A MARK PRECIOUS METALS : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (kind 10-Okay)

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CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

This Annual Report on Form 10-K (“Form 10-K”) contains statements that are
considered forward-looking statements. Forward-looking statements give the
Company’s current expectations and forecasts of future events. All statements
other than statements of current or historical fact contained in this Annual
Report, including statements regarding the Company’s future financial position,
business strategy, budgets, projected costs and plans, and objectives of
management for future operations, are forward-looking statements. The words
“anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,”
“plan,” and similar expressions, as they relate to the Company, are intended to
identify forward-looking statements. These statements are based on the Company’s
current plans, and the Company’s actual future activities and results of
operations may be materially different from those set forth in the
forward-looking statements. These forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from the statements made. Any or all of the forward-looking statements in this
Annual Report may turn out to be inaccurate. The Company has based these
forward-looking statements largely on its current expectations and projections
about future events and financial trends that it believes may affect its
financial condition, results of operations, business strategy, and financial
needs. The forward-looking statements can be affected by inaccurate assumptions
or by known or unknown risks, uncertainties and assumptions. The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events occurring after the date hereof. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the cautionary statements
contained in this Form 10-K.

In addition to the risks and uncertainties that may ordinarily influence our
business, the Company remains exposed to the effects of the COVID-19
pandemic. The pandemic has caused significant disruption in the financial
markets both globally and in the United States. The resulting macroeconomic
events have contributed to an increase in the business conducted by the Company,
but also pose certain risks and uncertainties for the Company. The Company does
not know how long the COVID-19 pandemic will continue, the extent to which the
effects that the Company has experienced from the pandemic thus far will
persist, or whether other effects on the Company and its businesses will
materialize in the short or long term.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes contained elsewhere in this Form 10-K. This discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in
these forward-looking statements. Factors that could cause or contribute to
these differences include those factors discussed below and elsewhere in this
Annual Report, particularly in ” Risk Factors .”

INTRODUCTION

Management’s discussion and analysis of financial condition and results of
operations is provided as a supplement to the accompanying consolidated
financial statements and related notes to aid in the understanding of our
results of operations and financial condition. Our discussion is organized as
follows:

• Executive overview . This section provides a general description of our

business, as well as significant transactions and events that we believe

are important in understanding the results of operations.

• Results of operations . This section provides an analysis of our

results of operations presented in the accompanying consolidated

statements of income by comparing the results for the respective periods

presented. Included in our analysis is a discussion of six performance

metrics: (i) ounces of gold and silver sold, (ii) Wholesale Sales ticket

volume, (iii) Direct-to-Consumer ticket volume, (iv) number of
Direct-to-Consumer customers, (v) inventory turnover ratio, and (vi)
number of secured loans at period-end.

• Segment results of operations . This section provides an analysis of

our results of operations presented for our three segments:

o Wholesale Sales & Ancillary Services

o Direct-to-Consumer , and

o Secured Lending

for the comparable periods.

• Non GAAP Measures. In addition to certain key operational metrics to

assess the performance of our business, management uses the financial

performance measure “adjusted net income before provision for taxes” that

is not prepared in accordance with U.S. Generally Accepted Accounting
Principles (“GAAP”)

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• Liquidity and financial condition . This section provides an analysis

of our cash flows, as well as a discussion of our outstanding debt as of

June 30, 2021, sources of liquidity and the amount of financial capacity

available to fund our future commitments and other financing arrangements.

• Critical accounting policies . This section discusses critical

accounting policies that are considered both important to our financial

condition and results of operations and require management to make

significant judgment and estimates. All of our significant accounting

policies, including the critical accounting policies are also summarized
in Note 2 to the Company’s consolidated financial statements.

• Recent accounting pronouncements . This section discusses new

accounting pronouncements, dates of implementation and their expected

impact on our accompanying consolidated financial statements.

EXECUTIVE OVERVIEW

Our Business

We conduct our operations in three reportable segments: (i) Wholesale Sales &
Ancillary Services (formerly known as Wholesale Trading & Ancillary Services),
(ii) Direct-to-Consumer (formerly known as Direct Sales) and (iii) Secured
Lending.

Wholesale Sales & Ancillary Services Segment

The Company operates its Wholesale Sales & Ancillary Services segment through
A-Mark Precious Metals, Inc., and its wholly-owned subsidiaries, A-Mark Trading
AG (“AMTAG”), Transcontinental Depository Services, LLC (“TDS” or “Storage”),
A-M Global Logistics, LLC (“AMGL” or “Logistics”), and AM&ST Associates, LLC
(“AMST” or “SilverTowne” or the “Mint”).

The Wholesale Sales & Ancillary Services segment operates as a full-service
precious metals company. We offer gold, silver, platinum, and palladium in the
form of bars, plates, powder, wafers, grain, ingots, and coins. Our Industrial
unit services manufacturers and fabricators of products utilizing or
incorporating precious metals. Our Coin and Bar unit deals in over 1,000 coin
and bar products in a variety of weights, shapes, and sizes for distribution to
dealers and other qualified purchasers. We have a marketing support office in
Vienna, Austria, and a trading center in El Segundo, California. The trading
center, for buying and selling precious metals, is available to receive orders
24 hours every day, even when many major world commodity markets are closed. In
addition to Wholesale Sales activity, A-Mark offers its customers a variety of
ancillary services, including financing, storage, consignment, logistics, and
various customized financial programs. As a U.S. Mint-authorized purchaser of
gold, silver, platinum, and palladium coins, A-Mark purchases product directly
from the U.S. Mint and other sovereign mints for sale to its customers.

Through its wholly-owned subsidiary, AMTAG, the Company promotes A-Mark’s
products and services to the international market. Through our wholly-owned
subsidiary TDS, we offer a variety of managed storage options for precious
metals products to financial institutions, dealers, investors, and collectors
around the world.

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

Through its wholly-owned subsidiary, AMST, the Company designs and produces
minted silver products. Our mint operations allow us to provide greater product
selection to our customers and greater pricing stability within the supply
chain, as well as to gain increased access to silver during volatile market
environments, which have historically created higher demand for precious metals
products.

Direct-to-Consumer

The Company operates its Direct-to-Consumer segment through its wholly-owned
subsidiaries JM Bullion, Inc. (“JMB”), Goldline, Inc. (“Goldline”), AMIP, LLC
(“AMIP”), and through its 50%-owned subsidiary Precious Metals Purchasing
Partners, LLC (“PMPP”).

JMB is a leading e-commerce retailer providing access to a broad array of gold,
silver, copper, platinum, and palladium products through its websites and
marketplaces. Currently, JMB operates five separately branded, company-owned
websites targeting specific niches within the precious metals retail market. The
Company acquired the 79.5% interest in JMB that it did not previously own in
March 2021. See Note 1 to the Company’s consolidated financial statements
for additional information regarding the acquisition of JMB.

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The Company acquired Goldline in August 2017 through an asset purchase
transaction with Goldline, LLC, which had been in operation since 1960. Goldline
is a direct retailer of precious metals to the investor community, and markets
its precious metal products on television, radio, and the internet, as well as
through customer service outreach.

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

The Company formed and capitalized PMPP in fiscal 2019, a 50%-owned subsidiary
of Goldline, pursuant to terms of a joint venture agreement, for the purpose of
purchasing precious metals from the partners’ retail customers, and then
reselling the acquired products back to affiliates of the partners. PMPP
commenced its operations in fiscal 2020.

Acquisition of JMB

On March 19, 2021, we completed the acquisition of the 79.5% of the stockholder
interest in JM Bullion, Inc. (“JMB”) that we did not previously own. JMB is a
leading e-commerce retailer providing access to a broad array of gold, silver,
copper, platinum, and palladium products through its own websites and
marketplaces. JMB owns and operates five separately branded websites, including
JMBullion.com, ProvidentMetals.com, Silver.com, GoldPrice.org, and
SilverPrice.org.

By acquiring JMB, we have substantially both expanded our e-commerce channel for
precious coin and metals sales and increased the diversification of our business
between wholesale and retail distribution. We believe that the acquisition will
enable us to:

• apply JMB’s proven online marketing strategies to other aspects of our

direct-to-consumer business;

• more effectively tailor our merchandising and pricing strategies to target

multiple customer demographics across our combined six (including
Goldline) unique consumer-facing brands;

• enhance our program under which we repurchase product from our customers;

• expand our logistics footprint by adding JMB’s centrally located
distribution hub in Dallas, Texas;

• offer JMB’s customers proprietary precious metal products developed by us,

as well as additional services, including distribution, storage, and
logistics;

• leverage the increased size of the combined businesses to achieve more

favorable pricing and financing terms; and

• provide JMB with opportunities for geographic expansion through our

international presence.

For the year ended June 30, 2021, JMB had revenues of approximately $673.3
million. This compares with the Company’s total revenues of approximately
$7,613.0 million, and the revenues of the Company’s direct-to-consumer segment
of approximately $874.3 million. The aforementioned results include JMB’s
activity from March 20, 2021 through June 30, 2021.

The following table compares the number of JMB’s new customers, active
customers, and total customers to the corresponding number of customers
associated with the other subsidiary in our Direct-to-Consumer segment for the
year ended June 30, 2021.

Year ended As of
June 30, 2021 June 30, 2021
New Customers Active Customers Total Customers
JMB 80,500 (1) 158,800 (1) 1,540,500
All-other Direct-to
Consumer 3,800 8,900 162,600
84,300 167,700 1,703,100

(1) Includes JMB’s customer data from March 20, 2021 through June 30, 2021.

In the following table we estimate, on a pro forma basis, the revenue and net
income of the Company had the acquisition of JMB, and certain other transactions
occurred on July 1, 2019.

in thousands, except for per share and share data Years Ended
June 30, June 30,
2021 2020
Revenue $ 8,152,982 $ 5,746,116
Net income $ 180,508 $ 53,964

These estimates are based on the historical results of the Company and JMB
during this period and take into account various transaction accounting
adjustments. This pro forma information is not necessarily indicative of what
the combined company’s results

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of operations would have been had the acquisition of JMB been completed as of
July 1, 2019, nor is it meant to be indicative of any anticipated future results
of operations that the combined company will experience.

Secured Lending

The Company operates its Secured Lending segment through its wholly-owned
subsidiaries, Collateral Finance Corporation, LLC. (“CFC”), AM Capital Funding,
LLC (“AMCF”), and CFC Alternative Investments (“CAI”).

CFC is a California licensed finance lender that originates and acquires
commercial loans secured by bullion and numismatic coins. CFC’s customers
include coin and precious metal dealers, investors, and collectors. As of
June 30, 2021, CFC and AMCF had, in the aggregate, approximately $113.0 million
in secured loans outstanding, of which approximately 65.4% were acquired from
third-parties (some of which may be customers of A-Mark) and approximately 34.6%
were originated by CFC.

