 thousand of loan premium as of September 30, 2020.

Includes $6 thousand of loan premium as of December 31, 2020.

Includes $6 thousand of loan premium as of June 30, 2020.

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Typically, the seller of the loan portfolio retains the responsibility for the servicing and administration of the loans.

As of September 30, 2020 and June 30, 2020, our secured loans carried weighted-average effective interest rates of 8.9% and 8.9%, respectively, and mature in periods ranging typically from on-demand to one year.

As of December 31, 2020 and June 30, 2020, our secured loans carried weighted-average effective interest rates of 8.7% and 8.9%, respectively, and mature in periods ranging typically from on-demand to one year.

The secured loans that the Company generates with active customers of A-Mark are reflected as an operating activity on the condensed consolidated statements of cash flows.

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The Company's secured loan receivables portfolio comprises loans with similar credit risk profiles, which enables the Company to apply a standard methodology to determine the credit quality for each loan and the allowance for credit losses, if any.

The credit quality of each loan is generally determined by the collateral value assessment, loan-to-value ratio (that is, the pr incipal amount of the loan divided by the estimated value of the collateral) and the type (or class) of secured material.

The credit quality of each loan is generally determined by the collateral value assessment, loan-to-value ratio (that is, the principal amount of the loan divided by the estimated value of the collateral) and the type (or class) of secured material.

All loans are fully secured by precious metal bullion or numismatic collateral, which remains in the physical custody of the Company for the duration of the loan.

The term of the loans is generally 180 days, however loans are typically renewed prior to maturity and therefore remain outstanding for a longer period of time.

Interest earned on a loan is billed monthly and is typically du e and payable within 20 days .

Interest earned on a loan is billed monthly and is typically due and payable within 20 days.

When an account is in default or if a margin call has not been met on a timely basis, the Company has the right to liquidate the borrower's collateral in order to satisfy the unpaid balance of the outstanding loans, including accrued and unpaid interest.

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The Company's secured loans by portfolio class, which align with internal management reporting, are as follows:

September 30, 2020

December 31, 2020

June 30, 2020

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Below is summary of aggregate outstanding secured loan balances bifurcated into ( i ) loans with a loan-to-value ratio of 75% or more and (ii ) loans with a loan-to-value ratio of less than 75% :

September 30, 2020

December 31, 2020

June 30, 2020

1 unchanged sentence

Loan-to-value of 75% or more

The Company had no loans with a loan-to-value ratio in excess of 100% as of September 30, 2020 or June 30, 2020.

The Company had no loans with a loan-to-value ratio in excess of 100% as of December 31, 2020 and June 30, 2020.

Non-Performing Loans/Impaired Loans

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In the event a loan was to become non-performing, the Company would determine a reserve to reduce the carrying balance to its estimated net realizable value.

As of September 30, 2020, or June 30, 2020, the Company had no allowance for secured loan losses.

As of December 31, 2020 and June 30, 2020, the Company had no allowance for secured loan losses.

A loan is considered impaired if it is probable, based on current information and events, that the Company will be unable to collect all amounts due according to the contractual terms of the loan.

Customer loans are reviewed for impairment and include loan s that are past due, non-performing, or in bankruptcy.

Customer loans are reviewed for impairment and include loans that are past due, non-performing, or in bankruptcy.

In the event of an impairment, recognition of interest income would be suspended and the loan would be placed on non-accrual status at the time.

Accrual would be resumed, and previously suspended inter est income would be recognized, when the loan becomes contractually current and/or collection doubts are removed.

Accrual would be resumed, and previously suspended interest income would be recognized, when the loan becomes contractually current and/or collection doubts are removed.

Cash receipts on impaired loans are recorded first against the receivable and then to any unrecognized interest income.

For the three months e nded September 30, 2020 and 2019 , the Company incurred no loan impairment costs.

For the six months ended December 31, 2020 and 2019, the Company incurred no loan impairment costs.

Our inventory consists of the precious metals that the Company has physically received, and inventory held by third-parties, which, at the Company's option, it may or may not receive.

Below, our inventory is summarized by classification at September 30, 2020 and June 30, 2020:

September 30,

Below, our inventory is summarized by classification at December 31, 2020 and June 30, 2020:

Inventory held for sale

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Inventory held for sale represents precious metals, excluding commemorative coin inventory, that have been received by the Company and are not subject to repurchase by or consignment arrangements with third parties, borrowed precious metals, and product financing arrangements.

As of September 30, 2020 and June 30, 2020, the inventory held for sale totaled $211.2 million and $153.4 million, respectively.

As of December 31, 2020 and June 30, 2020, the inventory held for sale totaled $122.1 million and $153.4 million, respectively.

Repurchase Arrangements with Customers .

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

As of September 30, 2020 and June 30, 2020, included within inventories is $80.8 million and $71.0 million, respectively, of precious metals products subject to repurchase arrangements with customers.

As of December 31, 2020 and June 30, 2020 , included within inventories is $100.0 million and $71.0 million , respectively, of precious metals products subject to repurchase arrangements with customers.

Consignment Arrangements with Customers .

