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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Spectrum Group International Inc (CE) | USOTC:SPGZ | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 21,500.00 | 0.00 | 01:00:00 |
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Preliminary proxy statement
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Definitive proxy statement
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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Spectrum Group International, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing proxy statement, if Other Than the Registrant)
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BY ORDER OF THE BOARD OF
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DIRECTORS
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/s/ Carol Meltzer
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Secretary
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Page
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SUMMARY TERM SHEET
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2
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QUESTIONS AND ANSWERS ABOUT THE REVERSE STOCK SPLIT AND THE SPECIAL MEETING
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7
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SPECIAL FACTORS
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12
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Purposes of and Reasons for the Reverse Stock Split
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12
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Background of the Reverse Stock Split
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15
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Fairness of the Reverse Stock Split
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17
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Alternatives Considered
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22
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Effects of the Reverse Stock Split
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22
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Opinion of Roth Capital Partners, LLC
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25
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The Spinoff Transaction
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32
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Conduct of Our Business after the Reverse Stock Split
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32
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Material U.S. Federal Income Tax Consequences of the Reverse Stock Split
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33
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Tax Consequences of the Reverse Stock Split to U.S. Holders
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33
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Tax Consequences of the Reverse Stock Split to Non-U.S. Holders
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35
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U.S. Federal Income Tax Withholding Requirements for All Stockholders
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35
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Tax Consequences of the Reverse Stock Split to the Company
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36
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Potential Conflicts of Interests of Officers, Directors and Certain Affiliated Persons
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36
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Sources of Funds and Expenses
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37
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Stockholder Approval
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38
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Effective Date
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38
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Termination of the Reverse Stock Split
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38
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Process for Payment for Fractional Shares
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39
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No Appraisal or Dissenters’ Rights
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40
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Escheat Laws
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40
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Regulatory Approvals
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40
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Litigation
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40
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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42
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PROPOSAL NO. 1
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42
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APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT OF OUTSTANDING SHARES
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42
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Annex Relating to Proposal No. 1
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42
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Vote Required for Approval of Proposal No. 1
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42
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Recommendation of our Board of Directors
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42
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PROPOSAL NO. 2
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42
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APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT THE REDUCTION IN AUTHORIZED SHARES
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42
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Annex Relating to Proposal No. 2
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42
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Vote Required for Approval of Proposal No. 2
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42
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Recommendation of our Board of Directors
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42
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Name and Address
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43
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Market Price of Common Stock; Dividends
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43
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Stockholders
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43
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Prior Public Offerings
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43
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Page
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Stock Purchases
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43
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Certain Information Concerning the Company, the Company’s Directors and Executive Officers and the Filing Persons
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44
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Transactions between the Company and Executive Officers and Directors of the Company
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45
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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46
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SPECIAL MEETING AND VOTING INFORMATION
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48
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Outstanding Voting Securities and Voting Rights
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48
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Record Date
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48
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Information Concerning Proxies; Revocation of Proxies
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48
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Solicitation of Proxies
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48
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Quorum and Certain Voting Matters
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48
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Voting of Proxies
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49
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Adjournment or Postponement
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49
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Financial Information
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50
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Summary Historical Financial Information
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50
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Pro Forma Consolidated Financial Statements (Unaudited)
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54
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WHERE YOU CAN FIND MORE INFORMATION
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61
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PROXY MATERIALS DELIVERED TO A SHARED ADDRESS
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61
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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61
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OTHER BUSINESS
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61
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ANNEX A
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61
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CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF SPECTRUM GROUP INTERNATIONAL, INC.
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61
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ANNEX B
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63
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Opinion of Roth Capital Partners, LLC
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63
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The Board of Directors, after consideration of numerous factors, has authorized an amendment to the Company’s Certificate of Incorporation that would effect a 1-for-1,000 reverse stock split of our common stock. At the same time the number of authorized shares of common and preferred stock of the Company would be reduced in the same ratio. References to the reverse stock split in this proxy statement include the reduction in the number of authorized common and preferred shares, unless the context otherwise requires.
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The reverse stock split is conditioned upon the prior occurrence of the spinoff to our stockholders of our A-Mark precious metals trading business. We currently expect the spinoff to take place on or about [______] [__], 2014. The Special Meeting will be held on __________, 2014, so that it is currently anticipated that there will be a period of approximately four weeks between the date of the A-Mark spinoff and the date of the Special Meeting.
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We anticipate that the reverse stock split will occur as soon as possible after the date of the Special Meeting, subject to stockholder approval and subsequent final action by our Board of Directors. The reverse split will become effective on the date the Company files a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware, or on any later date that the Company may specify in such Certificate of Amendment.
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As a result of the reverse stock split, each holder of record of fewer than 1,000 shares immediately before the effective date will receive cash in the amount of $0.65 (subject to any applicable U.S. federal, state and local withholding tax), without interest, per pre-split share and will no longer be a stockholder of the Company.
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Following the effective date of the reverse stock split, transmittal materials will be sent to those stockholders entitled to a cash payment that will describe how to turn in their stock certificates and receive the cash payments. Those stockholders entitled to a cash payment should not turn in their stock certificates at this time. See “Special Factors – Effective Date” beginning on page 38.
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Holders of 1,000 shares or more immediately prior to the effective date of the reverse stock split will not receive any cash payment in connection with the reverse stock split, and will receive a fractional share to the extent required by the reverse split ratio.
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See “Special Factors – Purposes of and Reasons for the Reverse Stock Split” beginning on page 12 and “Special Factors – Effects of the Reverse Stock Split” on page 22.
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The Board of Directors has decided that the costs of being an SEC reporting company, particularly following the spinoff of A-Mark, outweigh the benefits and, thus, it is no longer in our best interests or the best interests of our stockholders, including our unaffiliated stockholders, for us to remain an SEC reporting company. The reverse stock split will enable us to terminate the registration of our common stock under the Exchange Act, if, after the reverse stock split, there are fewer than 300 record holders of our common stock and we make the necessary filings with the SEC. Our reasons for proposing the reverse stock split include the following:
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The substantially smaller size of our Company following the spinoff of A-Mark.
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Annual cost savings we expect to realize as a result of the termination of the registration of our shares of common stock under the Exchange Act, including ongoing expenses for compliance with the Sarbanes-Oxley Act of 2002, as amended (the
“
Sarbanes-Oxley Act
”)
, and other accounting, legal, printing and other miscellaneous costs associated with being a publicly traded company, which we estimate will be approximately $2,500,000 per year, and which includes estimated executive and administrative time incurred in complying with public company requirements.
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The limited public trading volume and liquidity of our common stock.
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The ability of our small stockholders (those holding fewer than 1,000 shares) to liquidate their holdings in us and receive a price for their shares that we believe is fair and attractive (for the reasons set forth below under "substantive fairness" on page 17), without incurring brokerage commissions.
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As a result of the reverse stock split:
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The number of issued and outstanding shares of our common and preferred stock will be reduced proportionately based on the reverse stock split ratio of 1-for-1,000;
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The number of authorized shares of our common stock will be reduced proportionately based on the reverse stock split ratio of 1-for-1,000;
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We expect that the number of our stockholders of record will be reduced below 300, which will allow us to terminate the registration of our common stock under the Exchange Act. Effective on, and following the termination of the registration of our common stock under the Exchange Act, we will no longer be subject to any reporting requirements under the Exchange Act or the rules of the SEC applicable to SEC reporting companies and will be able to eliminate most of the expenses related to the disclosure, reporting and compliance requirements of the Sarbanes-Oxley Act.
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Each share of common stock held by a stockholder of record owning fewer than 1,000 shares immediately prior to the effective date of the reverse stock split will be converted into the right to receive $0.65 in cash (subject to any applicable U.S. federal, state and local withholding tax), without interest, per pre-split share.
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Each share of common stock held by a stockholder of record owning 1,000 shares or more immediately prior to the effective date of the reverse stock split will be reduced proportionately based on the reverse stock split ratio of 1-for-1,000 and will receive a fractional share to the extent required by the reverse split ratio.
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Stockholders who hold their shares in street name, through a broker, bank or other nominee, will be treated in accordance with the procedures of their nominee, but we intend that stock held in street name will be treated in the same manner as stock that is held of record.
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The Board of Directors anticipates that our common stock will be quoted on the OTC Pink marketplace following the reverse split, which is a lower tier of OTC Markets than the OTCQB marketplace (on which our common stock is currently quoted), and liquidity may decline.
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Our officers, directors and 10% stockholders will no longer be subject to the reporting requirements of Section 16 of the Exchange Act or be subject to the prohibitions against retaining short-swing profits from the sale of shares of our common stock.
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Persons acquiring more than 5% of our common stock will no longer be required to report their beneficial ownership under the Exchange Act.