AMCF, a wholly-owned subsidiary of CFC, was formed for the purpose of
securitizing eligible secured loans of CFC. AMCF issued, administers, and owns
Secured Senior Term Notes: Series 2018-1, Class A, with an aggregate principal
amount of $72.0 million and Secured Subordinated Term Notes, Series 2018-1,
Class B in the aggregate principal amount of $28.0 million. The Class A Notes
bear interest at a rate of 4.98%, and the Class B Notes bear interest at a rate
of 5.98% (collectively referred to as the “Notes”). The Notes have a maturity
date of December 15, 2023. See Note 14 to the Company’s consolidated
financial statements for additional information

CAI is a holding company that has an equity method interest in Collectible Card
Partners, LLC (“CCP”). The purpose of CCP is to provide capital to fund
commercial loans secured by graded sport cards and sports memorabilia. Formed in
April 2021, CCP had no operations in fiscal 2021.

Our Strategy

The Company was formed in 1965 and has grown into a significant participant in
the bullion and coin markets, with approximately $7.6 billion in revenues for
fiscal year 2021. Our strategy continues to focus on growth, including the
volume of our business, our geographic presence, and the scope of complementary
products, services, and technological tools that we offer to our customers. With
our recent acquisition of JMB, we have substantially expanded our e-commerce
channel for precious coin and metals sales and increased the diversification of
our business between wholesale and retail distribution.

We intend to continue to grow by leveraging off the strengths of our existing
integrated operations:

• our expertise in e-commerce and marketing;

• our expansive retail distribution network;

• the depth of our customer relationships;

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

• our trading systems in the U.S. and Europe;

• our network of precious metals dealers;

• our depository relationships around the world;

• our knowledge of secured lending;

• our design and production of minted silver products;

• our logistics capabilities; and

• the quality and experience of our management team.

Our Customers

Our customers include financial institutions, bullion retailers, industrial
manufacturers and fabricators, sovereign mints, refiners, coin and metal
dealers, investors, collectors, and e-commerce and other retail customers. The
Company makes a two-way market in its wholesale operations, which results in
many customers also operating as our suppliers in that segment. This diverse
base of wholesale customers purchases a variety of products from the Company in
a multitude of grades, primarily in the form of coins and bars. Our
Direct-to-Consumer segment sells to (and, through JMB and PMPP, buys from)
retail customers, with JMB focusing on e-commerce operations and Goldline
marketing through various traditional channels to the investor community. The
Direct-to-Consumer segment offers these customers a variety of gold, silver,
copper, platinum, and palladium products.

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

Revenues. The Company enters into transactions to sell and deliver gold, silver,
platinum, palladium, and rhodium to industrial and commercial users, coin and
bullion dealers, mints, and financial institutions. The metals are investment or
industrial grade and are sold in a variety of shapes and sizes.

The Company also sells and delivers gold, silver, platinum, palladium, and
copper products directly to customers and the investor community through its
Direct-to Consumer segment. Customers may place orders over the phone or online
at one of the Company’s websites.

The Company also sells precious metals on forward contracts at a fixed price
based on current prevailing precious metal spot prices with a certain delivery
date in the future (up to six months from inception date of the forward
contract). The Company also uses other derivative products (primarily futures
contracts) or combinations thereof to hedge commodity risks. We enter into these
forward and future contracts as part of our hedging strategy to mitigate our
price risk of holding inventory; they are not entered into for speculative
purposes.

Forward sales contracts by their nature are required to be included in revenues,
unlike futures contracts which do not impact the Company’s revenue. The decision
to use a forward contract versus another derivative type of product (e.g., a
futures contract) for hedging purposes is based on the economics of the
transaction. Since the volume of hedging can be significant, the movement in
and out of forwards can substantially impact revenues, either positively or
negatively, from period to period. For this reason, the Company believes ounces
sold (excluding ounces sold on forward sales contracts) is a meaningful metric
to assess our top line performance.

In addition, the Company earns revenue by providing storage solutions for
precious metals and numismatic coins for financial institutions, dealers,
investors and collectors worldwide and by providing storage and
order-fulfillment services to our retail customers. The Company also earns
revenue from advertisements placed on our Direct-to-Consumer websites. These
revenue streams represent less than 1% of the Company’s consolidated revenues.

The Company operates in a high volume/low margin industry. Revenues are
impacted by three primary factors: product volume, market prices, and market
volatility. A material changes in any one or more of these factors may result in
a significant change in the Company’s revenues. A significant increase or
decrease in revenues can occur simply based on changes in the underlying
commodity prices and may not be reflective of an increase or decrease in the
volume of products sold.

Gross Profit. Gross profit is the difference between our revenues and the cost
of our products sold. Since we quote prices based on the current commodity
market prices for precious metals, we enter into a combination of forward and
futures contracts to affect a hedge position equal to the underlying precious
metal commodity value, which substantially represents inventory subject to price
risk. We enter into these derivative transactions solely for the purpose of
hedging our inventory, and not for speculative purposes. Our gross profit
includes the gains and losses resulting from these derivative
instruments. However, the gains and losses on the derivative instruments are
substantially offset by the gains and losses on the corresponding changes in the
market value of our precious metals inventory. As a result, our results of
operations generally are not materially impacted by changes in commodity prices.

Volatility also affects our gross profit. Greater volatility typically causes
the premium spreads to widen resulting in an increase in the gross profit.
Product supply constraints during extended periods of higher volatility have
historically resulted in a heightening of wider premium spreads resulting in
further improvement in the gross profit.

Interest Income. The Company enters into secured loans and secured financing
structures with its customers under which it charges interest. CFC acquires loan
portfolios and originates loans that are secured by precious metal bullion and
numismatic material owned by the borrowers and held by the Company for the term
of the loan. Additionally, AMCF acquires certain loans from CFC that are secured
by precious metal bullion to meet the collateral requirements of the
Notes. Also, the Company offers a number of secured financing options to its
customers to finance their precious metals purchases including consignments and
other structured inventory finance products whereby the Company earns a fee
based on the underlying value of the precious metal (“repurchase arrangements
with customers”).

Interest Expense. The Company incurs interest expense associated with its: lines
of credit, notes, product financing agreements for the transfer and subsequent
re-acquisition of gold, silver, and platinum at a fixed price with a third-party
finance company (“product financing arrangements”), and short-term precious
metal borrowing arrangements with our suppliers (“liabilities on borrowed
metals”).

Performance Metrics

In addition to financial statement indicators, management also utilizes certain
key operational metrics to assess the performance of our business.

Gold and Silver Ounces Sold and Delivered to Customers. We look at the number of
ounces of gold and silver sold and delivered to our customers (excluding ounces
recorded on forward contracts). These metrics reflect our business volume
without regard to changes in commodity pricing, which also impacts revenue, but
can mask actual business trends.

The primary purpose of entering into forward sales transactions is to hedge
commodity price risk. Although the revenues realized from these forward sales
transactions are often significant, they generally have negligible impact to
gross margins. As a result, the

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Company excludes the ounces recorded on forward contracts from its performance
metrics, as the Company does not enter into forward sales transactions for
speculative purposes.

Wholesale Sales Ticket Volume. Another measure of our business that is
unaffected by changes in commodity pricing, is ticket volume (or number of
orders processed). Ticket volume for the Wholesale Sales & Ancillary Services
segment measures the total number of wholesale orders processed during the
period. In periods of higher volatility, there is generally increased trading in
the commodity markets, causing increased demand for our products, resulting in
higher business volume. Generally, the ounces sold on a per-ticket basis is
substantially higher for orders placed telephonically compared to those placed
on our online portal platform. During periods of heightened demand order size
per ticket may increase.

Direct-to-Consumer Ticket Volume. Ticket volume for the Direct-to-Consumer
segment measures the total number of retail orders processed during the period.
In periods of higher volatility, there is generally increased consumer demand
for our products, resulting in higher business volume.

Direct-to-Consumer Customers. We are focused on attracting new customers and
retaining existing customers to drive revenue growth. We use the following three
metrics as revenue growth indicators when assessing our customer base:

• New Direct-to-Consumer Customers means the number of customers that have

registered or setup a new account or made a purchase for the first time.

• Active Direct-to-Consumer Customers means the number of customers that

have made a purchase during the period.

• Total Direct-to-Consumer Customers means the aggregate number of customers

that have registered or set up an account or have made a purchase in the
past.

Inventory Turnover. Inventory turnover is another performance measure on which
we are focused and is calculated as the cost of sales divided by the average
inventory during the relevant period. Inventory turnover is a measure of how
quickly inventory has moved during the period. A higher inventory turnover
ratio, which we typically experience during periods of higher volatility when
trading is more robust, typically reflects a more efficient use of our capital.

The period of time that inventory is held by the Company varies depending upon
the nature of our inventory commitments with customers and suppliers. (See

Note 6 to the Company’s consolidated financial statements for a description
of our classifications of inventory by type.) When management analyzes inventory
turnover on a period over period basis, consideration is given to each inventory
type and its corresponding impact on the inventory turnover calculation. For
example:

• The Company enters into various structured borrowing arrangements that

commit the Company’s inventory (such as product financing arrangements or

liabilities on borrowed metals) for an unspecified period of time. While
the Company is able to obtain access to this inventory on demand, this
type of inventory tends not to turn over as quickly as other types of
inventory.

• The Company enters into repurchase arrangements with customers under which

A-Mark holds precious metals which are subject to repurchase for an

unspecified period of time. While the Company has legal title to this

inventory, the Company is required to hold this inventory (or like-kind

inventory) for the customer until the arrangement is terminated or the

material is repurchased by the customer. As a result, this type of

inventory tends not to turn over as quickly as other types of inventory.

Additionally, our inventory turnover ratio can be affected by hedging activity,
as the period over period change of the inventory turnover ratio may be
significantly impacted by a period over period change in hedging volume. For
example, if trading activity were to remain constant over two periods, but there
were significantly higher forward sales in the current period compared to a
prior period, the calculated inventory turnover ratio would increase
notwithstanding the constancy of the trading volume.

Number of Secured Loans. Finally, as a measure of the size of our Secured
Lending segment, we look at the number of outstanding secured loans to customers
that are primarily collateralized by precious metals at the end of each quarter.
Typically, the number of loans increases during periods of increasing precious
metal pricing and decreases during periods of declining precious metal prices.

The Company calculates a loan-to-value (“LTV”) ratio for each loan as the
principal amount of the loan divided by the liquidation value of the collateral,
which is based on daily spot market prices of precious metal bullion. When the
market price of the pledged collateral decreases and thereby increases the LTV
ratio of a loan above a prescribed maximum ratio, usually 85%, the Company has
the option to make a margin call on the loan. As a result, a decline of precious
metal market prices may cause a decrease in the number of loans outstanding in a
period.

Non-GAAP Financial Measures

In addition to certain key operational metrics to assess the performance of our
business, management uses financial performance measures that are not prepared
in accordance with GAAP. One of these non-GAAP measures is “Adjusted net income
before provision for income taxes”. We believe this non-GAAP measure provides
useful information that can be used to evaluate our performance. Non-GAAP
measures do not have standardized definitions and should not be relied upon in
isolation or as a substitute for measures prepared

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in accordance with GAAP. For a reconciliation of this non-GAAP measure to the
amounts included in our Statements of Income for the years ended June 30, 2021
and 2020, and certain limitations inherent in such measures, refer to the
“Non-GAAP Measures” section below.