The Company periodically loans metals to customers on a short-term consignment basis.

Inventory loaned under consignment arrangements to customers as of September 30, 2020 and June 30, 2020 totaled $0.7 million and $2.8 million, respectively.

Inventory loaned under consignment arrangements to customers as of December 31, 2020 and June 30, 2020 totaled $1.6 million and $2.8 million, respectively.

Such transactions are recorded as sales and are removed from the Company's inventory at the time the customer elects to price and purchase the precious metals.

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Unlike our bullion coins, the value of commemorative coins is not subject to the same level of volatility as bullion coins because our commemorative coins typically carry a substantially higher premium over the spot metal price than bullion coins.

Our commemorative coins are not hedged, and are included in inventories at the lower of cost or net realizable value and totaled $9,000 and $17,000 as of September 30, 2020 and June 30, 2020, respectively.

B orrowed Precious Metals .

Borrowed prec ious metals inventory include:

(i ) metals held by suppliers as colla teral on advanced pool metals, (ii ) metals due to suppliers for the use of their consigned inventory, (iii ) unallocated metal positions held by custo mers i n the Company’s inventory, and (iv ) shortages in unallocated metal positions held by the Company in the supplier’s inventory.

Our commemorative coins are not hedged, and are included in inventories at the lower of cost or net realizable value and totaled $9,000 and $17,000 as of December 31, 2020 and June 30, 2020, respectively.

Borrowed Precious Metals .

Borrowed precious metals inventory include:

(i) metals held by suppliers as collateral on advanced pool metals, (ii) metals due to suppliers for the use of their consigned inventory, (iii) unallocated metal positions held by customers in the Company’s inventory, and (iv) shortages in unallocated metal positions held by the Company in the supplier’s inventory.

Unallocated or pool metal represents an unsegregated inventory position that is due on demand, in a specified physical form, based on the total ounces of metal held in the position.

Amounts due under these arrangements require delivery either in the form of precious metals or cash.

The Company's inventory included borrowed precious metals with market values totaling $18.8 mill ion and $19.3 million as of September 30, 2020 and June 30, 2020 , respectively, with a corresponding offsetting obligation included in liabilities on borrowed metals on the condensed consolidated balance sheets.

The Company's inventory included borrowed precious metals with market values totaling $21.5 million and $19.3 million as of December 31, 2020 and June 30, 2020, respectively, with a corresponding offsetting obligation reflected as liabilities on borrowed metals on the condensed consolidated balance sheets.

Product Financing Arrangements .

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The obligation is stated at the amount required to repurchase the outstanding inventory.

Both the product financing arrangements and the underlying inventory are carried at fair value, with changes in fair value included in cost of sales in the condensed consolidated statements of income.

Such obligations totaled $101.6 million and $74.7 million as of September 30, 2020 and June 30, 2020, respectively.

Both the product financing and the underlying inventory are carried at fair value, with changes in fair value included in cost of sales in the condensed consolidated statements of income.

Such obligations totaled $272.5 million and $74.7 million as of December 31, 2020 and June 30, 2020, respectively.

The Company mitigates market risk of its physical inventory and open commitments through commodity hedge transactions.

(See Note 11 .) As of September 30, 2020 and June 30, 2020, the unrealized (losses) gains resulting from the difference between market value and cost of physical inventory were ($8.4) million and $6.5 million, respectively.

(See Note 11 .) As of December 31, 2020 and June 30, 2020, the unrealized gains resulting from the difference between market value and cost of physical inventory were $21.5 million and $6.5 million, respectively.

Premium component of inventory

The premium component, at market value, included in inventory as of September 30, 2020 and June 30, 2020 totaled $6.8 million and $3.7 million, respectively.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consists of the following at September 30, 2020 and June 30, 2020:

September 30,

The premium component, at market value, included in the inventory as of December 31, 2020 and June 30, 2020 totaled $12.0 million and $3.7 million, respectively.

PROPERTY, PLAN T, AND EQUIPMENT

Property, plant, and equipment consists of the following at December 31, 2020 and June 30, 2020:

Office furniture, and fixtures

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Property, plant, and equipment, net

Depreciation and amortization expense for the three months ended September 30, 2020 and 2019 was $347,000 and $415,000, respectively.

Depreciation expense for the three months ended December 31, 2020 and 2019 was $342,000 and $412,000, respectively.

Depreciation expense for the six months ended December 31, 2020 and 2019 was $689,000 and $827,000, respectively.

For the periods presented, no depreciation or amortization expense was allocated to cost of sales.

GOODWILL AND I NTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

Goodwill is an intangible asset that arises when a company acquires an existing business or assets (net of assumed liabilities) which comprise a business.

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Carrying Value

The carrying value of goodwill and other purchased intangibles as of September 30, 2020 and June 30, 2020 is as described below:

The carrying value of goodwill and other purchased intangibles as of December 31, 2020 and June 30, 2020 is as described below:

dollar amounts in thousands

September 30, 2020

December 31, 2020

June 30, 2020

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Intangible assets subject to amortization are amortized using the straight-line method over their useful lives, which are estimated to be three to fifteen years.