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Since our obligation to file periodic and other filings with the SEC will be suspended, our continuing stockholders may have access to less information about us and our business, operations and financial performance.
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The number of shares reserved for issuance and any maximum number of shares with respect to which equity awards may be granted to any participant under the Company’s equity-based compensation plan will be reduced proportionately based on the reverse stock split ratio of 1-for-1,000. However, prior to the reverse stock split, our outstanding equity awards will be replaced and adjusted in connection with the spinoff of A-Mark to relate solely to A-Mark common stock, so that at the time of the reverse split, we expect that our directors and employees will hold no equity awards that will be affected by the reverse stock split.
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Upon the effectiveness of the reverse stock split and as a result of the reduction of the number of shares of common stock outstanding by approximately 450,000 shares, we estimate that the ownership percentage of our shares of common stock held by our current directors, executive officers and 10% stockholders will increase from 43.0% to 43.6%. The increase in the ownership percentage of our shares of common stock held by our current directors, executive officers and 10% stockholders and the reduction in the number of shares outstanding following the completion of the reverse stock split is based upon information we received as of September 17, 2013 from our transfer agent, American Stock Transfer & Trust Company, as to our record holders, and information we have received regarding the holdings of beneficial owners of our common stock held in street name.
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The Board of Directors fully considered and reviewed the terms, purposes and effects of the reverse stock split. Based on its review, the Board of Directors unanimously determined that the reverse stock split is procedurally and substantively fair to our stockholders, including the unaffiliated stockholders who will receive cash consideration in the reverse stock split and unaffiliated stockholders who will continue as our stockholders.
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The Board of Directors considered a number of factors in reaching its determinations, including:
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the written opinion of Roth Capital Partners, LLC (“
Roth
”) dated November 12, 2013, to the effect that, as of such date and based upon the assumptions made, matters considered and limits of review set forth in Roth’s written opinion, the consideration to be received pursuant to the reverse stock split by stockholders owning fewer than 1,000 shares of common stock immediately prior to the effective date of the reverse stock split is fair, from a financial point of view, to such stockholders;
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anticipated savings we expect to realize as a result of the termination of the registration of our shares of common stock under the Exchange Act, including ongoing expenses for compliance with the Sarbanes-Oxley Act, and other accounting, legal, printing and other miscellaneous costs associated with being a publicly traded company, which we estimate will be approximately $2,500,000 per year, and which includes estimated executive and administrative time incurred in complying with public company requirements;
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the limited trading volume and liquidity of our shares of common stock and the opportunity the reverse stock split affords our smallest stockholders to obtain cash for their shares in a relatively limited trading market and at a price that we believe is fair and attractive (for the reasons set forth below under "Substantive Fairness" on page 17) without incurring brokerage commissions;
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our directors, executive officers and stockholders who own more than 10% of our outstanding common stock, which we refer to in this proxy statement as our “affiliates”, will be treated no differently than stockholders who are not directors, executive officers or 10% stockholders, which we refer to in this proxy statement as our “unaffiliated stockholders”, including unaffiliated cashed-out stockholders and unaffiliated continuing stockholders. The sole determining factor as to whether a stockholder will be a continuing stockholder after the reverse stock split is the number of shares of our common stock that they own on the effective date of the reverse stock split, although as a practical matter affiliates will not be cashed out as a result of the reverse split, because they each hold in excess of 1,000 shares;
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stockholders that desire to retain their equity interest in us after the reverse stock split can increase the number of shares they hold to 1,000 shares or more prior to the effective date of the reverse stock split, thereby avoiding being cashed-out; however, given the historically limited liquidity in our stock, there can be no assurance that any shares will be available for purchase and thus there can be no assurance that a stockholder will be able to acquire sufficient shares to meet or exceed the required 1,000 shares prior to the effective date of the reverse stock split; and
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because of the spinoff of A-Mark, which is a condition to the reverse stock split, it may be difficult for stockholders to determine the relationship between the pre- and post-spinoff value of our stock, which may impact their decision to acquire additional shares prior to the spinoff.
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We expect to realize annual cost savings as a result of the termination of the registration of our shares of common stock under the Exchange Act, as described above.
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We will be able to adjust and adapt our disclosures in accordance with the reduction in the scope of operations of the Company following the spinoff of A-Mark, on which the reverse stock split is being conditioned.
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Our management will be able to focus on long-term growth without undue emphasis on short-term financial results that is often expected of SEC reporting companies.
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Our smallest stockholders will have the opportunity to obtain cash for their shares at a price that we believe is fair and attractive (for the reasons set forth below under "Substantive Fairness" on page 17), without incurring brokerage commissions.
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Stockholders owning less than 1,000 shares will no longer have any ownership interest in the Company and will no longer participate in any future earnings and growth.
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We will cease to file annual, quarterly, current, and other reports and documents with the SEC, and stockholders will cease to receive annual reports and proxy statements as required under the Exchange Act. We will not be providing periodic reports in the format currently required of us under the provisions of the Exchange Act and, as a result, continuing stockholders will have access to less information about us and our business, operations, and financial performance.
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We will no longer be subject to the provisions of the Sarbanes-Oxley Act or the liability provisions of the Exchange Act (other than the general anti-fraud provisions thereof).
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As a result of the reverse stock split, our common stock will cease to be quoted on the OTCQB marketplace. While we anticipate that our common stock will be eligible for quotation on the OTC Pink marketplace, a lower tier of OTC Markets, trading opportunities in the OTC Pink marketplace will be dependent upon whether any broker-dealers commit to make a market for our common stock. We cannot guarantee that quotations for our common stock will in fact appear on OTC Pink. In addition, because of the limited liquidity of our common stock, the suspension of our obligation to publicly disclose financial and other information following the reverse stock split, and the deregistration of our common stock under the Exchange Act, continuing stockholders may potentially experience a significant decrease in the value of their common stock.
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Our directors, executive officers and 10% stockholders will no longer be required to file reports relating to their transactions in our common stock with the SEC. In addition, our directors, executive officers and 10% stockholders will no longer be subject to the recovery of the short-swing profits provisions of the Exchange Act, and persons acquiring more than 5% of our common stock will no longer be required to report their beneficial ownership under the Exchange Act.
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We estimate that the cost of payment to the holders of less than 1,000 shares, professional fees and other expenses of the reverse stock split will total approximately $600,000. As a result, immediately after the reverse stock split, our cash balances on hand will be reduced by the costs incurred in the reverse stock split.
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The reverse stock split will result in the suspension, and not the termination, of our filing obligations under the Exchange Act. If on the first day of any fiscal year after the suspension of our filing obligations we have more than 300 stockholders of record, then we must resume reporting pursuant to Section 15(d) of the Exchange Act, which would result in our once again incurring many of the expenses that we expect to save by virtue of the reverse stock split.
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Under Delaware law, our Certificate of Incorporation and our bylaws, no appraisal or dissenters’ rights are available to our stockholders who dissent from the reverse stock split.
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The potentially reduced liquidity of our common stock may result in fewer opportunities to utilize equity-based incentive compensation tools to recruit and retain top executive talent.
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Since we will no longer be registered with the SEC and will not be filing the periodic reports and proxy statements required under the Exchange Act, it may be more difficult for us to raise equity capital from public or private sources.
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Our decision to deregister and cease reporting with the SEC could impair our image with customers, suppliers and other constituents.
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The affirmative vote the holders of a majority of all shares of common stock issued and outstanding and entitled to vote at the Special Meeting will be required to approve the proposed amendments to the Certificate of Incorporation to effect the reverse stock split. Our directors and executive officers have indicated that they intend to vote the shares of our common stock
for which they hold or share voting power (13,148,045 shares, or approximately 42.3% of our issued and outstanding shares eligible to vote at the Special Meeting) “
FOR
” the reverse stock split. See “Special Factors – Stockholder Approval” beginning on page 38, and “ Information – Quorum and Certain Voting Matters” beginning on page 48.
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The receipt of cash by a holder of less than 1,000 shares generally will be taxable for U.S. federal income tax purposes. In general, neither the Company nor any continuing stockholder who does not receive cash in the reverse stock split should recognize any gain or loss with respect to the reverse stock split for U.S. federal income tax purposes. See “Special Factors – Material U.S. Federal Income Tax Consequences of the Reverse Stock Split” beginning on page 33.
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The reverse stock split will not be effected unless the spinoff of the Company’s A-Mark precious metals business has previously occurred. In addition, the Board of Directors has reserved the right to abandon the reverse stock split if it believes the reverse stock split is no longer in our best interests, and the Board of Directors has retained authority, in its discretion, to withdraw the reverse stock split from the agenda of the Special Meeting prior to any vote. In addition, even if the reverse stock split is approved by stockholders at the Special Meeting and the spinoff of A-Mark is consummated, the Board of Directors may determine not to implement the reverse stock split if it subsequently determines that the reverse stock split is not in our best interests. See “Special Factors – Termination of the Reverse Stock Split” beginning on page 38.