COVID-19

The COVID-19 outbreak has caused significant disruption in the financial markets
both globally and in the United States. The resulting macroeconomic events
contributed to an increase in the business conducted by the Company, but also
pose certain risks and uncertainties for the Company. It is challenging to
predict how long the COVID-19 pandemic will continue, the extent to which the
effects that the Company has experienced from the pandemic thus far will
persist, or whether other effects on the Company and its businesses will
materialize in the short or long term.

Macroeconomic events have positively affected the Company’s trading revenues and
gross profit as the volatility of the price of precious metals and numismatics
resulted in a material increase in the spread between bid and ask prices on
these products. We also experienced substantially increased demand for products
in each of our coin and bar, industrial and retail businesses. We attribute this
to certain customers, particularly in Goldline and our recently acquired JMB
retail units, seeking to assure a supply of precious metals necessary for the
operation of their businesses, and other customers’ seeking the safety of
investments in precious metals. In response to the heightened demand, in certain
cases prices for the products we sell have also risen.

We also experienced certain negative effects in the precious metals market
during fiscal year 2020. Through our CFC finance subsidiary, we make loans to
our customers secured by coins and precious metals. Numerous CFC loans were paid
off in March 2020 when the market experienced a temporary drop in precious metal
prices, which reduced collateral coverage. This had the effect of decreasing the
size of our loan portfolio and the interest earned on the portfolio. It also
required us to substitute cash and our own precious metals inventory as
collateral under our AMCF securitization program, as the pool of loans securing
the program declined. While we did not experience any related losses, there is
no assurance that this might not occur in the future. In the year that followed,
precious metal prices increased and the Company experienced growth in its loan
portfolio, which continued through the end of fiscal year 2021.

Fiscal Year

Our fiscal year end is June 30 each year. Unless otherwise stated, references to
years in this report relate to fiscal years rather than to calendar years.

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RESULTS OF OPERATIONS

Overview of Results of Operations for the Years Ended June 30, 2021 and 2020

Consolidated Results of Operations

The operating results of our business for the years ended June 30, 2021 and 2020
are as follows:

in thousands, except per share data
and performance metrics
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Revenues $ 7,613,015 100.000 % $ 5,461,094 100.000 % $ 2,151,921 39.4 %
Gross profit 210,198 2.761 % 66,973 1.226 % $ 143,225 213.9 %
Selling, general, and administrative
expenses (58,809 ) (0.772 )% (36,756 ) (0.673 )% $ 22,053 60.0 %
Interest income 18,474 0.243 % 21,237 0.389 % $ (2,763 ) (13.0 %)
Interest expense (19,865 ) (0.261 )% (18,859 ) (0.345 )% $ 1,006 5.3 %
Earnings from equity method
investments 15,547 0.204 % 4,878 0.089 % $ 10,669 218.7 %
Other income, net 1,079 0.014 % 348 0.006 % $ 731 210.1 %
Remeasurement gain on pre-existing
equity interest 26,306 0.346 % – 0.0 % $ 26,306 0.0 %
Unrealized (losses) gains on foreign
exchange (129 ) (0.002 )% 57 0.001 % $ 186 326.3 %
Net income before provision for
income taxes 192,801 2.533 % 37,878 0.694 % $ 154,923 409.0 %
Income tax expense (31,877 ) (0.419 )% (6,387 ) (0.117 )% $ 25,490 399.1 %
Net income 160,924 2.114 % 31,491 0.577 % $ 129,433 411.0 %
Net income attributable to
noncontrolling interests 1,287 0.017 % 982 0.018 % $ 305 31.1 %
Net income attributable to the
Company $ 159,637 2.097 % $ 30,509 0.559 % $ 129,128 423.2 %
Basic and diluted net income per
share attributable to
A-Mark Precious Metals, Inc.:
Per Share Data:
Basic $ 19.13 $ 4.34 $ 14.79 340.8 %
Diluted $ 17.79 $ 4.31 $ 13.48 312.8 %
Performance Metrics:(1)
Gold ounces sold(2) 2,743,000 2,181,000 562,000 25.8 %
Silver ounces sold(3) 114,275,000 90,385,000 23,890,000 26.4 %
Inventory turnover ratio(4) 19.0 17.6 1.4 8.0 %
Number of secured loans at period
end(5) 1,881 717 1,164 162.3 %

(1) See “Results of Segments” for a description of additional metrics not listed

above.

(2) Gold ounces sold represents the ounces of gold product sold and delivered to

the customer during the period, excluding ounces of gold recorded on forward

contracts.

(3) Silver ounces sold represents the ounces of silver product sold and delivered

to the customer during the period, excluding ounces of silver recorded on

forward contracts.

(4) Inventory turnover ratio is the cost of sales divided by average inventory

for the period presented above. This calculation excludes precious metals

held under financing arrangements, which are not classified as inventory on

the consolidated balance sheets.

(5) Number of outstanding secured loans to customers that are primarily

collateralized by precious metals at the end of the period.

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Revenues

in thousands, except performance
metrics
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Revenues $ 7,613,015 100.000 % $ 5,461,094 100.000 % $ 2,151,921 39.4 %
Performance Metrics
Gold ounces sold 2,743,000 2,181,000 562,000 25.8 %
Silver ounces sold 114,275,000 90,385,000 23,890,000 26.4 %

Revenues for the year ended June 30, 2021 increased $2,151.9 million, or 39.4%
to $7.613 billion from $5.461 billion in 2020. Excluding a decrease of $169.4
million of forward sales, our revenues increased $2.321 billion, which was due
to an increase in the total amount of gold and silver ounces sold and higher
selling prices of gold and silver.

Gold ounces sold for the year ended June 30, 2021 increased 562,000 ounces, or
25.8%, to 2,743,000 ounces from 2,181,000 ounces in 2020. Silver ounces sold for
the year ended June 30, 2021 increased 23,890,000 ounces, or 26.4%, to
114,275,000 ounces from 90,385,000 ounces in 2020. On average, the selling
prices for gold increased by 19.0% and selling prices for silver increased by
57.5% during the year ended June 30, 2021 as compared to the prior year period.

JMB’s revenue activity represented 8.8% of the Company’s consolidated revenue
for the year ended June 30, 2021. JMB’s gold and silver ounces sold represented
7.1% and 7.8%, respectively, of the Company’s consolidated total of gold and
silver ounces sold for the year ended June 30, 2021.

A key factor that contributed to the increase in demand for precious metals was
the volatility in precious metal prices caused by macroeconomic and other
events. A combination of price volatility, increased demand, and supply
constraints led to a significant expansion in premium spreads in the precious
metals market, having an onset during the second half of fiscal year 2020 and
sustaining through the current fiscal year. We are uncertain of the duration of
these conditions.

Gross Profit

in thousands, except performance
metric
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Gross profit $ 210,198 2.761 % $ 66,973 1.226 % $ 143,225 213.9 %
Performance Metric
Inventory turnover ratio 19.0 17.6 1.4 8.0 %

Gross profit for the year ended June 30, 2021 increased by $143.2 million, or
213.9%, to $210.2 million from $67.0 million in 2020. The overall gross profit
increase was due to higher gross profits from the Wholesale Sales & Ancillary
Services and Direct-to-Consumer segments.

The Company’s overall gross margin percentage year ended June 30, 2021 increased
by 153.5 basis points to 2.761% from 1.226% in 2020. The increase in gross
margin percentage was mainly attributable to significantly wider premium spreads
due to increased demand, higher trading profits due to increased volatility; and
lower forward sales. Forward sales increase revenues but are associated with
negligible gross margins that can significantly affect the gross margin
percentage. The Company enters into forward contracts to hedge its precious
metals price risk exposure and not for speculative purposes.

JMB’s gross profit represented 22.0% of the Company’s consolidated gross profit
for the year ended June 30, 2021.

Our inventory turnover rate for the year ended June 30, 2021 increased by 8.0%,
to 19.0 from 17.6 in 2020. The increase in our inventory turnover ratio was
primarily due to higher volume of ounces sold of precious metals, partially
offset by lower volume of ounces sold on forward contracts as well as higher
average inventory balances related to product financing arrangements, which is a
type of inventory that is typically held for longer periods.

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Selling, General and Administrative Expense

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Selling, general, and
administrative expenses $ (58,809 ) (0.772 )% $ (36,756 ) (0.673 )% $ 22,053 60.0 %

Selling, general and administrative expenses for the year ended June 30, 2021
increased $22.1 million, or 60.0%, to $58.8 million from $36.8 million in 2020.
The change was primarily due to $14.5 million of expenses incurred by JMB,
acquisition costs of $2.6 million associated with our recent incremental
acquisition of JMB, increased compensation expense (including performance-based
accruals) of $2.4 million, and higher insurance costs of $1.4 million.

JMB’s selling, general, and administrative expenses represented 24.6% of the
Company’s consolidated selling, general, and administrative expenses for the
year ended June 30, 2021.

Interest Income

in thousands, except performance
metric
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Interest income $ 18,474 0.243 % $ 21,237 0.389 % $ (2,763 ) (13.0 %)
Performance Metric
Number of secured loans at
period-end 1,881 717 1,164 162.3 %

Interest income for the year ended June 30, 2021 decreased $2.8 million, or
13.0%, to $18.5 million from $21.2 million in 2020. The aggregate decrease in
interest income was primarily due to lower interest income earned by our Secured
Lending Segment, partially offset by higher other finance product income.

The interest income from our Secured Lending segment decreased by $4.1 million
or by 33.2% compared with the prior year. The decrease in interest income earned
from the segment’s secured loan portfolio was primarily due to lower average
monthly loan balances during the current period as compared to the average
monthly loan balances for the prior year period.

The number of secured loans outstanding increased by 162.3% to 1,881 as of June
30, 2021, from 717 as of June 30, 2020. Typically, the number of loans increases
during periods of increasing precious metal prices and decreases during periods
of declining precious metal prices. Silver prices declined significantly in the
quarter ended March 31, 2020, resulting in an increase in margin calls and
borrower loan liquidations due to a decline in the value of the precious metals
collateral. Through the current fiscal year, silver prices increased and the
Company experienced growth in the number of loans. The Company did not incur
loan losses related to the margin calls or borrower loan liquidations during
either the current or the prior year period.

The interest income from our other finance product income increased by $1.2
million in comparison to the same year-ago period.

Interest Expense

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)

Interest expense $ (19,865 ) (0.261 )% $ (18,859 ) (0.345 )% $ 1,006 5.3 %

Interest expense for the year ended June 30, 2021 increased $1.0 million, or
5.3% to $19.9 million from $18.9 million in 2020. The increase was primarily
driven by higher interest expense associated with product financing
arrangements, higher interest and fees from liability on borrowed metals,
partially offset by a reduction in loan servicing fees, and less interest
expense related to our Trading Credit Facility. As compared to the same year-ago
period, the amount of interest expense that increased by component included: (i)
$1.4 million related to product financing arrangements, (ii) $0.5 million from
liability on borrowed metals, offset by decreased interest expense of (iii) $0.5
million of loan servicing fees, and (iv) $0.5 million of Trading Credit Facility
interest expense (including amortization of debt issuance costs).