Amortization expense related to the Company's intangible assets for the three months ended September 30, 2020 and 2019 was $154,000 and $253,000, respectively.

Amortization expense related to the Company's intangible assets for the three months ended December 31, 2020 and 2019 was $163,000 and $255,000, respectively.

Amortization expense related to the Company's intangible assets for the six months ended December 31, 2020 and 2019 was $317,000 and $508,000, respectively.

For the presented periods, no amortization expense was allocated to cost of sales.

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LONG-TERM INVESTMENTS

The Company has three investments in privately-held entities, each of which is a precious metals retailer and customer of the Company.

The Company has four investments in privately-held entities, each of which is a precious metals retailer and customer of the Company.

Depending on the entity, the Company may have one or more of the following in place:

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The following table shows the carrying value and ownership percentage of the Company's investment in each entity:

September 30, 2020

December 31, 2020

June 30, 2020

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Accounts payable and other current liabilities consist of the following:

September 30,

Trade payables to customers

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Such derivative contracts include open sale and purchase commitments, futures, forwards and margin accounts.

In the table below, the aggregate gross and net derivative receivables and payables balances are presented by contract type and type of hedge, as of September 30, 2020 and June 30, 2020 .

September 30, 2020

In the table below, the aggregate gross and net derivative receivables and payables balances are presented by contract type and type of hedge, as of December 31, 2020 and June 30, 2020.

December 31, 2020

June 30, 2020

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Open sale and purchase commitments

Future contracts

Forward contracts

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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 are recorded in cost of sales.

Below is a summary of the net gains (losses) on derivative instruments for the three months ended September 30, 2020 and 2019.

Below is a summary of the net gains (losses) on derivative instruments for the three and six months ended December 31, 2020 and 2019 .

Three Months Ended

September 30,

Six Months Ended

Gains (losses) on derivative instruments:

Unrealized gains on open future commodity and forward contracts and open sale and purchase commitments, net

Realized losses on future commodity contracts, net

Unrealized (losses) gains on open future commodity and forward contracts and open sale and purchase commitments, net

Realized (losses) gains on future commodity contracts, net

The Company’s net gains (losses) on derivative instruments, as shown in the table above, were substantially offset by the changes in fair market value of the underlying precious metals inventory and open sale and purchase commitments, which were also recorded in cost of sales in the condensed consolidated statements of income.

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In a hedging relationship, the change in the value of the derivative financial instrument is offset to a great extent by the change in the value of the underlying hedged item.

The following table summarizes the results of our hedging activities, which shows the precious metal commodity inventory position, net of open sale and purchase commitments, that is subject to price risk as of September 30, 2020 and June 30, 2020.

September 30,

Precious metals held under financing arrangements

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The notional balances of the Company's derivative instruments, consisting of contractual metal quantities, are expressed at current spot prices of the underlying precious metal commodity.

As of September 30, 2020 and June 30, 2020, the Company had the following outstanding commitments and open forward and future contracts:

September 30,

As of December 31, 2020 and June 30, 2020, the Company had the following outstanding commitments and open forward and future contracts:

Purchase commitments

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The Company regularly reviews the creditworthiness of its major counterparties and monitors its exposure to concentrations.

At September 30, 2020, the Company believes its risk of counterparty default is mitigated as a result of such evaluation and the short-term duration of these arrangements.

Foreign Currency Exchange R ate Management

At December 31, 2020, the Company believes its risk of counterparty default is mitigated as a result of such evaluation and the short-term duration of these arrangements.

Foreign Currency Exchange Rate Management

The Company utilizes foreign currency forward contracts to manage the effect of foreign currency exchange fluctuations on its sale and purchase transactions.

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The accounting treatment of our foreign currency exchange derivative instruments is similar to the accounting treatment of our commodity derivative instruments, that is, the change in the value in the financial instrument is immediately recognized as a component of cost of sales.

Unrealized losses on foreign exchange derivative instruments related to our open trades are shown on the face of the condensed consolidated statements of income totaled $97,000 and $122,000 for the three months ended September 30, 2020 and 2019, respectively.

Unrealized gains on foreign exchange derivative instruments related to our open trades are shown on the face of the condensed consolidated statements of income totaled $19,000 and $125,000 for the three months ended December 31, 2020 and 2019, respectively.

Unrealized (losses) gains on foreign exchange derivative instruments shown on the face of the condensed consolidated statements of income totaled ($78,000) and $3,000 for the six months ended December 31, 2020 and 2019, respectively.

The market values (fair values) of the Company’s foreign exchange forward contracts and the net open sale and purchase commitment transactions, denominated in foreign currencies, outstanding are as follows:

September 30,

Foreign exchange forward contracts

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Three Months Ended

September 30,

The provision for income tax expense by jurisdiction and the effective tax rate for the three months ended September 30, 2020 and 2019 are shown below:

Six Months Ended

The provision for income tax expense by jurisdiction and the effective tax rate for the three and six months ended December 31, 2020 and 2019 are shown below:

Three Months Ended

September 30,

Six Months Ended

State and local

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Tax Balances and Activity

Income Taxes Receivable and Payable

As of September 30, 2020 and June 30, 2020, income taxes payable totaled $2.9 million and $2.1 million, respectively.