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Annual cost savings we expect to realize as a result of the termination of the registration of our shares of common stock under the Exchange Act, including ongoing expenses for compliance with the Sarbanes-Oxley Act, and other accounting, legal, printing and other miscellaneous costs associated with being a publicly traded company, which we estimate will be approximately $2,500,000 per year, which includes estimated executive and administrative time incurred in complying with public company requirements.
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The ability to adjust and adapt our disclosures in accordance with the reduction in the scope of operations for the Company following the spinoff.
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The ability of our management to focus on long-term growth without an undue emphasis on short-term financial results that is often expected of SEC reporting companies.
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The ability of our small stockholders (those holding fewer than 1,000 shares) to liquidate their holdings in the Company and receive a price that we believe is fair and attractive (for the reasons set forth below under "Substantive Fairness" on page 17), without incurring brokerage commissions.
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You may submit another proxy by signing, dating and returning a completed proxy card with a later date.
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You may send a timely written notice that you are revoking your proxy to the Company’s Secretary at 1063 McGaw Avenue, Irvine, California, 92614.
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You may attend the Special Meeting and vote in person. Simply attending the Special Meeting will not, by itself, revoke your proxy.
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Fiscal Year Ended June 30,
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Estimated
Savings
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2013
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2012
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2011
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|||||||
Audit, Audit Related Fees, and Tax
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$
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1,404,645
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$
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2,032,027
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$
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2,106,190
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$
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1,054,645
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Sarbanes-Oxley Act and Other SEC Compliance
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$
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793,964
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$
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640,000
|
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$
|
740,000
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$
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743,964
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Directors’ Fees and D&O Insurance
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$
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660,000
|
|
|
$
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660,000
|
|
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$
|
689,500
|
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$
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635,000
|
|
Other
|
|
|
|
|
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$
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72,615
|
|
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$
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17,500
|
|
$
|
8,909
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|
Totals
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$
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2,917,518
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$
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3,404,642
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|
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$
|
3,553,190
|
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$
|
2,442,518
|
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•
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Listing on a Securities Exchange
. Our stock has not been listed on a national securities exchange since 2007, when our common stock, which was then trading on The NASDAQ National Market, was delisted because of our failure to file our Annual Report on Form 10-K for the fiscal year ending June 30, 2006 as a consequence of our determination to restate certain of our historical financial statements. Following the spinoff of our A-Mark precious metals trading business, we will be a significantly smaller company, and we expect that our qualifying for listing on even the lowest tier of the NASDAQ in the foreseeable future will not be assured.
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Liquidity
. Our common stock is quoted on the OTCQB marketplace and does not experience significant trading volume. Over the preceding 52 weeks the average daily trading volume of our common stock was 7,998 shares. Following the reverse stock split, we expect that our common stock will be quoted in the current information segment of the OTC Pink tier. Because our common stock is currently thinly traded, a situation which we expect will continue following the reverse stock split, we do not anticipate that our ceasing
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Publicly Available Information
. We expect to continue to make available quarterly and annual financial information concerning our business and operations on our website. Although this will not include all the information that is required to be included in filings with the SEC, it will provide our stockholders with information concerning the Company.
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Longer Term Focus
. SEC reporting issuers tend to be under pressure to focus on short-term results. Following the spinoff of A-Mark, we will be a much smaller company, and it will be especially important that our management focus on long term growth and development of our remaining collectibles business.
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Size and Scope of the Company’s Operations Following the Reverse Split
. The Board of Directors approved the reverse stock split in the context of the spinoff of the Company’s A-Mark precious metals trading business, which was the primary driver for the consideration of the reverse split and which is a condition to its effectiveness. The Board of Directors noted that following the spinoff, the size and scope of operations of the Company would be considerably reduced and that the cost of remaining an SEC reporting company would proportionately increase by a significant amount. The Board of Directors also believed that it would be necessary to rationalize the costs of the Company following the spinoff, because its A-Mark precious metals business would no longer be available to support corporate overhead.
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Our Stockholders’ Continuing Interest in a Public Reporting Company
. Our Board of Directors took into consideration that our stockholders will have a continuing interest in A-Mark, which will operate our precious metals trading business as a public reporting company and which comprises a substantial majority of our current business in terms of revenues, cash flow and operating profits. Even stockholders who will be cashed out in the reverse stock split will have a continuing interest in A-Mark (unless they own fewer than four shares), as the spinoff will occur prior to the reverse stock split.
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Future Cost and Time Savings.
The Board of Directors noted that, as a public company, we are required to prepare and file with the SEC, among other items, the following:
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Quarterly Reports on Form 10-Q;
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Annual Reports on Form 10-K;
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Proxy statements and annual stockholder reports as required by Regulation 14A under the Exchange Act; and
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Current Reports on Form 8-K.
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Opportunity to Liquidate Shares of Common Stock.
The Board of Directors considered the opportunity the reverse stock split presents for stockholders owning fewer than 1,000 shares to liquidate their holdings at a price that we believe is fair and attractive, without incurring brokerage costs.
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|
Equal Treatment of Affiliated and Unaffiliated Holders of Our Shares.
The reverse stock split will not affect holders of our shares differently on the basis of affiliate status. The sole determining factor in whether a stockholder will be a cashed-out holder or a continuing holder of our common stock as a result of the reverse stock split is the number of shares of our common stock held by the stockholder immediately prior to the reverse stock split. The Board appreciated, however, that as a practical matter the Company’s affiliates would not be cashed out as a result of the reverse stock split, because all of the Company’s affiliates hold in excess of 1,000 shares.
|
•
|
Opinion of the Financial Advisor.
The Board of Directors considered the presentation dated November 12, 2013 by Roth and the opinion of Roth provided to the Board of Directors on November 12, 2013, to the effect that, as of such date and based upon the assumptions made, matters considered and limits of review set forth in Roth’s written opinion, the consideration to be received by stockholders who are being cashed out pursuant to the reverse stock split is fair, from a financial point of view, to such stockholders. For more information about the opinion, you should read the discussion below under “Special Factors – Fairness Opinion of Roth Capital Partners, LLC” and the copy of the opinion of Roth dated November 12, 2013 attached as Annex B to this proxy statement.
|
•
|
Potential Ability to Remain a Holder of or Liquidate Our Shares.
Current stockholders of fewer than 1,000 shares can remain stockholders of the Company by acquiring additional shares so that they own at least 1,000 shares immediately before the reverse stock split. Conversely, stockholders that own 1,000 or more shares and desire to liquidate their shares in connection with the reverse stock split (at the price offered by us) can reduce their holdings to less than 1,000 shares by selling shares prior to the reverse stock split. Because of the spinoff of A-Mark, which is a condition to the reverse stock split, it may be difficult for stockholders to determine the relationship between the pre- and post-spinoff value of our stock which may impact their decision to acquire additional shares, or
|
•
|
Limited Liquidity for the Company’s Common Stock.
The Board of Directors noted that the trading volume in our common stock has been, and continues to be, relatively limited. The average daily trading volume of the stock for the 30-day, 60-day, 90-day and 120-day period ended November 11, 2013, which was prior to the Board of Directors’ initial approval of the reverse stock split, was 14,277, 10,753, 7,575 and 7,056 shares per day, respectively. The Board of Directors also observed that the trading volume of the Company’s common stock could further decline following the spinoff of A-Mark, when the Company would be smaller in size and its revenues, cash flow and operating profits would decline because the Company would cease to have the benefits of the A-Mark business.
|
•
|
Going Concern Value
. The Board of Directors took into account the going concern value of the collectibles business, as determined by Roth utilizing a discounted cash flow analysis. That analysis yielded a range of per share values for the Company’s common stock following the A-Mark spinoff of $0.30 to $0.48 and was based on projections for the collectibles business.
|
•
|
Current and Historical Prices.
The Board of Directors considered both the historical market prices and recent trading activity and current market prices of our common stock. However, as these prices do not reflect the effect of the spinoff, the Board of Directors could not directly compare the price per share to be paid to holders of less than 1,000 shares in the reverse stock split with the historical trading prices of our stock. In this regard, the Board did not believe there was any satisfactory way to allocate the pre-spinoff price of the Company’s stock between the A-Mark business and the collectibles business, because the A-Mark business has been profitable while the collectibles business has experienced losses in recent years; because of the Board’s view that the market was not fully valuing the A-Mark business on account of its association with the collectibles business; and because of the Board’s view that the Company’s stock price in an illiquid market was not an accurate indicator of either the value of the combined company or how either of A-Mark or the collectibles business would trade on a standalone basis.
|
•
|
Net Book Value and Liquidation Value.