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Earnings from equity method investments

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Earnings from equity method
investments $ 15,547 0.204 % $ 4,878 0.089 % $ 10,669 218.7 %

Earnings from equity method investments for the year ended June 30, 2021
increased $10.7 million or 218.7% to $15.5 million from $4.9 million in
2020. The aggregate increase was due to increased net income recognized by each
of our unconsolidated equity-method subsidiaries.

The Company’s share of JMB’s earnings in fiscal 2021(through the Acquisition
Date) and fiscal 2020 totaled $11.7 million and $4.2 million, respectively.

Other income, net

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Other income, net $ 1,079 0.014 % $ 348 0.006 % $ 731 210.1 %

Other income, net for the year ended June 30, 2021 increased $0.7 million, or
210.1% to $1.1 million from $0.3 million in 2020. The aggregate increase was
primarily due to an increase of $0.5 million in royalties earned, combined with
the impact of $0.2 million of costs recorded as other expense associated with
the settlement of our purchase of Goldline that was recognized during 2020.

Remeasurement gain on pre-existing equity interest

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Remeasurement gain on
pre-existing equity interest $ 26,306 0.346 % $ – 0.0 % $ 26,306 0.0 %

The remeasurement gain on pre-existing equity interest was recognized during the
Company’s fiscal third quarter in connection with the acquisition of JMB. The
Company’s estimated fair value of its 20.5% pre-existing equity interest in JMB
was determined to be approximately $33.9 million at the acquisition date. Based
on the total consideration paid of $207.4 million, the remeasurement resulted in
the recognition of a pretax gain of $26.3 million. For additional information
about our most recent acquisition see Note 1 to the Company’s consolidated
financial statements.

Provision for Income Taxes

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Income tax expense $ (31,877 ) (0.419 )% $ (6,387 ) (0.117 )% $ 25,490 399.1 %

Our income tax expense was $31.9 million and $6.4 million for the years ended
June 30, 2021 and 2020, respectively. Our effective tax rate was approximately
16.5% and 16.9% for the years ended June 30, 2021 and 2020, respectively. For
the year ended June 30, 2021, our effective tax rate differs from the federal
statutory rate primarily due to the exclusion of the fair value remeasurement
gain of our pre-existing equity investment in JMB, a one-time benefit from the
reversal of the previously established deferred tax liability related to our
equity investment in JMB, an exclusion of the fiscal 2021 pre-acquisition period
JMB equity earnings, the foreign derived intangible income special deduction,
and an adjustment made to pre-acquisition deferred taxes related to our
investment in AMST, offset by state taxes (net of federal tax benefit), state
tax rate change, and other normal course non-deductible expenditures.

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SEGMENT RESULTS OF OPERATIONS

The Company conducts its operations in three reportable segments: (i) Wholesale
Sales & Ancillary Services (formerly known as Wholesale Trading & Ancillary
Services), (ii) Direct-to-Consumer (formerly known as Direct Sales), and (iii)
Secured Lending. Each of these reportable segments represents an aggregation of
operating segments that meets the aggregation criteria set forth in the Segment
Reporting Topic 280 of the FASB Accounting Standards Codification (“ASC”).

The segment name changes of Wholesale Sales & Ancillary Services and
Direct-to-Consumer had no impact on the Company’s historical financial position,
results of operations, cash flow or segment level results previously reported.

Results of Operations – Wholesale Sales & Ancillary Services Segment

The Company operates its Wholesale Sales & Ancillary Services segment through
A-Mark Precious Metals, Inc., and its wholly-owned subsidiaries, A-Mark Trading
AG (“AMTAG”), Transcontinental Depository Services (“TDS”), and A-M Global
Logistics, LLC (“Logistics”), and AM&ST Associates, LLC (“AMST” or “Silver
Towne” or the “Mint”). Also, the Wholesale Sales & Ancillary Services segment
includes the consolidating eliminations of inter-segment transactions and
unallocated segment adjustments.

Overview of Results of Operations for the Years Ended June 30, 2021 and 2020

– Wholesale Sales & Ancillary Services Segment

The operating results of our Wholesale Sales & Ancillary Services segment for
the years ended June 30, 2021 and 2020 are as follows:

in thousands, except performance
metrics
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Revenues $ 6,738,707 100.000 % $ 5,360,899 100.000 % $ 1,377,808 25.7 %
Gross profit 138,813 2.060 % 56,908 1.062 % $ 81,905 143.9 %
Selling, general, and
administrative expenses (33,869 ) (0.503 )% (27,150 ) (0.506 )% $ 6,719 24.7 %
Interest income 10,315 0.153 % 9,024 0.168 % $ 1,291 14.3 %
Interest expense (11,666 ) (0.173 )% (10,527 ) (0.196 )% $ 1,139 10.8 %
Earnings from equity method
investments 15,547 0.231 % 4,878 0.091 % $ 10,669 218.7 %
Other income (expense), net – – (10 ) (0.000 )% $ 10 100.0 %
Remeasurement gain on
pre-existing equity interest 26,306 0.390 % – 0.0 % $ 26,306 0.0 %
Unrealized (losses) gains on
foreign exchange (129 ) (0.002 )% 57 0.001 % $ 186 326.3 %
Net income before provision for
income taxes $ 145,317 2.156 % $ 33,180 0.619 % $ 112,137 338.0 %
Performance Metrics:
Gold ounces sold(1) 2,486,000 2,136,000 350,000 16.4 %
Silver ounces sold(2) 103,812,000 89,612,000 14,200,000 15.8 %
Wholesale Sales ticket volume(3) 143,439 142,690 749 0.5 %

(1) Gold ounces sold represents the ounces of gold product sold and delivered to

the customer during the period, excluding ounces of gold recorded on forward

contracts.

(2) Silver ounces sold represents the ounces of silver product sold and delivered

to the customer during the period, excluding ounces of silver recorded on

forward contracts.

(3) Trading ticket volume represents the total number of product orders processed

by A-Mark.

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Revenues – Wholesale Sales & Ancillary Services

in thousands, except
performance metrics
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Revenues $ 6,738,707 100.000 % $ 5,360,899 100.000 % $ 1,377,808 25.7 %
Performance Metrics
Gold ounces sold 2,486,000 2,136,000 350,000 16.4 %
Silver ounces sold 103,812,000 89,612,000 14,200,000 15.8 %
Wholesale Sales ticket volume 143,439 142,690 749 0.5 %

Revenues for the year ended June 30, 2021 increased $1.378 billion, or 25.7%, to
$6.739 billion from $5.361 billion in 2020. Excluding a decrease of $169.4
million of forward sales, our revenues increased $1.547 billion mainly due to an
increase in the total amount of gold and silver ounces sold and higher selling
prices of gold and silver.

Gold ounces sold for the year ended June 30, 2021 increased 350,000 ounces, or
16.4%, to 2,486,000 ounces from 2,136,000 ounces in 2020. Silver ounces sold for
the year ended June 30, 2021 increased 14,200,000 ounces, or 15.8%, to
103,812,000 ounces from 89,612,000 ounces in 2020. On average, the selling
prices for gold increased by 18.7% and selling prices for silver increased by
55.7% during the year ended June 30, 2021 as compared to the prior year period.

The Wholesale Sales ticket volume for the year ended June 30, 2021 increased by
749 tickets, or 0.5%, to 143,439 tickets from 142,690 tickets in 2020. The
current year ticket volume also reflects a higher dollar order size compared
with the prior year as customers purchased in larger quantities during fiscal
2021 due to supply constraints.

A key factor that contributed to the increase in demand for precious metals was
the volatility in precious metal prices caused by macroeconomic and other
events. A combination of price volatility, increased demand, and supply
constraints led to a significant expansion in premium spreads in the precious
metals market, having an onset during the second half of fiscal year 2020 and
sustaining through the current fiscal year. We are uncertain of the duration of
these conditions.

Gross Profit – Wholesale Sales & Ancillary Services

in thousands, except
performance metric
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Gross profit $ 138,813 2.060 % $ 56,908 1.062 % $ 81,905 143.9 %

Gross profit for the year ended June 30, 2021 increased by $81.9 million, or
143.9%, to $138.8 million from $56.9 million in 2020. The overall gross profit
increase was primarily due to higher sales volumes and increased spreads.

This segment’s profit margin percentage increased by 99.8 basis points to 2.060%
from 1.062% in 2020. The increase in gross margin percentage was mainly
attributable to significantly wider premium spreads due to increased demand,
higher trading profits due to increased volatility, and the impact of decreased
forward sales. Forward sales increase revenues but are associated with
negligible gross margins. The Company enters into forward contracts to hedge its
precious metals price risk exposure and not for speculative purposes.

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Selling, General and Administrative Expenses – Wholesale Sales & Ancillary
Services

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Selling, general, and
administrative expenses $ (33,869 ) (0.503 )% $ (27,150 ) (0.506 )% $ 6,719 24.7 %

Selling, general and administrative expenses for the year ended June 30, 2021
increased $6.7 million, or 24.7%, to $33.9 million from $27.2 million in 2020.
The change was primarily due to the acquisition costs of $2.6 million associated
with the Company’s recent acquisition of JMB, increased compensation expense
(including performance-based accruals) of $2.4 million, and higher insurance
costs of $1.4 million.

Interest Income – Wholesale Sales & Ancillary Services

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Interest income $ 10,315 0.153 % $ 9,024 0.168 % $ 1,291 14.3 %

Interest income for the year ended June 30, 2021 increased $1.3 million, or
14.3%, to $10.3 million from $9.0 million in 2020. The overall increase is
primarily due to $1.2 million interest earned from repurchase agreements and
$0.2 million of interest income earned from spot deferred trade orders.

Interest Expense – Wholesale Sales & Ancillary Services

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Interest expense $ (11,666 ) (0.173 )% $ (10,527 ) (0.196 )% $ 1,139 10.8 %

Interest expense for the year ended June 30, 2021 increased $1.1 million, or
10.8% to $11.7 million from $10.5 million in 2020. The increase was primarily
driven by higher interest expense associated with product financing arrangements
of $0.5 million, higher interest and fees from liability on borrowed metals of
$0.5 million, and higher interest expense of $0.1 million related to the Trading
Credit Facility.

Earnings from equity method investments- Wholesale Sales & Ancillary Services

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Earnings from equity method
investments $ 15,547 0.231 % $ 4,878 0.091 % $ 10,669 218.7 %

Earnings from equity method investments for the year ended June 30, 2021
increased $10.7 million, or 218.7% to $15.5 million from $4.9 million in 2020.
The increase was due to increased net income recognized by each of our
unconsolidated equity-method subsidiaries.

The Company’s share of JMB’s earnings in fiscal 2021(through the Acquisition
Date) and fiscal 2020 totaled $11.7 million and $4.2 million, respectively.