Income Taxes Payable

As of December 31, 2020 and June 30, 2020, income taxes payable totaled $0.7 million and $2.1 million, respectively.

Deferred Tax Assets and Liabilities

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

As of September 30, 2020 and June 30, 2020, management concluded that it was more likely than not that the Company would be able to realize the benefit of the U.S.

As of December 31, 2020 and June 30, 2020, management concluded that it was more likely than not that the Company would be able to realize the benefit of the U.S.

federal and state deferred tax assets.

We based this conclusion on historical and projected operating performance, as well as our expectation that our operations will generate sufficient taxable income in future periods to realize the tax benefits associated with the deferred tax assets.

A tax valuation allowance was considered unnecessary as of September 30, 2020 and June 30, 2020.

As of September 30, 2020 , the condensed consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax asset of $1.0 million and a federal deferred tax liability of $1.1 million .

As of June 30, 2020 , the conso lidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax asset of $1.0 million and a federal deferred tax liability of $1.1 million .

A tax valuation allowance was considered unnecessary as of December 31, 2020 and June 30, 2020

As of December 31, 2020 and June 30, 2020, the condensed consolidated balance sheet reflects the deferred tax items for each tax-paying component (i.e., federal and state), resulting in a state deferred tax asset of $1.0 million and a federal deferred tax liability of $1.1 million, respectively.

Net Operating Loss Carryforwards and Tax Credits

As of September 30, 2020 and June 30, 2020, the Company has approximately $12.6 million and 12.6 million of state net operating loss carryforwards, respectively.

As of September 30, 2020 and June 30, 2020, the Company’s tax-effected net operating loss carryforwards were $0.9 million and $0.9 million respectively.

As of December 31, 2020 and June 30, 2020 , the Company has approximately $12.6 million and $12.6 million of state net operating loss carryforwards, respectively.

As of December 31, 2020 and June 30, 2020 , the Company’s tax-effected net operating loss carryforwards were $0.9 million and $0.9 million respectively.

The state net operating loss carryforwards start to expire in the fiscal year ending June 30, 2025.

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The Company's measurement of its uncertain tax positions is based on management's assessment of all relevant information, including, but not limited to prior audit experience, audit settlement, or lapse of the applicable statute of limitations.

For the three months ended September 30, 2020, there was no material movement in unrecognized tax benefits including interest and penalties.

For the six months ended December 31, 2020, there was no material movement in unrecognized tax benefits including interest and penalties.

RELATED PARTY TRANSACTIONS

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Equity method investees.

The Company has three investments in privately held entities, each of which is a precious metals retailer and customer of the Company.

The Company has four investments in privately held entities, each of which is a precious metals retailer and customer of the Company.

Depending on the entity, the Company may have one or more of the following in place:

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Receivables and Payables, Net

As of September 30, 2020 and June 30, 2020, the Company had related party receivables and payables balances as set forth below:

September 30, 2020

As of December 31, 2020 and June 30, 2020, the Company had related party receivables and payables balances as set forth below:

December 31, 2020

June 30, 2020

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Equity method investees

Balance principally includes two secured lines of credit with a balance of $3.4 million and $0.8 million (shown as a component of secured loans receivable);

offset by $0.3 million of receivables, net (shown as components of receivables and derivative assets)).

See "Secured Lines of Credit", below.

Balance primarily represents receivables, net (shown as components of receivables and derivative assets).

Balance primarily represents payables, net (shown as components of accounts payable and other current liabilities , and derivative liabilities).

Balance principally includes two secured lines of credit with a balance of $0 and $0.1 million (shown as a component of secured loans receivable);

and $0.2 million of receivables, net (shown as components of receivables, and derivative assets).

See "Secured Loans Receivable” below.

Balance primarily represents receivables, net (shown as components of receivables, derivative assets and other long-term assets).

See "Other Long-term Assets” below.

Balance primarily represents payables, net (shown as components of accounts payables and derivative liabilities).

Long-term Investments

As of September 30, 2020 and June 30, 2020, the aggregate carrying balance of the equity method investments was $20.9 million and $16.8 million, respectively (see Note 9 ).

Secured Lines of Credit

As of December 31, 2020 and June 30, 2020, the aggregate carrying balance of the equity method investments was $30.0 million and $16.8 million, respectively (see Note 9 ).

Secured Loans Receivable

On September 19, 2017, CFC entered into a loan agreement with Stack's Bowers Galleries providing a secured line of credit, bearing interest at a competitive rate per annum, with a maximum borrowing line (subject to temporary increases) of $5.3 million.

The loan is secured by precious metals and numismatic products.

As of September 30, 2020 and June 30, 2020, the outstanding principal balance of this loan was $0.8 million and $0.7 million, respectively.

As of December 31, 2020 and June 30, 2020, the outstanding principal balance of this loan was $0.1 million and $0.7 million, respectively.