The Board did not consider the net book value of our collectibles business as a material indicator of our value following the spinoff, because it is indicative of historical costs rather than the going concern value of the collectibles business. Net book value per share, pro forma for the spinoff of A-Mark, as of September 30, 2013, was $1.41. The Board also did not consider liquidation value, pro forma for the spinoff of A-Mark, as a reliable indicator of fairness, since the Board believed that the Company was likely to receive substantially less than the book value for its non-cash assets, particularly its inventory and property plant and equipment, were it to liquidate.
|
•
|
No Participation in Future Growth by Cashed-out Stockholders.
After the reverse stock split, holders of less than 1,000 shares of our common stock will no longer have any ownership interest in us and will no longer participate in our future earnings and growth.
|
•
|
Reduction in Information about the Company.
After completion of the reverse stock split, we will cease to file annual, quarterly, current, and other reports and documents with the SEC. We will not be providing periodic reports in the format currently required of us under the provisions of the Exchange Act and, as a result, continuing stockholders will have access to less information about us and our business, operations, and financial performance.
|
•
|
Limited Liquidity.
After the reverse stock split, our common stock will no longer be eligible to be quoted on the OTCQB marketplace. It is anticipated that the common stock will be eligible for the OTC Pink marketplace, which is a lower tier of OTC Markets. Trading opportunities on the OTC Pink marketplace will be dependent upon whether any broker-dealers commit to make a market for our common stock, and we cannot guarantee that quotations for our common stock will in fact appear on OTC Pink. In addition, because of the potential deterioration in the liquidity of our common stock, the suspension of our obligation to publicly disclose financial and other information following the reverse stock split, and the deregistration of our common stock under the Exchange Act, continuing stockholders may potentially experience a significant decrease in the value of their common stock.
|
•
|
Limited Oversight.
After completion of the reverse stock split, we will no longer be subject to the provisions of the Sarbanes-Oxley Act and certain of the liability provisions of the Exchange Act.
|
•
|
Reporting Obligations of Certain Insiders.
Our executive officers, directors and 10% stockholders will no longer be required to file reports relating to their transactions in our common stock with the SEC. In addition, our executive officers, directors and 10% stockholders will no longer be subject to the short-swing profits provisions of the Exchange Act, and persons acquiring more than 5% of our common stock will no longer be required to report their beneficial ownership under the Exchange Act.
|
•
|
Reduced Cash on Hand.
We estimate that the cost of payment to holders of less than 1,000 shares, professional fees, transfer agent costs and other expenses of the reverse stock split will total approximately $600,000. As a result, immediately after the reverse stock split, our cash balances on hand will be reduced by the costs incurred in the reverse stock split.
|
•
|
Filing Requirements Reinstituted.
The filing of the Form 15 will result in the suspension and not the termination of our filing obligations under the Exchange Act. This suspension remains in effect so long as we have fewer than 300 stockholders of record. Thus, subsequent to the time the Form 15 becomes effective, if on the first day of any fiscal year we have more than 300 stockholders of record, then we must resume reporting pursuant to Section 15(d) of the Exchange Act.
|
•
|
No Appraisal Rights.
Under Delaware law, our Certificate of Incorporation and our bylaws, no appraisal or dissenters’ rights are available to our stockholders who dissent from the reverse stock split.
|
•
|
Reduced Management Incentive.
The lack of liquidity provided by a ready market of common stock may result in fewer opportunities to utilize equity-based incentive compensation tools to recruit and retain executive talent. Stock options and other equity-based incentives are typically less attractive if they cannot be turned into cash quickly and easily once earned. Our Board of Directors believes that this is unlikely to have any significant adverse impact on us, since stock options and other equity-based incentives have not been a significant part of our executives’ compensation packages in the past, our common stock is only thinly traded irrespective of the reverse stock split and the market for our common stock may further contract as a result of the spinoff.
|
•
|
Less Attractive Acquisition Currency.
Stock that is registered with the SEC is generally a more attractive acquisition currency than unregistered stock, since the acquirer of the publicly traded security has constant access to important information about the publicly traded company. Our Board of Directors recognized that this may not be a significant disadvantage, however, because (i) the relative illiquidity of our common stock makes our common stock less attractive for investors than most publicly traded securities with significant trading volume, and (ii) we have not historically utilized our stock as currency in acquisitions.
|
•
|
Reduced Equity Capital Raising Opportunities.
One of the primary reasons many companies “go public” is to be able to more easily and efficiently access the public capital markets to raise cash. Similar opportunities are generally less available (without significant expense) to companies that do not have a class of securities registered with the SEC. Following the reverse stock split, since we will no longer be registered with the SEC, it will likely be more costly and time consuming for us to raise equity capital from public or private sources. Our Board of Directors has concluded that this may not be of great significance to us since this is not expected to be a course of action that we would expect to pursue for the foreseeable future.
|
•
|
Loss of Prestige.
SEC reporting companies are often viewed by stockholders, employees, investors, customers, vendors and others as more established, reliable and prestigious than privately held companies. In addition, SEC reporting companies are often followed by analysts who publish reports on their operations and prospects. Companies that lose status as an SEC reporting company may risk losing prestige in the eyes of the public, the investment community and key constituencies. However, our Board of Directors did not attach significant weight to this factor because we do not currently enjoy research analyst coverage or similar media attention and almost all of our significant competitors are privately held companies.
|
•
|
Loss of Cash Flow from A-Mark
. A substantial portion of the Company’s cash flow currently derives from the A-Mark precious metals trading business. This cash flow is used to fund in substantial part the general corporate overhead of the Company. Following the spinoff, the A-Mark cash flow will no longer be available to the Company for these purposes, and the Company will be required to fund all of its expenses solely from the cash flow generated by the collectibles business. As a condition to the spinoff, the Company expects to receive an opinion of Roth to the effect that it will be solvent following the spinoff and that the Company will be able to pay its obligations as they become due.
|
•
|
Management Changes
. Effective as of the spinoff, Mr. Greg Roberts will resign his position as Chief Executive Officer and President of the Company, and Ms. Carol Meltzer will resign her position as General Counsel, Executive Vice President and Corporate Secretary. Mr. Roberts and Ms. Meltzer will continue to perform services for the Company for a period of time pursuant to the terms of a secondment agreement between the Company and A-Mark.
|
•
|
Issuer Tender Offer.
Under this alternative, we would offer to purchase a set number of shares of our common stock according to a specific timetable. Because of the requirement in an issuer tender offer to treat tendering stockholders ratably, shares would have to be repurchased on a pro rata basis and, as a result, there would be no assurance that enough stockholders would tender all of their shares of our common stock to reduce the number of record holders of our common stock to fewer than 300. Additionally, the cost of effecting an issuer tender offer would likely be greater than the cost of implementing a reverse stock split since partial tenders by larger holders would require payment for tendered shares without reducing the number of record holders. If the number of record holders remained in excess of 300, we would have to resort to a reverse stock split to eliminate additional record holders. In light of the indeterminate number of shares necessary to accomplish the objective of a deregistration transaction under this alternative, the cost of doing so was determined to be too uncertain and most likely significantly in excess of the cost associated with the reverse stock split.
|
•
|
Odd Lot Tender Offer.
Unlike a traditional issuer tender offer, an odd lot tender offer would be offered only to stockholders owning a set number (or fewer) shares of our common stock. Because the tender of shares would be at the option of the stockholder, there could be no assurance that enough stockholders would participate so as to reduce the number of record holders to fewer than 300. While the time frame for completing an odd lot tender offer is shorter than the period of time involved in accomplishing a reverse stock split and could be less expensive, our Board of Directors opted for the reverse stock split because of the lack of assurance that an odd lot tender offer would produce the intended result.
|
•
|
Purchase of Shares on the Open Market.