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Remeasurement gain on pre-existing equity interest – Wholesale Sales & Ancillary
Services

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Remeasurement gain on
pre-existing equity interest $ 26,306 0.390 % $ – 0.0 % $ 26,306 0.0 %

The remeasurement gain on pre-existing equity interest was recognized during the
Company’s fiscal third quarter in connection with the acquisition of JMB. The
Company’s estimated fair value of its 20.5% pre-existing equity interest in JMB
was determined to be approximately $33.9 million at the acquisition date. Based
on the total consideration paid of $207.4 million, the remeasurement resulted in
the recognition of a pretax gain of $26.3 million. For additional information
about our most recent acquisition see Note 1 to the Company’s the
consolidated financial statements.

Results of Operations – Direct-to-Consumer Segment

The Company operates its Direct-to-Consumer segment through our wholly-owned
subsidiaries: JM Bullion, Inc. (“JMB”), Goldline, Inc. (“Goldline”), and AMIP,
LLC (“AMIP”), and through our 50%-owned subsidiary Precious Metals Purchasing
Partners, LLC (“PMPP”). As a result of the completion of our acquisition of JMB
on March 19, 2021 (see Note 1 of the Company’s consolidated financial
statements) we have included JMB’s financial activity, including performance
data, since March 20, 2021 in the Direct-to-Consumer segment’s fiscal 2021
results.

Overview of Results of Operations for the Years Ended June 30, 2021 and 2020

– Direct-to-Consumer Segment

The operating results of our Direct-to-Consumer segment for the years ended
June 30, 2021 and 2020 are as follows:

in thousands, except
performance metrics
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Revenues $ 874,308 (a) 100.000 % $ 100,195 (c) 100.000 % $ 774,113 772.6 %
Gross profit 71,385 8.165 % (b) 10,065 10.045 % (d) $ 61,320 609.2 %

Selling, general and
administrative expenses (22,391 ) (2.561 )% (7,713 ) (7.698 )% $ 14,678 190.3 %
Interest expense (898 ) (0.103 )% – – $ 898 –
Other expense, net – – (219 ) (0.219 )% $ (219 ) (100.0 )%
Net income before provision
for income taxes $ 48,096 5.501 % 2,133 2.129 % $ 45,963 2154.9 %
Performance Metrics:
Gold ounces sold(1) 257,000 45,000 212,000 471.1 %
Silver ounces sold(2) 10,463,000 773,000 9,690,000 1253.6 %
Number of new customers(3) 84,300 1,900 82,400 4336.8 %
Number of active customers(4) 167,700 6,200 161,500 2604.8 %
Number of total customers(5) 1,703,100 158,000 1,545,100 977.9 %
DTC ticket volume(6) 331,664 18,541 313,123 1688.8 %

(a) Includes $8.5 million of inter-segment sales from the Direct-to-Consumer

segment to the Wholesale Sales & Ancillary Services segment.

(b) Gross profit percentage, excluding inter-segment sales from the

Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services

segment, is 8.226% for the period.

(c) Includes $26.4 million of inter-segment sales from the Direct-to-Consumer

segment to the Wholesale Sales & Ancillary Services segment.

(d) Gross profit percentage, excluding inter-segment company sales from the

Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services

segment, is 12.549% for the period.

(1) Gold ounces sold represents the ounces of gold product sold during the

period.

(2) Silver ounces sold represents the ounces of silver product sold during the

period.

(3) Number of new customers represents the number of customers that have

registered or setup a new account or made a purchase for the first time

during the period.

(4) Number of active customers represents the number of customers that have made

a purchase during the period.

(5) Number of total customers represents the aggregate number of customers that

have registered or set up an account or have made a purchase in the past.

(6) Ticket volume represents the total number of product orders processed by JMB,

Goldline, and PMPP during the period.

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Segment Results – Direct-to-Consumer

Revenues – Direct-to-Consumer

in thousands, except
performance metrics
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Revenues $ 874,308 100.000 % $ 100,195 100.000 % $ 774,113 772.6 %
Performance Metrics:
Gold ounces sold 257,000 45,000 212,000 471.1 %
Silver ounces sold 10,463,000 773,000 9,690,000 1253.6 %
Number of new customers 84,300 1,900 82,400 4336.8 %
Number of active
customers 167,700 6,200 161,500 2604.8 %
Number of total customers 1,703,100 158,000 1,545,100 977.9 %
DTC ticket volume 331,664 18,541 313,123 1688.8 %

Revenues for the year ended June 30, 2021 increased $774.1 million, or 772.6%,
to $874.3 million from $100.2 million in 2020. Excluding inter-segment sales
from the Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services
segment, revenues for the year ended June 30, 2021 increased $792.0 million or
1073.2% to $865.8 million from $73.8 million in 2020.

Gold ounces sold for the year ended June 30, 2021 increased 212,000 ounces, or
471.1%, to 257,000 ounces from 45,000 ounces in 2020. Silver ounces sold for the
year ended June 30, 2021 increased 9,690,000 ounces, or 1253.6%, to 10,463,000
ounces from 773,000 ounces in 2020. On average, the selling prices for gold
increased by 9.9% and selling prices for silver increased by 49.5% during the
year ended June 30, 2021 as compared to the prior year period.

The number of new customers for the year ended June 30, 2021 increased 82,400,
or 4,336.8% to 84,300 from 1,900 in 2020. The number of active customers for
the year ended June 30, 2021 increased 161,500, or 2,604.8% to 167,700 from
6,200 in 2020. The number of total customers as of June 30, 2021 increased
1,545,100, or 977.9% to 1,703,100 from 158,000 as of June 30, 2020. The
increases in the customer-based metrics were primarily due to our acquisition of
JMB in 2021, inclusive of its customer base.

The Direct-to-Consumer ticket volume for the year ended June 30, 2021 increased
by 313,123 tickets, or 1688.8%, to 331,664 tickets from 18,541 tickets in
2020. The increase in ticket volume was primarily due to transactions generated
by our newly acquired subsidiary, JMB.

A key factor that contributed to the increase in demand for precious metals was
the volatility in precious metal prices caused by macroeconomic and other
events. A combination of price volatility, increased demand, and supply
constraints led to a significant expansion in premium spreads in the precious
metals market, having an onset during the second half of fiscal year 2020 and
sustaining through the current fiscal year. We are uncertain of the duration of
these conditions.

Gross Profit – Direct-to-Consumer

in thousands, except
performance metric
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Gross profit $ 71,385 8.165 % $ 10,065 10.045 % $ 61,320 609.2 %

Gross profit for the year ended June 30, 2021 increased by $61.3 million, or
609.2%, to $71.4 million from $10.1 million in 2020. For the year ended June 30,
2021, the Company’s profit margin percentage decreased by 188.1 basis points to
8.165% from 10.045% in 2020. Excluding the impact of inter-segment sales from
the Direct-to-Consumer segment to the Wholesale Sales & Ancillary Services
segment, the Direct-to-Consumer segment’s gross profit margin percentage
decreased by 432.3 basis points to 8.226% from 12.549% in 2020.

Selling, General and Administrative Expense – Direct-to-Consumer

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Selling, general and
administrative
expenses $ (22,391 ) (2.561 )% $ (7,713 ) (7.698 )% $ 14,678 190.3 %

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Selling, general and administrative expenses for the year ended June 30, 2021
increased $14.7 million, or 190.3%, to $22.4 million from $7.7 million in
2020. The change was primarily due to increased amortization and depreciation
costs of $8.6 million, increased advertising expenses of $2.7 million and higher
compensation expense (including performance-based accruals) of $2.5 million.
JMB’s activity, a company that we recently acquired, accounted for approximately
98.0% of the aggregate change for this segment.

Interest expense – Direct-to-Consumer

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Interest expense $ (898 ) (0.103 )% $ – – $ 898 –

Interest expense for the year ended June 30, 2021 increased $0.9 million to $0.9
million from $0.0 million in 2020. The increase related to JMB’s product
financing activity with A-Mark.

Other income (expense) – Direct-to-Consumer

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)

Other expense, net $ – – $ (219 ) (0.219 )% $ (219 ) (100.0 )%

There was no activity for the current period. For the year ended June 30, 2020,
the other expense activity of $0.2 million related to a one-time charge in
connection with the settlement of the purchase price related to the acquisition
of Goldline.

Results of Operations – Secured Lending Segment

The Company operates its Secured Lending segment through its wholly-owned
subsidiaries, Collateral Finance Corporation, LLC. (“CFC”), AM Capital Funding,
LLC (“AMCF”), and CFC Alternative Investments (“CAI”).

Overview of Results of Operations for the Years Ended June 30, 2021 and 2020

– Secured Lending Segment

The operating results of our Secured Lending segment for the years ended
June 30, 2021 and 2020 are as follows:

in thousands, except performance
metrics
Years Ended June 30, 2021 2020 $ %
% of % of
interest interest Increase/ Increase/
$ income $ income (decrease) (decrease)
Interest income $ 8,159 100.000 % $ 12,213 100.000 % $ (4,054 ) (33.2 %)
Interest expense (7,301 ) (89.484 )% (8,332 ) (68.222 )% $ (1,031 ) (12.4 %)
Selling, general and
administrative expenses (2,549 ) (31.242 )% (1,893 ) (15.500 )% $ 656 34.7 %
Other income, net 1,079 13.225 % 577 4.724 % $ 502 87.0 %
Net (loss) income before
provision for income taxes $ (612 ) (7.501 )% $ 2,565 21.002 % $ 3,177 123.9 %
Performance Metric:
Number of secured loans at
period end(1) 1,881 717 1,164 162.3 %

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

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Interest Income – Secured Lending

in thousands, except performance
metric
Years Ended June 30, 2021 2020 $ %
% of % of
interest interest Increase/ Increase/
$ income $ income (decrease) (decrease)
Interest income $ 8,159 100.000 % $ 12,213 100.000 % $ (4,054 ) (33.2 %)
Performance Metric
Number of secured loans at
period-end 1,881 717 1,164 162.3 %

Interest income for the year ended June 30, 2021 decreased $4.1 million, or
33.2%, to $8.2 million from $12.2 million in 2020. The decrease in interest
income earned from the segment’s secured loan portfolio was primarily due to
lower average monthly loan balances during the current period as compared to the
average monthly loan balances for the prior year period.

The number of secured loans outstanding increased by 162.3% to 1,881 as of June
30, 2021, from 717 as of June 30, 2020. Typically, the number of loans increases
during periods of increasing precious metal prices and decreases during periods
of declining precious metal prices. Silver prices declined significantly in the
quarter ended March 31, 2020, resulting in an increase in margin calls and
borrower loan liquidations due to a decline in the value of the precious metals
collateral. Through the current fiscal year, silver prices increased and the
Company experienced growth in the number of loans.

The Company did not incur loan losses related to the margin calls or borrower
loan liquidations during either the current or the prior year period.