On March 1, 2018, CFC entered into a loan agreement with Stack's Bowers Galleries providing a secured line of credit on the wholesale value (i.e., the excess over the spot value of the metal), of numismatic products bearing interest at a competitive rate per annum, with a maximum borrowing line (subject to temporary increases) of $10.0 million.

In addition to the annual rate of interest, the Company is entitled to receive a participation interest equal to 10% of the net profits realized by Stack's Bowers Galleries on the ultimate sale of the products.

As of September 30, 2020 and June 30, 2020, the outstanding principal balance of this loan was $3.4 million and $8.0 million, respectively.

As of December 31, 2020 and June 30, 2020, the outstanding principal balance of this loan was $0.0 million and $8.0 million, respectively.

Other Long-term Assets

The convertible revolving credit facility collateral includes all:

(i) account receivables;

(ii) inventory;

(iii) fixed assets;

(iv) intellectual property;

(v) contract rights;

and (vi) deposit accounts, in each case subordinated to an unrelated third-party lender’s security interest.

As of December 31, 2020 and June 30, 2020, the carrying value of the convertible revolving credit facility was $2.5 million and $3.5 million, respectively.

(See Note 2 for further details.)

Activity with Related Parties

Sales and Purchases

During the three months ended September 30, 2020 and 2019, the Company made sales and purchases to various companies, which have been deemed to be related parties, as follows:

During the three and six months ended December 31, 2020 and 2019, the Company made sales and purchases to various companies, which have been deemed to be related parties, as follows:

Three Months Ended

September 30, 2020

September 30, 2019

Six Months Ended

December 31, 2020

December 31, 2019

December 31, 2020

December 31, 2019

Stack's Bowers Galleries

2 unchanged sentences

Interest Income

During the three months ended September 30, 2020 and 2019, the Company earned interest income related to loans made to Stack's Bowers Galleries and to financing arrangements (including repurchase agreements) with affiliated companies, as set forth below:

During the three and six months ended December 31, 2020 and 2019, the Company earned interest income related to loans made to Stack's Bowers Galleries and to financing arrangements (including repurchase agreements) with affiliated companies, as set forth below:

Three Months Ended

September 30,

Six Months Ended

Interest income from secured loans receivables

Interest income from finance products and repurchase arrangements

During the three months ended September 30, 2020 and 2019, the Company recorded its proportional share of its equity method investee's net income as other income which totaled $4.1 million and $11,000, respectively.

During the three months ended September 30, 2020 and 2019, the Company earned royalty income related to one of CFC's secured lending agreements with Stack's Bowers Galleries which totaled $359,000 and $42,000, respectively.

During the three months ended December 31, 2020 and 2019, the Company recorded its proportional share of its equity method investee's net income as other income that totaled $2,362,000 and $102,000, respectively.

During the six months ended December 31, 2020 and 2019, the Company recorded its proportional share of its equity method investee's net income as other income that totaled $6,488,000 and $114,000, respectively.

During the three months ended December 31, 2020 and 2019, the Company earned royalty income related to one of CFC's secured lending agreements with Stack's Bowers Galleries that totaled $205,000 and $47,000, respectively.

During the six months ended December 31, 2020 and 2019, the Company earned royalty income related to one of CFC's secured lending agreements with Stack's Bowers Galleries that totaled $564,000 and $89,000, respectively.

FINANCING AGREEMENTS

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The Trading Credit Facility is secured by substantially all of the Company’s assets on a first priority basis.

As of September 30, 2020, and as a result of various amendments, 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.

As of December 31, 2020, and as a result of various amendments, 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 Trading Credit Facility is scheduled to terminate on March 26, 2021.

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These loan costs have been capitalized when incurred and are amortized over the term of the Trading Credit Facility.

As of September 30, 2020 and June 30, 2020, the remaining unamortized balance was approximately $0.7 million and $0.5 million, respectively.

As of December 31, 2020 and June 30, 2020, the remaining unamortized balance was approximately $0.4 million and $0.5 million, respectively.

The Company routinely uses the Trading Credit Facility to purchase and finance precious metals and for operating cash flow purposes.

Amounts under the Trading Credit Facility bear interest based on London Interbank Offered Rate (“LIBOR”) plus a 2.50% margin for revolving credit line loans and a 4.50% margin for bridge loans (that is, for loans that exceed the available revolving credit line).

The one-month LIBOR rate was approximately 0.15% and 0.16% as of September 30, 2020 and June 30, 2020, respectively.

Borrowings are due on demand and totaled $214.0 million and $135.0 million at September 30, 2020 and June 30, 2020, respectively.

The one-month LIBOR rate was approximately 0.14% and 0.16% as of December 31, 2020 and June 30, 2020 , respectively.

Borrowings are due on demand and totaled $175.0 million and $135.0 million at December 31, 2020 and June 30, 2020 , respectively.

The amounts available under the respective borrowing facilities are determined at the end of each week and at each month end following a specified borrowing base formula.

The Company is able to access additional credit as needed to finance operations, subject to the overall limits of the borrowing facilities and lender approval of the borrowing base calculation.