We have the ability to make periodic repurchases of our common stock in the open market. However, this alternative would take an extended amount of time to complete, and, as it would be voluntary, there would be no assurance of acquiring sufficient shares to reduce the number of record holders to fewer than 300. The cost of such a method would also be undeterminable. Also, because many registered stockholders who own small numbers of shares do not hold their shares in brokerage accounts, open market purchase efforts are ineffective in reaching such stockholders.
|
•
|
Each share of common stock held by a stockholder of record owning fewer than 1,000 shares immediately prior to the effective date of the reverse stock split will be converted into the right to receive $0.65 in cash (subject to any applicable U.S. federal, state and local withholding tax), without interest, per pre-split share.
|
•
|
Each share of common stock held by a stockholder of record owning 1,000 shares or more immediately prior to the effective date of the reverse stock split will represent one-thousandth of a share of common stock after completion of the reverse stock split.
|
•
|
We expect to have fewer than 300 stockholders of record of our common stock following the reverse stock split and, therefore, to be eligible to terminate registration of our common stock with the SEC, which would terminate our obligation to continue filing annual and periodic reports and other filings required under the federal securities laws that are applicable to public reporting companies and eliminate most of the expenses related to the disclosure, reporting and compliance requirements of the Sarbanes-Oxley Act.
|
•
|
The Board of Directors anticipates that our common stock will trade on the OTC Pink marketplace. The liquidity of our common stock has been limited in the past, and its liquidity could further contract because we will no longer be an SEC reporting company.
|
•
|
our obligation to comply with the requirements of the proxy rules and to file proxy statements under Section 14 of the Exchange Act will terminate;
|
•
|
our executive officers, directors and 10% stockholders no longer will be required to file reports relating to their transactions in our common stock with the SEC and no longer will be subject to the recovery of short-swing profits provisions of the Exchange Act; and
|
•
|
persons acquiring more than 5% of our common stock no longer will be required to report their beneficial ownership under the Exchange Act.
|
◦
|
reviewed A-Mark’s registration statement on Form S-1 (the
“
Registration Statement
”
) in connection with the spinoff, filed on November 12, 2013;
|
◦
|
reviewed a draft of this proxy statement received by Roth on November 9, 2013;
|
◦
|
reviewed certain publicly available business and financial information of the Company that Roth believed to be relevant to its inquiry;
|
◦
|
reviewed certain internal financial statements and other financial and operating data concerning the Company;
|
◦
|
reviewed certain pro forma financial forecasts relating to the Company (giving effect to the spinoff) prepared by the management of the Company (the
“
Company Forecasts
”
);
|
◦
|
discussed the past and current operations, financial condition and prospects of the Company with management of the Company;
|
◦
|
reviewed the reported prices and trading activity for the Company’s common stock;
|
◦
|
compared the financial performance of the Company, and the prices and trading activity of the Company’s common stock, with that of certain publicly traded companies Roth deemed relevant;
|
◦
|
considered publicly available financial terms of certain transactions we deemed relevant; and
|
◦
|
performed such other analyses and considered such other factors as Roth has deemed appropriate.
|
|
FY 2014
|
FY 2015
|
FY 2016
|
FY 2017
|
FY 2018
|
Total Revenue
|
$175,070
|
$175,070
|
$175,070
|
$175,070
|
$175,070
|
Gross Profit
|
21,594
|
21,594
|
21,594
|
21,594
|
21,594
|
Operating Income
|
(2,180)
|
1,638
|
2,938
|
2,938
|
2,938
|
Net Income (Loss)
|
(1,935)
|
775
|
1,557
|
1,577
|
1,577
|
Adjusted EBITDA
|
(930)
|
2,888
|
4,188
|
4,188
|
4,188
|
◦
|
Copart. Inc.
|
◦
|
DGSE Companies Inc.
|
◦
|
KAR Auction Services, Inc.
|
◦
|
Ritchie Bros. Auctioneers Incorporated
|
◦
|
Sotheby’s
|
◦
|
The Stanley Gibbons Group PLC
|
◦
|
Turners Auctions Limited
|
|
EV/EBITDA
Multiples |
||||||||||
|
LTM
|
|
2013
|
|
2014
|
|
2015
|
||||
Copart. Inc.
|
13.1
|
x
|
|
12.3
|
x
|
|
10.9
|
x
|
|
10.0
|
x
|
DGSE Companies Inc.
|
10.2
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
KAR Auction Services, Inc.
|
13.2
|
|
|
11.7
|
|
|
10.6
|
|
|
9.8
|
|
Ritchie Bros. Auctioneers Incorporated
|
13.2
|
|
|
12.7
|
|
|
11.8
|
|
|
10.3
|
|
Sotheby’s
|
15.8
|
|
|
14.9
|
|
|
12.2
|
|
|
NA
|
|
The Stanley Gibbons Group PLC
|
14.8
|
|
|
14.3
|
|
|
13.2
|
|
|
NA
|
|
Turners Auctions Limited
|
7.2
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
15.8
|
x
|
|
14.9
|
x
|
|
13.2
|
x
|
|
10.3
|
x
|
Mean
|
12.5
|
|
|
13.2
|
|
|
11.7
|
|
|
10.0
|
|
Median
|
13.2
|
|
|
12.7
|
|
|
11.8
|
|
|
10.0
|
|
Low
|
7.2
|
|
|
11.7
|
|
|
10.6
|
|
|
9.8
|
|
|
|||||||||||
|
LTM
|
|
2013
|
|
2014
|
|
2015
|
||||
Copart. Inc.
|
22.7
|
x
|
|
21.7
|
x
|
|
18.1
|
x
|
|
15.8
|
x
|
DGSE Companies Inc.
|
NM
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
KAR Auction Services, Inc.
|
37.0
|
|
|
23.8
|
|
|
19.8
|
|
|
17.1
|
|
Ritchie Bros. Auctioneers Incorporated
|
25.9
|
|
|
24.7
|
|
|
22.5
|
|
|
19.4
|
|
Sotheby’s
|
33.4
|
|
|
28.2
|
|
|
22.8
|
|
|
18.9
|
|
The Stanley Gibbons Group PLC
|
16.7
|
|
|
18.5
|
|
|
17.3
|
|
|
NA
|
|
Turners Auctions Limited
|
14.8
|
|
|
NA
|
|
|
NA
|
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
37.0
|
x
|
|
28.2
|
x
|
|
22.8
|
x
|
|
19.4
|
x
|
Mean
|
25.1
|
|
|
23.4
|
|
|
20.1
|
|
|
17.8
|
|
Median
|
24.3
|
|
|
23.8
|
|
|
19.8
|
|
|
18.0
|
|
Low
|
14.8
|
|
|
18.5
|
|
|
17.3
|
|
|
15.8
|
|
|
Summary of Selected Company Analysis
Implied Per Share Equity Value Range
|
||||||||||||||||||||||
|
LTM
|
|
2013
|
|
2014
|
|
2015
|
||||||||||||||||
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
||||||||
EV / EBITDA
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
$
|
0.65
|
|
$
|
0.69
|
P / E
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
|
0.47
|
|
|
0.57
|
Announcement Date
|
|
Acquirer
|
|
Target
|
|
EV / LTM EBITDA
|
|
|
|
|
|
|
|
|
|
September 2013
|
|
The Stanley Gibbons Group
|
|
Noble Investments
|
|
16.3
|
x
|
June 2013
|
|
Copart
|
|
Recovery Services
|
|
NA
|
|
May 2013
|
|
Spectrum Group International
|
|
Stack’s-Bowers Numismatics
|
|
NA
|
|
October 2012
|
|
The Stanley Gibbons Group
|
|
StampWants.com
|
|
NA
|
|
May 2012
|
|
Liquidity Services
|
|
GoIndustry DoveBid
|
|
NA
|
|
May 2012
|
|
Ritchie Bros. Auctioneers
|
|
AssetNation
|
|
NM
|
|
August 2011
|
|
ADESA
|
|
Openlane
|
|
NA
|
|
June 2011
|
|
DGSE Companies
|
|
Southern Bullion Coin & Jewelry
|
|
NA
|
|
May 2011
|
|
Start Today
|
|
Crown Jewel
|
|
NA
|
|
May 2011
|
|
Liquidity Services
|
|
TruckCenter.com
|
|
NA
|
|
March 2011
|
|
USS Co. Ltd., iKco., Ltd.
|
|
Japan Bike Auction Co.
|
|
NA
|
|
December 2010
|
|
Spectrum Group International
|
|
Stack’s-Bowers Numismatics
|
|
NM
|
|
November 2010
|
|
Ratos AB
|
|
KVD-Kvarndammen Bilauktioner AB
|
|
NA
|
|
November 2010
|
|
CoreLogic
|
|
RealtyBid
|
|
NA
|
|
August 2010
|
|
The Stanley Gibbons Group
|
|
Benham Collectibles
|
|
3.5
|
|
April 2007
|
|
Copart
|
|
Universal Salvage
|
|
14.0
|
|
December 2006
|
|
Goldman Sachs Group
|
|
ADESA
|
|
9.9
|
|
November 2006
|
|
Management Buyout
|
|
Hometown Auto Retailers
|
|
8.0
|
|
July 2006
|
|
DGSE Companies
|
|
Superior Galleries
|
|
NM
|
|
April 2006
|
|
eBay
|
|
Tradera
|
|
NA
|
|
February 2005
|
|
Kelso & Company, and Parthenon Capital Partners
|
|
Insurance Auto Auctions
|
|
10.9
|
|
February 2001
|
|
eBay
|
|
iBazar
|
|
NA
|
|
June 2000
|
|
ADESA
|
|
Canadian Auction Group
|
|
NA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
16.3
|
x
|
|
|
|
|
Mean
|
|
10.4
|
|
|
|
|
|
Median
|
|
10.4
|
|
|
|
|
|
Low
|
|
3.5
|
|
|
|
Implied Per Share Equity Value Range
|
|
|||||
EV / LTM EBITDA
|
|
$
|
NM
|
|
|
$
|
NM
|
|
•
|
Complete Termination
. A U.S. Holder’s exchange of common stock for cash in the reverse stock split generally will result in a “complete termination” of such holder’s interest in us if, in connection with the reverse stock split, either (i) all of the common stock actually and constructively owned by such holder is exchanged for cash, or (ii) all of the shares of common stock actually owned by such holder is exchanged for cash, and, with respect to constructively-owned shares of common stock, such holder is eligible to waive (and effectively waives) constructive ownership of all such common stock under procedures described in Section 302(c) of the Code.
|
•
|
Substantially Disproportionate Redemption.