Interest Expense – Secured Lending

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of
interest interest Increase/ Increase/
$ income $ income (decrease) (decrease)

Interest expense $ (7,301 ) (89.484 )% $ (8,332 ) (68.222 )% $ (1,031 ) (12.4 %)

Interest expense for the year ended June 30, 2021 decreased $1.0 million, or
12.4% to $7.3 million from $8.3 million in 2020. The change in interest expense
is driven by the value of our secured loan portfolio, which is primarily
financed through our notes payable and Trading Credit Facility. As compared to
the same year-ago period, loan servicing costs decreased $0.5 million and
interest expense related to our notes payable and Trading Credit Facility
decreased $0.5 million.

Selling, General and Administrative Expenses – Secured Lending

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of
interest interest Increase/ Increase/
$ income $ income (decrease) (decrease)
Selling, general, and
administrative expenses $ (2,549 ) (31.242 )% $ (1,893 ) (15.500 )% $ 656 34.7 %

Selling, general and administrative expenses for the year ended June 30, 2021
increased $0.7 million, or 34.7%, to $2.5 million from $1.9 million in 2020. The
increase was mainly driven by higher professional fees of $0.3 million,
increased marketing expenses of $0.2 million, and higher storage costs of $0.1
million.

Other Income, net – Secured Lending

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of
interest interest Increase/ Increase/
$ income $ income (decrease) (decrease)
Other income, net $ 1,079 13.225 % $ 577 4.724 % $ 502 87.0 %

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Other income, net for the year ended June 30, 2021 increased $0.5 million, or
87.0% to $1.1 million from $0.6 million in 2020. The increase was primarily due
to an increase of $0.5 million in royalty income.

NON-GAAP MEASURES

Adjusted net income before provision for income taxes

Overview

In addition to our results determined in accordance with GAAP, we believe the
below non-GAAP measure is useful in evaluating our operating performance. We use
the financial measure “adjusted net income before provision for income taxes” to
present our pre-tax earnings from on-going business operations. This measure is
not prepared in accordance with GAAP. The items excluded from this financial
measure may have a material impact on our financial results. Certain of those
items are non-recurring, while others are non-cash in nature. Accordingly, this
non-GAAP financial measure should be considered in addition to, and not as a
substitute for or superior to, the comparable measures prepared in accordance
with GAAP.

Reconciliation

In our reconciliation from our reported GAAP “net income before provision for
taxes” to our non-GAAP “adjusted net income before provision for taxes,” we
eliminate the impact of the following four amounts: (i) remeasurement gains;
(ii) acquisition expenses; (iii) amortization expenses related to intangible
assets acquired; and (iv) depreciation expense. The following tables reconcile
this non-GAAP financial measure to its most closely comparable GAAP measure on
our financial statements for the years ended June 30, 2021 and 2020.

in thousands
Years Ended June 30, 2021 2020 $ %
% of % of Increase/ Increase/
$ revenue $ revenue (decrease) (decrease)
Revenues $ 7,613,015 100.000 % $ 5,461,094 100.000 % $ 2,151,921 39.4 %

Net income before provision for
income taxes $ 192,801 2.533 % $ 37,878 0.694 % $ 154,923 409.0 %

Adjustments:

Remeasurement gain on
pre-existing equity interest (26,306 ) (0.346 )% – – $ 26,306 (- %)
Acquisition costs 2,576 0.034 % – – $ 2,576 (- %)
Amortization of acquired
intangibles 9,341 0.123 % 1,028 0.019 % $ 8,313 808.8 %
Depreciation expense 1,447 0.019 % 1,872 0.034 % $ (425 ) (22.7 %)
Adjusted net income before
provision for income taxes
(Non-GAAP) $ 179,859 2.363 % $ 40,778 0.747 % $ 139,081 341.1 %

Adjustments

Remeasurement gains or losses. This adjustment relates to our acquisition in
March 2021 of the 79.5% of the equity interest in JMB that was not previously
owned by us. When we acquire control of a business for which we had previously
owned a noncontrolling equity interest, we are required to estimate the fair
value of our pre-existing equity investment and record the change in its value
as a remeasurement gain or loss, which we present on the face of our
consolidated statements of income. Remeasurement gains and losses are recorded
upon the completion of an acquisition. We exclude these types of remeasurement
gains and losses when we evaluate our on-going operational performance and to
facilitate comparison of period-to-period operational performance. For
additional information about our acquisition of JMB, see Note 1 to the
Company’s consolidated financial statements.

Acquisition expenses. This adjustment relates as well to the JMB acquisition. We
incur expenses for professional services rendered in connection with business
combinations, which are included as a component of selling, general, and
administrative expenses in the Company’s consolidated statements of income.
Acquisition expenses are recorded in the periods in which the costs are
incurred, and the services are received. We exclude acquisition expenses when we
evaluate our on-going operational performance and to facilitate comparison of
period-to-period operational performance.

Amortization of purchased intangibles. Amortization expense of purchased
intangibles is included as a component of selling, general, and administrative
expenses in the Company’s consolidated statements of income. Such amortization
expense varies in amount and frequency and is significantly impacted by the
timing and size of our acquisitions. Management finds it useful to exclude these
charges from our operating expenses to assist in the review of a measure that
more closely corresponds to cash operating income generated from our
business. The use of intangible assets such as our existing customer
relationships and developed technology contributed to our revenues earned during
the periods presented and is expected to contribute to our revenues in future
periods. Amortization of purchased intangible assets will recur in future
periods. For additional information about the amortization of our purchased
intangibles, see Note 8 to the Company’s consolidated financial statements.

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Depreciation expense. Depreciation expense is included as a component of
selling, general, and administrative expenses in the Company’s consolidated
statements of income. Depreciation expense is calculated using a straight-line
method based on the estimated useful lives of the related assets, ranging from
three years to twenty-five years. Due to depreciation expense being non-cash in
nature, management finds it useful to exclude these charges from our operating
expenses to assist in the review of a measure that more closely corresponds to
cash operating income generated from our business.

LIQUIDITY AND FINANCIAL CONDITION

Primary Sources and Uses of Cash

Overview

Liquidity refers to the availability to the Company of amounts of cash to meet
all of our cash needs. Our sources of liquidity principally include cash from
operations, Trading Credit Facility (see “Lines of Credit” below), and product
financing arrangements.

A substantial portion of our assets are liquid. As of June 30, 2021,
approximately 80.6% of our assets consisted of cash, receivables, derivative
assets, secured loans receivables, precious metals held under financing
arrangements and inventories, measured at fair value. Cash generated from the
sales or financing of our precious metals products is our primary source of
operating liquidity. Among other things, these include our product financing
arrangements and liabilities on borrowed metals. Typically, the Company acquires
its inventory by: (i) purchasing inventory from its suppliers by utilizing our
own capital and lines of credit; (ii) borrowing precious metals from its
suppliers under short-term arrangements which may bear interest at a designated
rate, and (iii) repurchasing inventory at an agreed-upon price based on the spot
price on the specified repurchase date.

In addition to selling inventory, the Company generates cash from earning
interest income. The Company enters into secured loans and secured financing
structures with its customers under which it charges interest. The loans are
secured by precious metals and numismatic material owned by the borrowers and
held by the Company as security for the term of the loan. The Company also
offers a number of secured financing options to its customers to finance their
precious metals purchases including consignments and other structured inventory
finance products. Furthermore, our customers may enter into agreements whereby
the customer agrees to repurchase our precious metals at the prevailing spot
price for delivery of the product at a specific point in time in the future;
interest income is earned from the contract date until the material is delivered
and paid for in full.

We may also raise funds through the public or private offering of equity or debt
securities, although there is no assurance that we will be able to do so at the
times and in the amounts required. We have an effective universal shelf
registration statement, on file with the Securities and Exchange Commission for
this purpose, under which we may issue approximately $66.5 million worth of
securities at this time.

We continually review our overall credit and capital needs to ensure that our
capital base, both stockholders’ equity and available credit facilities, can
appropriately support our anticipated financing needs. The Company also
continually monitors its current and forecasted cash requirements and draws upon
and pays down its lines of credit so as to minimize interest expense. (See

Note 14 to the Company’s consolidated financial statements.)

Lines of Credit

in thousands
June 30,
2021
Compared to
June 30, June 30, June 30,
2021 2020 2020
Lines of credit $ 185,000 $ 135,000 $ 50,000

Effective March 26, 2021, through an amendment and restatement of the applicable
credit documents, A-Mark renewed its uncommitted demand borrowing facility
(“Trading Credit Facility”) with a syndicate of banks. Under the agreements,
Coöperatieve Rabobank U.A. acts as lead lender and administrative agent and
Macquarie Bank Limited acts as syndication agent. As of June 30, 2021, the
Trading Credit Facility provided the Company with access up to $270.0 million,
featuring a $220.0 million base, with a $50.0 million accordion option. The
maturity date of the credit facility is March 25, 2022. The Trading Credit
Facility was initially entered into on March 31, 2016, and the Company has
successfully amended and extended the terms of the Trading Credit Facility each
year since its inception. The Trading Credit Facility was amended effective July
16, 2021, and now provides for a $330 million credit facility, consisting of a
$280 million base and a $50 million accordion feature. (See Note 19 to the
Company’s consolidated financial statements.)

A-Mark routinely uses funds drawn under the Trading Credit Facility to purchase
metals from its suppliers and for other operating cash flow purposes. Our CFC
subsidiary also uses the funds drawn under the Trading Credit Facility to
finance its lending activities.

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Notes Payable

in thousands
June 30,
2021
Compared to
June 30, June 30, June 30,
2021 2020 2020
Notes payable $ 93,249 $ 92,517 $ 732

On September 14, 2018, AM Capital Funding, LLC. (“AMCF”), a wholly owned
subsidiary of CFC, completed an issuance of Secured Senior Term Notes, Series
2018-1, Class A in the aggregate principal amount of $72.0 million and Secured
Subordinated Term Notes, Series 2018-1, Class B in the aggregate principal
amount of $28.0 million. The Class A Notes bear interest at a rate of 4.98% and
the Class B Notes bear interest at a rate of 5.98%. The Notes have a maturity
date of December 15, 2023.

As of June 30, 2021, the consolidated aggregate carrying balance of the Notes
was $93.2 million (which excludes the $5.0 million Note that the Company
retained), and the remaining unamortized loan cost balance was approximately
$1.8 million, which is amortized using the effective interest method through the
maturity date. (See Note 14 to the Company’s consolidated financial
statements.)

Liabilities on Borrowed Metals

in thousands
June 30,
2021
Compared to
June 30, June 30, June 30,
2021 2020 2020

Liabilities on borrowed metals $ 91,866 $ 168,206 $ (76,340 )

We borrow precious metals from our suppliers and customers under short-term
arrangements using other precious metal from our inventory or precious metals
held under financing arrangements as collateral. Amounts under these
arrangements require repayment either in the form of precious metals or cash.
Liabilities also arise from unallocated metal positions held by customers in our
inventory. Typically, these positions are due on demand, in a specified physical
form, based on the total ounces of metal held in the position.