Based on the month end borrowing bases in effect, the availability under the Trading Credit Facility, after taking into account current borrowings, totaled $86.1 million and $76.3 million as determined on September 30, 2020 and June 30, 2020, respectively.

Based on the month end borrowing bases in effect, the availability under the Trading Credit Facility, after taking into account current borrowings , totaled $64.1 million and $76.3 million as determined on December 31, 2020 and June 30, 2020 , respectively.

The Trading Credit Facility has certain restrictive financial covenants, including one requiring the Company to maintain a minimum tangible net worth.

As of September 30, 2020 the minimum tangible net worth financial covenant under the Trading Credit Facility was $55.7 million.

The Company is in compliance with all restrictive financial covenants as of September 30, 2020.

For the three months ended September 30, 2020 and 2019 interest expense related to the Company’s lines of credit totaled $1.4 million and $2.1 million, which represents 31.8% and 41.6% of the total interest expense recognized, respectively.

For the three months ended September 30, 2020 and 2019, our lines of credit carried a daily weighted average effective interest rate of 2.95% and 4.75%, respectively.

As of December 31, 2020 the minimum tangible net worth financial covenant under the Trading Credit Facility was $55.7 million.

The Company is in compliance with all restrictive financial covenants as of December 31, 2020.

For the three months ended December 31, 2020 and 2019, interest expense related to the Company’s lines of credit totaled $1.6 million and $1.9 million, which represents 31.6% and 37.6%, respectively, of the total interest expense recognized.

Our lines of credit carried a daily weighted average effective interest rate of 2.97% and 4.22%, respectively, for the three months ended December 31, 2020 and 2019.

For the six months ended December 31, 2020 and 2019, interest expense related to the Company’s lines of credit totaled $3.0 million and $4.1 million, which represents 31.7% and 39.6%, respectively of the total interest expense recognized.

Our lines of credit carried a daily weighted average effective interest rate of 2.96% and 4.49%, respectively, for the six months ended December 31, 2020 and 2019.

Notes Payable

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In addition, AMCF may from time to time sell precious metals to A-Mark for cash.

As of September 30, 2020, the consolidated 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.

As of September 30, 2020, the balance of the interest payable was $234,000.

As of December 31, 2020, the consolidated carrying balance of the Notes was $92.9 million (which excludes the $5.0 million note that the Company retained), and the remaining unamortized loan cost balance was approximately $2.1 million, which is amortized using the effective interest method through the maturity date.

As of December 31, 2020, the balance of the interest payable was $0.2 million.

Interest on the Notes is payable monthly in arrears at the aggregate rate of 5.26% per annum.

For the three months ended September 30, 2020 and 2019, the interest expense related to the Notes (including loan amortization costs) totaled $1.4 million and $1.5 million, which represents 33.0% and 28.6% of the total interest expense recognized by the Company, respectively.

For the three months ended September 30, 2020 and 2019, the Notes' weighted average effective interest rate was 5.88% and 5.88%, respectively.

For the three months ended December 31, 2020 and 2019, the interest expense related to the Notes (including loan amortization costs) totaled $1.4 million and $1.3 million, which represents 28.2% and 26.2% of the total interest expense recognized by the Company.

For the three months ended December 31, 2020 and 2019, the Notes' weighted average effective interest rate was 5.88% and 5.88%, respectively.

For the six months ended December 31, 2020 and 2019, the interest expense related to the Notes (including loan amortization costs) totaled $2.8 million and $2.8 million, which represents 30.4% and 27.4% of the total interest expense recognized by the Company, respectively.

For the six months ended December 31, 2020 and 2019, the Notes' weighted average effective interest rate was 5.88% and 5.88%, respectively.

Liabilities on Borrowed Metals

The Company recorded liabilities on borrowed precious metals with market values totaling $153.8 million as of September 30, 2020, with corresponding metals totaling $135.0 million and $18.8 million included in precious metals held under financing arrangements and inventories, respectively, on the condensed consolidated September 30, 2020 balance sheet.

The Company recorded liabilities on borrowed precious metals with market values totaling $141.8 million as of December 31, 2020, with corresponding metals totaling $120.3 million and $21.5 million included in precious metals held under financing

arrangements and inventories, respectively, on the condensed consolidated December 31, 2020 balance sheet.

The Company recorded liabilities on borrowed metals with market values totaling $168.2 million as of June 30, 2020 with corresponding metals totaling $148.9 million and $19.3 million included in precious metals held under financing arrangements and inventories, respectively, on the condensed consolidated June 30, 2020 balance sheet.

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Both the product financing obligation and the underlying inventory (which is entirely restricted) are carried at fair value, with changes in fair value recorded as a component of cost of sales in the condensed consolidated statements of income.

Such obligation totaled $101.6 million and $74.7 million as of September 30, 2020 and June 30, 2020, respectively.

COMMITMENTS A ND CONTINGENCIES

Such obligation totaled $272.5 million and $74.7 million as of December 31, 2020 and June 30, 2020, respectively.

COMMITMENTS AND CONTINGENCIES

Refer to Note 2 for information relating to minimum rental payments under operating and finance leases.

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The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors.