A U.S. Holder’s exchange of common stock for cash in the reverse stock split generally will be “substantially disproportionate” with respect to such holder if, among other things, immediately after the exchange (
i.e.
, treating all common stock exchanged for cash in the reverse stock split as no longer outstanding), (i) such holder’s percentage ownership of our voting stock is less than 80% of such holder’s percentage ownership of our voting stock immediately before the exchange (
i.e.
, treating all common stock exchanged for cash in the reverse stock split as outstanding), and (ii) such holder owns less than 50% of the total combined voting power of all classes of our stock entitled to vote. For purposes of these percentage ownership tests, a holder will be considered as owning common stock owned directly as well as indirectly through application of the constructive ownership rules described above.
|
•
|
Not Essentially Equivalent to a Dividend.
In order for a U.S. Holder’s exchange of common stock for cash in the reverse stock split to qualify as “not essentially equivalent to a dividend,” such holder must experience a “meaningful reduction” in its proportionate interest in us as a result of the exchange, taking into account the constructive ownership rules described above. Whether a U.S. Holder’s exchange of common stock pursuant to the reverse stock split will result in a “meaningful reduction” of such holder’s proportionate interest in us will depend on such holder’s particular facts and circumstances. The IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder (for example, less than 1%) in a publicly-held corporation who exercises no control over corporate affairs may constitute a “meaningful reduction.”
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
Unexercised
|
|
Unexercised
|
|
|
Option
|
|
Option
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Options (#)
|
|
Options (#)
|
|
|
Exercise
|
|
Expiration
|
|
Stock
|
|
|
|
|||||||||||||||||||||||
Name
|
|
Exercisable
|
|
Unexercisable
|
|
|
Price
|
|
Date
|
|
Awards
|
|
|
|
|||||||||||||||||||||||
Jeffrey D. Benjamin
|
|
|
100,000
|
|
|
|
400,000
|
(1)
|
|
|
|
|
2.00
|
|
|
|
10/25/2022
|
|
|
|
--
|
|
|||||||||||||||
Gregory N. Roberts
|
|
|
100,000
|
|
|
|
--
|
|
|
|
|
|
2.00
|
|
|
|
2/15/2023
|
|
|
|
--
|
|
|||||||||||||||
|
|
|
100,000
|
|
|
|
--
|
|
|
|
|
|
2.50
|
|
|
|
2/15/2023
|
|
|
|
|
|
|||||||||||||||
|
|
|
100,000
|
|
|
|
--
|
|
|
|
|
|
3.00
|
|
|
|
2/15/2023
|
|
|
|
|
|
|||||||||||||||
|
|
|
22,500
|
|
|
|
--
|
|
|
|
|
|
14.22
|
|
|
|
3/31/2014
|
|
|
|
|
|
|||||||||||||||
Paul Soth
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
|
|
|
|
75,000
|
|
|||||||||||||||
Carol Meltzer
|
|
|
30,000
|
|
|
|
30,000
|
(3)
|
|
|
|
|
2.10
|
|
|
|
2/4/2023
|
|
|
|
--
|
|
|||||||||||||||
|
|
|
22,500
|
|
|
|
--
|
|
|
|
|
|
14.22
|
|
|
|
3/31/2014
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal Fees
|
|
125,000
|
|
|
Financial Advisor/Fairness Opinion
|
|
100,000
|
|
|
Payment for Fractional Shares
|
|
300,000
|
|
|
Transfer Agent Costs
|
|
25,000
|
|
|
Printing and Miscellaneous Costs
|
|
50,000
|
|
|
Total Expenses
|
|
$
|
600,000
|
|
•
|
Any change in the nature of our stockholdings prior to the effective date of the reverse stock split, which would result in us being
|
•
|
Any change in the number of our record holders that would enable us to deregister our shares under the Exchange Act without effecting the reverse stock split;
|
•
|
Any change in the number of our shares that will be exchanged for cash in connection with the reverse stock split that would increase the cost and expense of the reverse stock split from that which is currently anticipated; or
|
•
|
Any adverse change in our financial condition that would render the reverse stock split inadvisable.
|
•
|
the letter of transmittal sent by us;
|
•
|
the above-referenced affidavit;
|
•
|
the above-referenced indemnity agreement; and
|
•
|
any other document required by us, which may include a bond or other security satisfactory to us indemnifying us and our other persons against any losses incurred as a consequence of paying cash in lieu of issuing fractional shares of our common stock in exchange for the existing shares of our common stock evidenced or purported to be evidenced by such lost or destroyed certificate.
|
•
|
On September 25, 2012, the Company purchased from Afinsa and Auctentia a total of 15,609,796 shares of common stock, as a result of which the combined holdings of Afinsa and Auctentia was reduced from 57% to 9.9% of the Company’s common stock outstanding. In addition, the Company purchased from Auctentia 20% of the shares of the Company’s subsidiary Spectrum PMI, Inc., which was the holding company for the Company’s A-Mark subsidiary. The purchase of the securities was pursuant to a Securities Purchase Agreement, dated March 5, 2012, as amended, among the Company, Afinsa and Auctentia, and the aggregate purchase price, including interest and other charges, was $51.2 million. The purchase price was funded through the proceeds of a rights offering and private placement of shares of common stock, which also closed on September 25, 2012, as well as the Company’s cash on hand, resulting in a net impact to working capital of $25.6 million in cash and cash equivalents.
|
•
|
On February 8, 2013, the Company's board of directors approved a stock repurchase plan which authorizes the repurchase of up to $5 million of the Company's common stock. The authorization remains open through August 8, 2014. Purchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions. As of September 30, 2013, 123,100 shares of common stock at a weighted average price per share of $2.01 had been repurchased by the Company under the plan.
|
Name of
Beneficial Owner
|
Actual, at January 29, 2014
|
Pro Forma, assuming completion of the reverse stock split immediately before January 29, 2014
|
||
Amount of Beneficial Ownership
|
Percent of Outstanding
Common Stock (1)
|
Amount of Beneficial Ownership
|
Percent of Outstanding
Common Stock (1)
|
|
Afinsa Bienes Tangibles, S.A. en Liquidacion (2)
|
3,032,271
|
9.7%
|
3,032.271
|
9.9%
|
Joel R. Anderson (3)
Charles C. Anderson
Harold Anderson
|
2,908,068
|
9.3%
|
2,908.068
|
9.5%
|
Jeffrey D. Benjamin (4)
|
3,065,556
|
9.8%
|
2,965.556
|
9.7%
|
William A. Richardson (5)
|
4,050,918
|
13.0%
|
4,050.918
|
13.2%
|
Gregory N. Roberts (6)
|
3,938,080
|
12.5%
|
3,615.580
|
11.8%
|
(1)
|
Percentages have been calculated based on 31,126,789 shares of Common Stock outstanding, actual, at January 29, 2014 and based on an estimated 30,676.8 shares of Common Stock outstanding, pro forma, at January 29, 2014.
|
(2)
|
Beneficial ownership of Afinsa Bienes Tangibles, S.A. (“
Afinsa
”) is based on its amended Schedule 13D filed with the SEC reporting beneficial ownership of Company common stock at September 25, 2012. Afinsa’s beneficial ownership of Company common stock totaled 3,032,270 shares, actual, at that date, including 44,164 shares held directly and 2,988,106 shares (9.6% of the outstanding class, actual) held through its wholly-owned subsidiary, Auctentia, S.L. (“
Auctentia
”). Afinsa's and Auctentia’s address is Lagasca 88, 28001 Madrid, Spain. Based on Afinsa and Auctentia’s Schedule 13D, as amended, filed with the SEC, Afinsa had sole voting power and sole dispositive power over 44,164 shares of Company common stock, actual, and Afinsa and Auctentia had shared voting power and shared dispositive power over 2,988,106 shares of Company common stock, actual.