Product Financing Arrangements

in thousands
June 30,
2021
Compared to
June 30, June 30, June 30,
2021 2020 2020

Product financing arrangements $ 201,028 $ 74,678 $ 126,350

The Company has agreements with financial institutions and other third parties
that allow the Company to transfer its gold and silver inventory to the third
party at an agreed-upon price based on the spot price, which provides
alternative sources of liquidity. During the term of the agreement both parties
intend for inventory to be returned at an agreed-upon price based on the spot
price on the termination (repurchase) date. The third parties charge monthly
interest as a percentage of the market value of the outstanding obligation; such
monthly charges are classified as interest expense. These transactions do not
qualify as sales and therefore are accounted for as financing arrangements and
reflected in the Company’s consolidated balance sheets as product financing
arrangements. The obligation is stated at the amount required to repurchase the
outstanding inventory. Both the product financing arrangements and the
underlying inventory (which is entirely restricted) are carried at fair value,
with changes in fair value included as a component of cost of sales.

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Secured Loans Receivable

in thousands
June 30,
2021
Compared to
June 30, June 30, June 30,
2021 2020 2020
Secured loans receivable $ 112,968 $ 63,710 $ 49,258

CFC is a California licensed finance lender that makes and acquires commercial
loans secured by bullion and numismatic coins that affords our customers a
convenient means of financing their inventory or collections. (See Note 5

to

the Company’s consolidated financial statements.) AMCF also purchases and holds
secured loans from CFC to meet its collateral requirements related to the Notes
(See Note 14 to Company’s consolidated financial statements.) Most of the
Company’s secured loans are short-term in nature. The renewal of these
instruments is at the discretion of the Company and, as such, provides us with
some flexibility in regard to our capital deployment strategies.

Dividends

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. 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 during the year ended June 30, 2021.

Cash Flows

The majority of the Company’s trading activities involve two-day value trades
under which payment is received in advance of delivery or product is received in
advance of payment. The combination of sales volume, inventory turnover, and
precious metals price volatility can cause material changes in the sources of
cash used in or provided by operating activities on a daily basis. The Company
manages these variances through its liquidity forecasts and counterparty limits
by maintaining a liquidity reserve to meet the Company’s cash needs. The Company
uses various short-term financial instruments to manage the cycle of our trading
activities from customer purchase order to cash collections and product
delivery, which can cause material changes in the amount of cash used in or
provided by financing activities on a daily basis.

The following summarizes components of our consolidated statements of cash flows
for the years ended June 30, 2021 and 2020:

in thousands
June 30,
2021
Compared to
June 30, June 30, June 30,
Year Ended 2021 2020 2020
Net cash (used in) provided by operating
activities $ (52,654 ) $ 47,935 $ (100,589 )
Net cash (used in) provided by investing
activities $ (130,393 ) $ 48,774 $ (179,167 )
Net cash provided by (used in) financing
activities $ 232,127 $ (52,704 ) $ 284,831

For the years presented, our principal capital requirements have been to fund
(i) working capital and (ii) investing activity. Our working capital
requirements fluctuated with market conditions, the availability of precious
metals, and the volatility of precious metals commodity pricing. The primary
reason for the increase in net cash used in operating activities was due to
increased inventory purchases during a period of increased demand and rising
precious metal prices. Net cash used in investing activities increased as a
result of increased loan origination and acquisition activity, which was driven
by higher precious metal spot prices, as well as our acquisition of JMB. The
primary reason for the increase in net cash provided by financing activities was
due to an increased use of short term debt financing to accommodate a period of
high demand for precious metal products, as well as proceeds received in
connection with the Company’s public offering of its common stock.

Net cash (used in) provided by operating activities

Operating activities used $52.7 million and provided $47.9 million in cash for
the years ended June 30, 2021 and 2020, respectively, representing a $100.6
million increase in cash used compared to the year ended June 30, 2020. The
increase in cash used was primarily due to changes in working capital, which
includes the balances of accounts payable and other current liabilities,
inventories, liabilities on borrowed metals, and derivative liabilities,
partially offset by increased net income as a result of increased demand,
adjusted for noncash items, and by changes in the balances of derivative assets.

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Net cash (used in) provided by investing activities

Investing activities used $130.4 million and provided $48.8 million in cash for
the years ended June 30, 2021 and 2020, respectively, representing a $179.2
million increase in cash used compared to the year ended June 30, 2020. This
period over period increase in cash used was primarily due to the higher
investing cash outflows of $110.2 million associated with the acquisition and
origination of secured loans during the period, the incremental acquisition of a
pre-existing equity method investment of $78.9 million, and an increase of cash
outflows of $8.0 million in connection with the purchase of long term
investments, partially offset by $17.5 million redemption amount upon
acquisition of a pre-existing equity method investment.

Net cash provided by (used in) financing activities

Financing activities provided $232.1 million and used $52.7 million in cash for
the years ended June 30, 2021 and 2020, respectively, representing a $284.8
million increase in the source of cash compared to the year ended June 30,
2020. This period over period increase was primarily due to the change in cash
provided by product financing arrangements of $146.2 million, the change in the
cash provided by the Trading Credit Facility of $82.0 million, the net proceeds
of $75.3 million the Company received in connection with its public offering of
common stock, and cash received from employee stock option exercises of $3.6
million, partially offset by the payment of two non-recurring special dividends
in the aggregate amount of $21.2 million, and the change in balance of debt
issuance costs of $1.1 million.

Capital Resources

We believe that our current cash availability under the Trading Credit Facility,
product financing arrangements, financing derived from borrowed metals and the
cash we anticipate generating from operating activities will provide us with
sufficient liquidity to satisfy our working capital needs, capital expenditures,
investment requirements, and commitments through at least the next twelve
months.

CONTRACTUAL OBLIGATIONS, CONTINGENT LIABILITIES AND COMMITMENTS

Counterparty Risk

We manage our counterparty risk by setting credit and position risk limits with
our trading counterparties. These limits include gross position limits for
counterparties engaged in sales and purchase transactions and inventory
consignment transactions with us. They also include collateral limits for
different types of sale and purchase transactions that counterparties may engage
in from time to time.

Commodities Risk and Derivatives

We use a variety of strategies to manage our risk including fluctuations in
commodity prices for precious metals. Our inventory consists of, and our trading
activities involve, precious metals and precious metal products, for which
prices are linked to the corresponding precious metal commodity prices.
Inventory purchased or borrowed by us is subject to price changes. Inventory
borrowed is a natural hedge, since changes in value of the metal held are offset
by the obligation to return the metal to the supplier or deliver metals to the
customer.

Open sale and purchase commitments in our trading activities are subject to
changes in value between the date the purchase or sale price is fixed (the trade
date) and the date the metal is received or delivered (the settlement date). We
seek to minimize the effect of price changes of the underlying commodity through
the use of forward and futures contracts. Our open sale and purchase commitments
generally settle within 2 business days, and for those commitments that do not
have stated settlement dates, we have the right to settle the positions upon
demand.

Our policy is to substantially hedge our underlying precious metal commodity
inventory position. We regularly enter into metals commodity forward and futures
contracts with financial institutions to hedge price changes that would cause
changes in the value of our physical metals positions and purchase commitments
and sale commitments. We have access to all of the precious metals markets,
allowing us to place hedges. We also maintain relationships with major market
makers in every major precious metals dealing center, which allows us to enter
into contracts with market makers. Our forwards contracts open at June 30, 2021
are scheduled to settle within 60 days. Futures positions do not have settlement
dates. The Company typically uses futures contracts for its shorter-term hedge
positions and forward contracts for longer term hedge positions.

The Company enters into these derivative transactions solely for the purpose of
hedging our inventory holding risk, and not for speculative market purposes. Due
to the nature of our hedging strategy, we are not using hedge accounting as
defined under, Derivatives and Hedging Topic 815 of the Accounting Standards
Codification (“ASC”.) Unrealized gains or losses resulting from our futures and
forward contracts are reported as cost of sales with the related amounts due
from or to counterparties reflected as derivative assets or liabilities. The
Company adjusts the derivatives to fair value on a daily basis until the
transactions are settled. When these contracts are net settled, the unrealized
gains and losses are reversed and the realized gains and losses for forward
contracts are recorded in revenue and cost of sales and the net realized gains
and losses for futures are recorded in cost of sales.

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The Company’s net (losses) gains on derivative instruments for the years ended
June 30, 2021 and 2020, totaled ($125.6) million and $8.1 million,
respectively. These net (losses) gains on derivative instruments were
substantially offset by the changes in fair market value of the underlying
precious metals inventory and open sale and purchase commitments, which is also
recorded in cost of sales in the consolidated statements of income.

The purpose of the Company’s hedging policy is to substantially match the change
in the value of the derivative financial instrument to the change in the value
of the underlying hedged item. The following table summarizes the results of our
hedging activities, showing the precious metal commodity inventory position, net
of open sale and purchase commitments, which is subject to price risk, compared
to change in the value of the derivative instruments as of June 30, 2021 and
June 30, 2020:

in thousands
June 30, June 30,
2021 2020
Inventories $ 458,019 $ 321,281
Precious metals held under financing arrangements 154,742

178,577

612,761

499,858

Less unhedgeable inventories:
Commemorative coin inventory, held at lower
of cost or net realizable value (406 ) (17 )
Premium on metals position (11,017 ) (3,684 )
Precious metal value not hedged (11,423 )

(3,701 )

601,338

496,157

Commitments at market:
Open inventory purchase commitments 987,926

514,553

Open inventory sales commitments (590,156 ) (309,134 )
Margin sale commitments (7,322 ) (14,652 )
In-transit inventory no longer subject to market risk (16,707 ) (3,605 )
Unhedgeable premiums on open commitment positions 8,638

2,779

Borrowed precious metals (91,866 ) (168,206 )
Product financing arrangements (201,028 ) (74,678 )
Advances on industrial metals 287

318

89,772 (52,625 )
Precious metal subject to price risk 691,110

443,532

Precious metal subject to derivative financial
instruments:
Precious metals forward contracts at market values 175,352

73,948

Precious metals futures contracts at market values 514,240

369,842

Total market value of derivative financial
instruments 689,592

443,790

Net precious metals subject to commodity price risk $ 1,518 $

(258 )

We are exposed to the risk of default of the counterparties to our derivative
contracts. Significant judgment is applied by us when evaluating the fair value
implications. We regularly review the creditworthiness of our major
counterparties and monitor our exposure to concentrations. At June 30, 2021, we
believe our risk of counterparty default is mitigated based on our evaluation of
the creditworthiness of our major counterparties, the strong financial condition
of our counterparties, and the short-term duration of these arrangements.

Commitments and Contingencies

Refer to Note 15 to the Company’s consolidated financial statements for
information relating Company’s commitments and contingencies.

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OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2021 and June 30, 2020, we had the following outstanding sale and
purchase commitments and open forward and future contracts, which are normal and
recurring, in nature:

in thousands
June 30, June 30,
2021 2020
Purchase commitments $ 987,926 $ 514,553
Sales commitments $ (590,156 ) $ (309,134 )
Margin sale commitments $ (7,322 ) $ (14,652 )
Open forward contracts $ 175,352 $ 73,948
Open futures contracts $ 514,240 $ 369,842

Foreign exchange forward contracts $ 6,541 $ 4,599

The notional amounts of the commodity forward and futures contracts and the open
sales and purchase orders, as shown in the table above, are not reflected at the
notional amounts in the consolidated balance sheets. The Company records
commodity forward and futures contracts at the fair value, which is the
difference between the market price of the underlying metal or contract measured
on the reporting date and the trade amount measured on the date the contract was
transacted. The fair value of the open derivative contracts are shown as a
component of derivative assets or derivative liabilities in the accompanying
consolidated balance sheets.