As of September 30, 2020, no shares had been repurchased under the program.

As of December 31, 2020, no shares had been repurchased under the program.

In the aggregate, the Company paid $21.2 million in dividends for the six months ended December 31, 2020.

2014 Stock Award and Incentive Plan

The Company's amended and restated 2014 Stock Award and Incentive Plan (the "2014 Plan") was approved by the Company's stockholders on November 2, 2017.

As of September 30, 2020, 203,664 shares were authorized for issuance under the 2014 Plan, which terminates in 2027.

As of December 31, 2020, 188,664 shares were authorized for issuance under the 2014 Plan, which terminates in 2027.

Under the 2014 Plan, the Company may grant options and other equity awards as a means of attracting and retaining officers, employees, non-employee directors and consultants, to provide incentives to such persons, and to align the interests of such persons with the interests of stockholders by providing compensation based on the value of the Company's stock.

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Stock Options

During the three months ended September 30, 2020 and 2019, the Company incurred $178,428 and $166,304 of compensation expense related to stock options, respectively.

As of September 30, 2020, there remained a total of $1,587,316 in compensation expense related to employee stock options, to be recorded over the remaining vesting period of such options.

During the three months ended December 31, 2020 and 2019, the Company incurred $209,839 and $237,665 of compensation expense related to stock options, respectively.

During the six months ended December 31, 2020 and 2019, the Company incurred $388,268 and $403,969 of compensation expense related to stock options, respectively.

As of December 31, 2020, there remained a total of $1,559,329 in compensation expense related to employee stock options, to be recorded over the remaining vesting period of such options.

The weighted average period remaining vesting period of the outstanding options is approximately 2.6 years.

An obligatory event was triggered as a result of the non-recurring special dividend declared on September 3, 2020.

Two obligatory events were triggered as a result of the non-recurring special dividends declared on September 3, 2020 and October 29, 2020.

In accordance with the terms of the Company’s equity award plans under which the options were issued, an adjustment was required to protect the holders of such stock options from decreases in the value of the stock options due to payment of the non-recurring special dividend.

The event decreased the exercise price of each stock option by $1.50.

This was effective on the date of record which was September 21, 2020.

The fair value of the options before and after the event was unchanged and therefore no incremental stock-based compensation was recorded.

The following table summarizes the stock option activity for the three months ended September 30, 2020 .

Both these events decreased the exercise price of each stock option by $1.50 per dividend.

This was effective on the date of record which was September 21, 2020 and November 23, 2020.

The fair value of the options before and after these events were unchanged and therefore no incremental stock-based compensation was recorded

The following table summarizes the stock option activity for the six months ended December 31, 2020.

Intrinsic Value

2 unchanged sentences

Cancellations, expirations and forfeitures

Outstanding at September 30, 2020

Exercisable at September 30, 2020

Following is a summary of the status of stock options outstanding at September 30, 2020, and accordingly reflects the adjusted stock option exercise prices:

Outstanding at December 31, 2020

Exercisable at December 31, 2020

Following is a summary of the status of stock options outstanding at December 31, 2020 and reflects the adjusted stock option prices:

Exercise Price Ranges

3 unchanged sentences

Exercise Price

The following table summarizes the nonvested stock option activity three months ended September 30, 2020.

The following table summarizes the nonvested stock option activity for the six months ended December 31, 2020.

Nonvested Outstanding at June 30, 2020

Nonvested Outstanding at September 30, 2020

Nonvested Outstanding at December 31, 2020

Valuation and Other Significant Assumptions of Equity Awards Issued

4 unchanged sentences

Certain of such provisions allow the Company to issue preferred stock with rights senior to those of the common stock, or impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions.

CUSTOMER AND SUP PLIER CONCENTRATIONS

CUSTOMER AND SUPPLIER CONCENTRATIONS

Customer Concentration

Customers providing 10 percent or more of the Company's revenues for the three months ended September 30, 2020 are presented on a comparative basis, with their corresponding balances for the three months ended September 30, 2019 in the table below:

Customers providing 10 percent or more of the Company's revenues for the three or six months ended December 31, 2020 are presented on a comparative basis, with their corresponding balances for the three and six months ended December 31, 2020 and 2019 in the table below:

Three Months Ended

September 30, 2020

September 30, 2019

Six Months Ended

December 31, 2020

December 31, 2019

December 31, 2020

December 31, 2019

Total revenue

Customer concentrations

No single customer provided 10 percent or more of the Company's accounts receivable or our secured loans receivable as of September 30, 2020.

HSBC Bank USA (1)

Sales with this trading partner includes sales on forward contracts that are entered into for hedging purposes rather than sales characterized with the physical delivery of precious metal product.

No single customer provid ed 10 percent or more of the Company's accounts receivable or secured loan receivable balances as of December 31, 2020 and June 30, 2020 .

Supplier Concentration

3 unchanged sentences

The Company evaluates segment reporting in accordance with FASB ASC 280, Segment Reporting , each reporting period, including evaluating the organizational structure and the reporting package that is reviewed by the chief operating decision makers.