|
(3)
|
Beneficial ownership of Joel R. Anderson, Charles C. Anderson and Harold Anderson is based on their Schedule 13D filed with the SEC reporting their beneficial ownership, as a group, at September 25, 2012 and additional advice provided to the Company by Joel R. Anderson. Based on such information, the group’s beneficial ownership of Company common stock, actual, totaled 2,908,068 shares at January 29, 2013. Based on such information, Joel R. Anderson had beneficial ownership of 1,218,214 shares, Charles C. Anderson had beneficial ownership of 1,465,354 shares, and Harold Anderson had beneficial ownership of 224,500 shares, actual. The address of Joel R. and Charles C. Anderson is 202 North Court Street, Florence, Alabama 35630, and the address of Harold Anderson is 3101 Clairmont Road, Suite C, Atlanta, GA 30329.
|
(4)
|
Beneficial ownership of Jeffrey D. Benjamin is based on his Schedule 13D filed with the SEC reporting beneficial ownership of shares of Company common stock at September 25, 2012 and additional advice provided to the Company. His beneficial ownership of Company common stock, actual, totaled 3,065,556 shares, including 100,000 shares underlying exercisable options. Such beneficial ownership includes 1,000,000 shares, actual, held in a family trust as to which Mr. Benjamin neither has nor shares voting or dispositive power, as to which shares he disclaims beneficial ownership. Such beneficial ownership, actual, excludes 400,000 shares underlying options that are not currently exercisable and will not become exercisable within 60 days. At the time of the spinoff, the stock options will be replaced and adjusted to be options to purchase A-Mark common stock and therefore beneficial ownership, pro forma, does not include any shares underlying such awards. The address of Mr. Benjamin is 1063 McGaw Avenue, Irvine, CA 92614.
|
(5)
|
Beneficial ownership of William A. Richardson is based on his amended Schedule 13D filed with the SEC reporting beneficial ownership of Company common stock at September 17, 2012, and additional advice provided to the Company. His beneficial ownership of Company common stock, actual, totaled 4,050,918 shares at January 29, 2014, including 3,115,755 shares owned directly by Silver Bow Ventures LLC (10.0% of the outstanding class) as to which Mr. Richardson shares voting and dispositive power with Gregory N. Roberts. The address of Mr. Richardson and Silver Bow Ventures LLC is 1063 McGaw Avenue, Irvine, CA 92614.
|
(6)
|
Beneficial ownership of Gregory N. Roberts is based on his advice to the Company regarding his beneficial ownership of Company common stock. His beneficial ownership of Company common stock, actual, totaled 3,938,080 shares at January 29, 2014, including 499,825 shares as to which Mr. Roberts shares voting and dispositive power with his wife; 3,115,755 shares owned directly by Silver Bow Ventures LLC (10.0% of the outstanding class) as to which Mr. Roberts shares voting and dispositive power with William Richardson; and 322,500 shares issuable to Mr. Roberts upon exercise of currently exercisable options, as to which Mr. Roberts has sole voting and sole dispositive power. At the time of the spinoff, the stock options will be replaced and adjusted to be options to purchase A-Mark common stock, and therefore beneficial ownership, pro forma, does not include any shares underlying such awards. The address of Mr. Roberts is 1063 McGaw Avenue, Irvine, CA 92614.
|
Name and Address of
Beneficial Owner
|
Actual, at January 29, 2014
|
Pro Forma, assuming completion of the reverse stock split immediately before January 21, 2014
|
||
Amount
of Beneficial Ownership
|
Percent of Outstanding
Common Stock (1)
|
Amount
of Beneficial Ownership
|
Percent of Outstanding
Common Stock (1)
|
|
Joel R. Anderson (2)
|
2,908,068
|
9.3%
|
2,908.068
|
9.5%
|
Antonio Arenas
|
*
|
*
|
*
|
*
|
Jeffrey D. Benjamin (3)
|
3,065,556
|
9.8%
|
2,965.556
|
9.7%
|
Arthur Hamilton
|
*
|
*
|
*
|
*
|
Ellis Landau
|
716,102
|
2.3%
|
716.102
|
2.3%
|
William Montgomery (4)
|
994,650
|
3.2%
|
994.650
|
3.2%
|
John U. Moorhead
|
73,119
|
*
|
73.119
|
*
|
Jess M. Ravich
|
1,028,906
|
3.3%
|
1,028.906
|
3.4%
|
Gregory N. Roberts (5)
|
3,938,080
|
12.5%
|
3,615.580
|
11.8%
|
Carol Meltzer (6)
|
256,107
|
*
|
203.607
|
*
|
Paul Soth
|
23,564
|
*
|
23.564
|
*
|
All directors and executive officers as a group (11 persons)
|
13,004,152
(7)
|
41.2%
|
12,529.152
(7) |
40.8%
|
(1)
|
See footnote (1) to the table under the caption “Beneficial Ownership of Principal Stockholders” above.
|
(2)
|
See footnote (3) to the table under the caption “Beneficial Ownership of Principal Stockholders” above.
|
(3)
|
See footnote (4) to the table under the caption “Beneficial Ownership of Principal Stockholders” above.
|
(4)
|
Includes 710,980 shares of Company common stock, actual, held in a trust as to which Mr. Montgomery has no voting power and limited dispositive power, and as to which shares Mr. Montgomery disclaims beneficial ownership.
|
(5)
|
See footnote (6) to the table under the caption “Beneficial Ownership of Principal Stockholders” above.
|
(6)
|
Beneficial ownership, actual, includes 52,500 shares underlying options that are currently exercisable, but excludes 30,000 shares underlying options that are not currently exercisable and will not be exercisable within 60 days. At the time of the spinoff, stock options will be replaced and adjusted to be awards solely relating to A-mark, and therefore beneficial ownership, pro forma, does not include any shares underlying such awards.
|
(7)
|
Beneficial ownership, actual, includes 475,000 shares underlying options that are currently exercisable, but excludes 430,000 shares underlying options that are not currently exercisable and will not be exercisable within 60 days and excludes 75,000 shares underlying RSUs that will not vest and be settled within 60 days. At the time of the spinoff, stock options, RSUs and other equity awards will be replaced and adjusted to be awards relating solely to A-Mark common stock, and therefore beneficial ownership, pro forma, does not include any shares underlying equity awards.
|
|
|
Three months ended
|
||||
in thousands, except per share data
(unaudited) |
|
September 30, 2013
|
|
|
September 30, 2012
|
|
Revenues
|
$
|
1,534,800
|
|
|
$
|
1,664,867
|
Gross profit
|
|
13,329
|
|
|
|
10,180
|
Operating expenses
|
|
12,223
|
|
|
|
11,417
|
Operating income (loss)
|
|
1,106
|
|
|
|
(1,237)
|
Pre-tax income (loss) from continuing operations
|
|
1,615
|
|
|
|
(667)
|
Income (loss) from continuing operations
|
|
915
|
|
|
|
(651)
|
Income (loss) from discontinued operations, net of tax, attributable to Spectrum Group International, Inc.
|
|
—
|
|
|
|
(787)
|
Net income (loss)
|
|
915
|
|
|
|
(1,438)
|
Less: net loss (income) attributable to non-controlling interest
|
|
41
|
|
|
|
(84)
|
Net income (loss) attributable to Spectrum Group International, Inc.
|
$
|
956
|
|
|
$
|
(1,522)
|
Income (loss) per share attributable to Spectrum Group International, Inc.
|
|
|
|
|
|
|
Basic – continuing operations
|
$
|
0.03
|
|
|
$
|
(0.020)
|
Basic – discontinued operations
|
$
|
—
|
|
|
$
|
(0.020)
|
Diluted – continuing operations
|
$
|
0.03
|
|
|
$
|
(0.020)
|
Diluted – discontinued operations
|
$
|
—
|
|
|
$
|
(0.020)
|
Basic – net income (loss)
|
$
|
0.03
|
|
|
$
|
(0.050)
|
Diluted – net income (loss)
|
$
|
0.03
|
|
|
$
|
(0.050)
|
|
|
Year ended
|
|||
in thousands, except per share data
|
|
June 30, 2013
|
|
|
June 30, 2012
|
Revenue
|
$
|
7,406,043
|
|
|
7,962,949
|
Gross profit
|
|
50,863
|
|
|
48,639
|
Operating expenses
|
|
48,549
|
|
|
52,423
|
Operating income (loss)
|
|
2,314
|
|
|
(3,784)
|
Pre-tax income
|
|
5,139
|
|
|
9,085
|
Income from continuing operations
|
|
3,385
|
|
|
4,783
|
Income from discontinued operations, net of tax, attributable to Spectrum Group International, Inc.