The Company enters into the derivative forward and future transactions solely
for the purpose of hedging its inventory holding risk, and not for speculative
market purposes. The Company’s gains (losses) on derivative instruments are
substantially offset by the changes in fair market value of the underlying
precious metals inventory position, including our open sale and purchase
commitments. The Company records the derivatives at the trade date, and any
corresponding unrealized gains or losses are shown as a component of cost of
sales in the consolidated statements of income. We adjust the carrying value of
the derivatives to fair value on a daily basis until the transactions are
physically settled. (See Note 11 to the Company’s consolidated financial
statements.)

CRITICAL ACCOUNTING POLICIES

The Company’s consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States (“U.S. GAAP”). In
connection with the preparation of our financial statements, we are required to
make estimates and assumptions about future events and apply judgments that
affect the reported amounts of assets, liabilities, revenue, expenses and
related disclosures. We base our assumptions, estimates and judgments on
historical experience, current trends and other factors that we believe to be
relevant at the time the Company’s consolidated financial statements are
prepared. On a regular basis, we review our accounting policies, assumptions,
estimates and judgments to ensure that the Company’s consolidated financial
statements are presented fairly and in accordance with U.S. GAAP. However,
because future events and their effects cannot be determined with certainty,
actual results could materially differ from our estimates.

Our significant accounting policies are discussed in Note 2 to the Company’s
consolidated financial statements. We believe that the following accounting
policies are the most critical to aid in fully understanding and evaluating our
reported financial results, and they require our most difficult, subjective or
complex judgments, resulting from the need to make estimates about the effect of
matters that are inherently uncertain. We have reviewed these critical
accounting estimates and related disclosures with the Audit Committee of our
Board of Directors.

Revenue Recognition

The Company accounts for its metals and sales contracts using settlement date
accounting. Pursuant to such accounting, the Company recognizes the sale or
purchase of the metals at settlement date. During the period between the trade
and settlement dates, the Company has entered into a forward contract that meets
the definition of a derivative in accordance with the Derivatives and Hedging
Topic 815 of the ASC. The Company records the derivative at the trade date with
any corresponding unrealized gain (loss), shown as component of cost of sales in
the consolidated statements of income. The Company adjusts the derivatives to
fair value on a daily basis until the transactions are settled. When these
contracts are settled, the unrealized gains and losses are reversed, and revenue
is recognized for contracts that are physically settled. For contracts that are
net settled, the realized gains and losses are recorded in cost of sales, with
the exception of forward contracts, where their associated realized gains and
losses are recorded in revenue and cost of sales, respectively.

Also, the Company recognizes its storage, logistics, licensing, advertising
revenue, and other services revenues in accordance with the FASB’s release ASU
2014-09 Revenue From Contracts With Customers Topic 606 and subsequent related
amendments (“ASC 606”), which follows five basic steps to determine whether
revenue can be recognized: (i) identify the contract with a customer; (ii)
identify the performance obligations in the contract; (iii) determine the
transaction price; (iv) allocate the transaction price to the performance
obligations in the contract, and (v) recognize revenue when (or as) the
entity satisfies a performance obligation.

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Inventories

The Company’s inventory, which primarily consists of bullion and bullion coins,
is acquired and initially recorded at cost and then marked to fair market
value. The fair market value of the bullion and bullion coins comprises two
components: (i) published market values attributable to the cost of the raw
precious metal, and (ii) the premium paid at acquisition of the metal, which is
attributable to the incremental value of the product in its finished goods form.
The market value attributable solely to such premium is readily determinable by
reference to multiple reputable published sources. The precious metal component
of the inventory may be hedged through the use of precious metal commodity
positions, while the premium component of our inventory is not a commodity that
may be hedged.

The Company’s inventory, except for certain lower of cost or net realizable
value basis products (as described below), is subsequently recorded at their
fair market values. The daily changes in the fair market value of our inventory
are offset by daily changes in the fair market value of hedging derivatives that
are taken with respect to our inventory positions; both the change in the fair
market value of the inventory and the change in the fair market value of these
derivative instruments are recorded in cost of sales in the consolidated
statements of income.

While the premium component included in inventory is marked-to-market, our
commemorative coin inventory, including its premium component, is held at the
lower of cost or net realizable value, because the value of commemorative coins
is influenced more by supply and demand determinants than on the underlying spot
price of the precious metal content of the commemorative coins. 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.
Additionally, neither the commemorative coin inventory nor the premium component
of our inventory is hedged.

Inventory includes amounts borrowed from suppliers and customers arising from
various arrangements including unallocated metal positions held by customers in
the Company’s inventory, amounts due to suppliers for the use of consigned
inventory, metals held by suppliers as collateral on advanced pool metals, as
well as 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 under these arrangements
require delivery either in the form of precious metals or cash. The Company
mitigates market risk of its physical inventory and open commitments through
commodity hedge transactions. (See Note 11 to the Company’s consolidated
financial statements.)

The Company enters into product financing agreements for the transfer and
subsequent option or obligation to reacquire its gold and silver inventory at an
agreed-upon price based on the spot price with a third party finance company.
This inventory is restricted and is held at a custodial storage facility in
exchange for a financing fee, charged by the third party finance company. During
the term of the financing agreement, the third party company holds the inventory
as collateral, and both parties intend for the inventory to be returned to the
Company at an agreed-upon price based on the spot price on the termination
(repurchase) date. The third party charges a monthly fee as percentage of the
market value of the outstanding obligation; such monthly charge is classified as
interest expense. These transactions do not qualify as sales and have been
accounted for as financing arrangements in accordance with ASC 470-40 Product
Financing Arrangements, and are reflected in the Company’s consolidated balance
sheets as product financing arrangements. The obligation is stated at the amount
required to repurchase the outstanding inventory. Both the product financing and
the underlying inventory (which is restricted) are carried at fair value, with
changes in fair value included in cost of sales in the Company’s consolidated
statements of income.

The Company periodically loans metals to customers on a short-term consignment
basis. Such inventory is removed at the time the customer elects to price and
purchase the metals, and the Company records a corresponding sale and
receivable.

The Company enters into financing arrangements with certain customers under
which A-Mark purchases precious metals products that are subject to repurchase
by the customer at the fair value of the product on the repurchase date. The
Company or the counterparty may typically terminate any such arrangement with 14
days’ notice. Upon termination the customer’s rights to repurchase any
remaining inventory is forfeited.

Business Combinations

We make certain judgments and estimates when determining the fair value of
assets acquired and liabilities assumed in a business combination. Those
judgments and estimates also include determining the lives assigned to acquired
intangibles, the resulting amortization period, what indicators will trigger an
impairment, whether those indicators are other than temporary, what economic or
competitive factors affect valuation, valuation methodology, and key assumptions
including discount rates and cash flow estimates.

Goodwill and Other Purchased Intangible Assets

We evaluate goodwill and other indefinite-lived intangibles for impairment
annually in the fourth quarter of the fiscal year (or more frequently if
indicators of potential impairment exist) in accordance with the Intangibles –
Goodwill and Other Topic 350 of the ASC. Other finite-lived intangible assets
are evaluated for impairment when events or changes in business circumstances
indicate that

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the carrying amount of the assets may not be recoverable. We may first
qualitatively assess whether relevant events and circumstances make it more
likely than not that the fair value of the reporting unit’s goodwill is less
than its carrying value. If, based on this qualitative assessment, we determine
that goodwill is more likely than not to be impaired, a quantitative impairment
test is performed. This step requires us to determine the fair value of the
business and compare the calculated fair value of a reporting unit with its
carrying amount, including goodwill. If through this quantitative analysis the
Company determines the fair value of a reporting unit exceeds its carrying
amount, the goodwill of the reporting unit is considered not to be impaired. If
the Company concludes that the fair value of the reporting unit is less than its
carrying value, a goodwill impairment will be recognized for the amount by which
the carrying amount exceeds the reporting unit’s fair value.

The Company also performs impairment reviews on its indefinite-lived intangible
assets (i.e., trade names and trademarks). In assessing its indefinite-lived
intangible assets for impairment, the Company has the option to first perform a
qualitative assessment to determine whether events or circumstances exist that
lead to a determination that it is more likely than not that the fair value of
the indefinite-lived intangible asset is less than its carrying amount. If the
Company determines that it is not more likely than not that the fair value of an
indefinite-lived intangible asset is less than its carrying amount, the Company
is not required to perform any additional tests in assessing the asset for
impairment. However, if the Company concludes otherwise or elects not to perform
the qualitative assessment, then it is required to perform a quantitative
analysis to determine if the fair value of an indefinite-lived intangible asset
is less than its carrying value. If through a quantitative analysis the Company
determines the fair value of an indefinite-lived intangible asset exceeds its
carrying amount, the indefinite-lived intangible asset is considered not to be
impaired. If the Company concludes that the fair value of an indefinite-lived
intangible asset is less than its carrying value, an impairment will be
recognized for the amount by which the carrying amount exceeds the
indefinite-lived intangible asset’s fair value.

Income Taxes

As part of the process of preparing the Company’s consolidated financial
statements, the Company is required to estimate its provision for income taxes
in each of the tax jurisdictions in which it conducts business, in accordance
with the Income Taxes Topic 740 of the ASC (“ASC 740”). The Company computes its
annual tax rate based on the statutory tax rates and tax planning opportunities
available to it in the various jurisdictions in which it earns income.
Significant judgment is required in determining the Company’s annual tax rate
and in evaluating uncertainty in its tax positions. The Company has adopted the
provisions of ASC 740-10, which clarifies the accounting for uncertain tax
positions. ASC 740-10 requires that the Company recognizes the impact of a tax
position in the financial statements if the position is not more likely than not
to be sustained upon examination based on the technical merits of the position.
The Company recognizes interest and penalties related to certain uncertain tax
positions as a component of income tax expense and the accrued interest and
penalties are included in deferred and income taxes payable in the Company’s
consolidated balance sheets. See Note 12 to the Company’s consolidated
financial statements for more information on the Company’s accounting for income
taxes.

Income taxes are accounted for using an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income in the
period that includes the enactment date. A valuation allowance is provided when
it is more likely than not that some portion or all of the net deferred tax
assets will not be realized. The factors used to assess the likelihood of
realization include the Company’s forecast of the reversal of temporary
differences, future taxable income, and available tax planning strategies that
could be implemented to realize the net deferred tax assets. Failure to achieve
forecasted taxable income in applicable tax jurisdictions could affect the
ultimate realization of deferred tax assets and could result in an increase in
the Company’s effective tax rate on future earnings. Based on our assessment, it
appears more likely than not that all of the net deferred tax assets will be
realized through future taxable income.

RECENT ACCOUNTING PRONOUNCEMENTS

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

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