The Company's operations are organized under three business segments — Wholesale Trading & Ancillary Services, Secured Lending, and Direct Sales.

The Company's operations are organized under three business segments — Wholesale Sales & Ancillary Services, Secured Lending, and Direct Sales.

(See Note 1 for a description of the types of products and services from which each reportable segment derives its revenues.)

Three Months Ended

September 30,

Six Months Ended

Revenue by segment (1)(2)

Wholesale Trading & Ancillary Services (3)

Inter-segment purchases from and sales to the Direct Sales segment are transacted at Wholesale Trading & Ancillary Services segment's prices, which is consistent with arms-length transactions with third parties.

Wholesale Sales & Ancillary Services⁽³⁾

Inter-segment purchases from and sales to the Direct Sales segment are transacted at Wholesale Sales & Ancillary Services segment's prices, which is consistent with arms-length transactions with third-parties.

The Secured Lending segment earns interest income from its lending activity and earns no revenue from the sales of precious metals.

Therefore, no amounts are shown for the Secured Lending segment in the above table.

The elimination of inter-segment sales is reflected in the Wholesale Trading & Ancillary Services segment.

Includes $4.7 million of inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.

Includes $8.6 million of inter-segment sales from the Direct Sales segment to the Wholesale Trading & Ancillary Services segment.

The elimination of inter-segment sales are reflected in the Wholesale Sales & Ancillary Services segment.

Includes $2.1 million of inter-segment sales from the Direct Sales segment to the Wholesale Sales & Ancillary Services segment.

Includes $4.8 million of inter-segment sales from the Direct Sales segment to the Wholesale Sales & Ancillary Services segment.

Includes $6.9 million of inter-segment sales from the Direct Sales segment to the Wholesale Sales & Ancillary Services segment.

Includes $13.1 million of inter-segment sales from the Direct Sales segment to the Wholesale Sales & Ancillary Services segment.

Three Months Ended

September 30,

Six Months Ended

Revenue by geographic region (as determined by the shipping or billing address or where the services were performed):

3 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Gross profit by segment (1)

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Total gross profit

Gross margin percentage by segment (1)

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Weighted average gross margin percentage

3 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Operating income (expense) by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Selling, general and administrative expenses

12 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Net income (loss) before provision for income taxes by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Secured Lending

1 unchanged sentence

Three Months Ended

September 30,

Six Months Ended

Depreciation and amortization by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Secured Lending

1 unchanged sentence

Three Months Ended

September 30,

Six Months Ended

Advertising expense by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Secured Lending

Precious metals held under financing arrangements

September 30,

Precious metals held under financing arrangements by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Secured Lending

September 30,

Inventories by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Secured Lending

September 30,

Inventories by geographic region

1 unchanged sentence

North America, excluding United States

September 30,

Assets by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Secured Lending

September 30,

Assets by geographic region

2 unchanged sentences

Long-term Assets

September 30,

Long-term assets by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Secured Lending

September 30,

Long-term assets by geographic region

2 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Capital expenditures on property, plant, and equipment by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Secured Lending

September 30,

Goodwill and Intangible Assets

Goodwill by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

Direct Sales (1)

Direct Sales goodwill balance is net of $1.4 million accumulated impairment losses.

Direct Sales segment’s goodwill balance is net of $1.4 million accumulated impairment losses.

Intangible Assets

September 30,

Intangibles by segment

Wholesale Trading & Ancillary Services

Wholesale Sales & Ancillary Services

SUBSEQUENT EVENTS

Dividend Declaration

On October 29, 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 November 23, 2020, payable on or about November 30, 2020.

The estimated dividends to be paid total $10.6 million.

Pending Acquisition

On February 8, 2021, the Company entered into a stock purchase agreement with the stockholders of JM Bullion, Inc., a Delaware corporation (“JMB”), for the acquisition of the 79.47% interest in JMB that is not currently owned by the Company.

JMB is an e-commerce retailer of gold, silver, copper, platinum and palladium products.

The purchase price is approximately $138.3 million, consisting of $103.7 million in cash and $34.6 million in common stock of the Company, valued at $ 2 8 .

9 6 per share, in each case subject to adjustment.

The share valuation represents the volume weighted average of the trading prices of the Company’s common stock for the 30 consecutive trading days preceding the date of the purchase agreement.

The cash portion of the purchase price will be reduced by an amount equal to 20.53% (which is the Company’s percentage ownership interest in JMB) of the amount of a cash redemption to be made by JMB to its stockholders, other than the Company, prior to the acquisition.

In addition, the stock portion of the purchase price will be reduced such that no single stockholder of JMB will own more than 4.8% of the Company’s common stock immediately following the acquisition.

If the stock consideration of a selling JMB stockholder is reduced, the cash consideration payable to that JMB stockholder will be increased by an amount equal to 65% of the value of the decrease in stock consideration.

The Company intends to finance the cash portion of the purchase price with cash on hand and through any available means of financing, including a public or private equity or convertible debt offering.

The acquisition is subject to various closing conditions.

The Company anticipates closing the acquisition in the third quarter of the current fiscal year.

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 1. Financial Statements