|
|
(139)
|
|
|
258
|
Net income
|
|
3,246
|
|
|
5,041
|
Less: Net income attributable to non-controlling interest
|
|
123
|
|
|
(979)
|
Net income attributable to Spectrum Group International, Inc.
|
$
|
3,369
|
|
|
4,062
|
Earnings (loss) per share attributable to Spectrum Group International, Inc.
|
|
|
|
|
|
Basic – continuing operations
|
$
|
0.11
|
|
|
0.15
|
Basic – discontinued operations
|
$
|
—
|
|
|
0.01
|
Diluted – continuing operations
|
$
|
0.11
|
|
|
0.15
|
Diluted – discontinued operations
|
$
|
—
|
|
|
0.01
|
Basic – net income
|
$
|
0.11
|
|
|
0.12
|
Diluted – net income
|
$
|
0.11
|
|
|
0.12
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|||||||
ASSETS
|
|
|
|
|
|
||||||||
Current assets:
|
|
|
|
|
|
||||||||
|
Cash and cash equivalents
|
$
|
|
$23,643
|
|
|
|
|
$25,305
|
|
|||
|
Receivables and secured loans, net – trading operations
|
|
109,696
|
|
|
|
127,380
|
|
|||||
|
Accounts receivable and consignor advances, net – collectibles operations
|
|
12,347
|
|
|
|
20,428
|
|
|||||
|
Inventory, net
|
|
188,253
|
|
|
|
164,780
|
|
|||||
|
Prepaid expenses and other assets
|
|
2,306
|
|
|
|
2,770
|
|
|||||
|
Deferred tax assets
|
|
3,630
|
|
|
|
13,192
|
|
|||||
|
Current assets of discontinued operations
|
|
—
|
|
|
|
8,273
|
|
|||||
|
|
Total current assets
|
|
339,875
|
|
|
|
362,128
|
|
||||
|
Property and equipment, net
|
|
13,908
|
|
|
|
11,710
|
|
|||||
|
Goodwill
|
|
4,884
|
|
|
|
5,985
|
|
|||||
|
Other purchased intangible assets, net
|
|
6,317
|
|
|
|
7,157
|
|
|||||
|
Restricted cash
|
|
602
|
|
|
|
550
|
|
|||||
|
Income taxes receivable
|
|
1,836
|
|
|
|
2,637
|
|
|||||
|
Deferred tax assets – non-current
|
|
3,387
|
|
|
|
1,207
|
|
|||||
|
Other assets
|
|
566
|
|
|
|
942
|
|
|||||
|
Non-current assets of discontinued operations
|
|
—
|
|
|
|
1,895
|
|
|||||
|
|
Total assets
|
$
|
|
$371,375
|
|
|
|
|
$394,211
|
|
||
|
|
|
|
|
|
|
|
||||||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||||||||
Current liabilities:
|
|
|
|
|
|
||||||||
|
Accounts payable and consignor payables
|
$
|
|
$95,839
|
|
|
|
|
$102,103
|
|
|||
|
Liability on borrowed metals
|
|
20,117
|
|
|
|
27,076
|
|
|||||
|
Obligation under product financing arrangement
|
|
38,554
|
|
|
|
15,576
|
|
|||||
|
Accrued expenses and other current liabilities
|
|
10,693
|
|
|
|
9,920
|
|
|||||
|
Income taxes payable
|
|
6,364
|
|
|
|
17,860
|
|
|||||
|
Lines of credit
|
|
100,857
|
|
|
|
92,669
|
|
|||||
|
Debt obligations, current portion
|
|
161
|
|
|
|
154
|
|
|||||
|
Current liabilities of discontinued operations
|
|
—
|
|
|
|
8,224
|
|
|||||
|
|
Total current liabilities
|
|
272,585
|
|
|
|
273,582
|
|
||||
|
|
|
|
|
|
|
|||||||
|
Long term tax liabilities
|
|
9,322
|
|
|
|
8,010
|
|
|||||
|
Debt obligations, net of current portion
|
|
8,788
|
|
|
|
6,574
|
|
|||||
|
Other long-term liabilities
|
|
1,888
|
|
|
|
168
|
|
|||||
|
|
Total liabilities
|
|
292,583
|
|
|
|
288,334
|
|
||||
|
|
|
|
|
|
|
|||||||
|
Commitments and contingencies
|
|
|
|
|
|
|||||||
|
Redeemable non-controlling interest, VIE
|
|
160
|
|
|
|
124
|
|
|||||
|
Stockholders’ equity:
|
|
|
|
|
|
|||||||
|
|
Preferred stock, $0.01 par value, authorized 10,000 shares; issued and outstanding: none
|
|
—
|
|
|
|
—
|
|
||||
|
|
Common stock, $0.01 par value, authorized 40,000 shares; issued and outstanding: 30,909 and 32,723 at June 30, 2013 and June 30, 2012, respectively
|
|
309
|
|
|
|
327
|
|
||||
|
|
Additional paid-in capital
|
|
206,655
|
|
|
|
242,418
|
|
||||
|
|
Accumulated other comprehensive income
|
|
6,605
|
|
|
|
6,389
|
|
||||
|
|
Accumulated deficit
|
|
(134,937)
|
|
|
|
(156,777)
|
|
||||
|
|
|
Total Spectrum Group International, Inc. stockholders’ equity
|
|
78,632
|
|
|
|
92,357
|
|
|||
|
Non-controlling interest
|
|
—
|
|
|
|
13,396
|
|
|||||
|
|
Total stockholders’ equity
|
|
78,632
|
|
|
|
105,753
|
|
||||
|
|
Total liabilities, redeemable non-controlling interest and stockholders’ equity
|
$
|
|
$371,375
|
|
|
|
|
$394,211
|
|
||
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
(Thousands of dollars)
|
Historical
|
|
Separation of A-Mark and Effect of the Reverse Stock Split (a)
|
|
Stock Repurchase Adjustment (e)
|
|
Pro Forma
|
||||
ASSETS
|
|
|
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$43,529
|
|
|
$(16,617)
|
|
$(293)
|
|
|
$26,619
|
|
Receivables and secured loans, net - trading operations
|
63,345
|
|
|
(63,345)
|
|
-
|
|
-
|
|
||
Accounts receivable and consignor advances, net - collectibles operations
|
16,468
|
|
|
-
|
|
-
|
|
16,468
|
|
||
Inventory, net
|
195,733
|
|
|
(175,366)
|
|
-
|
|
20,367
|
|
||
Prepaid expenses and other assets
|
2,496
|
|
|
(602)
|
|
-
|
|
1,894
|
|
||
Short Term Receivable
|
-
|
|
|
1,803
|
|
-
|
|
1,803
|
|
||
Deferred tax assets
|
3,630
|
|
|
(3,277)
|
|
-
|
|
353
|
|
||
|
|
|
|
|
|
|
|
||||
Total current assets
|
325,201
|
|
|
(257,404)
|
|
(293)
|
|
67,504
|
|
||
|
|
|
|
|
|
|
|
||||
Property and equipment, net
|
14,391
|
|
|
(1,285)
|
|
-
|
|
13,106
|
|
||
Goodwill
|
4,884
|
|
|
(4,884)
|
|
-
|
|
-
|
|
||
Other purchased intangibles, net
|
6,134
|
|
|
(3,046)
|
|
-
|
|
3,088
|
|
||
Restricted cash
|
606
|
|
|
-
|
|
-
|
|
606
|
|
||
Income tax receivables
|
2,696
|
|
|
12,823
|
|
-
|
|
15,519
|
|
||
Deferred tax assets
|
3,387
|
|
|
(2,216)
|
|
-
|
|
1,171
|
|
||
Other assets
|
157
|
|
|
(53)
|
|
-
|
|
104
|
|
||
|
|
|
|
|
|
|
|
||||
Total assets
|
357,456
|
|
|
(256,065)
|
|
(293)
|
|
101,098
|
|
||
|
|
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
|
|
|
||||
Accounts payable, customer deposits and consignor payables
|
|
$81,658
|
|
|
$(47,779)
|
|
-
|
|
|
$33,879
|
|
Liability on borrowed metals
|
13,308
|
|
|
(13,308)
|
|
-
|
|
-
|
|
||
Product Financing Obligation
|
45,456
|
|
|
(45,456)
|
|
-
|
|
-
|
|
||
Accrued expenses and other current liabilities
|
9,586
|
|
|
(5,283)
|
|
-
|
|
4,303
|
|
||
Income taxes payable
|
7,783
|
|
|
(7,783)
|
|
-
|
|
-
|
|
||
Line of credit
|
99,833
|
|
|
(99,700)
|
|
-
|
|
133
|
|
||
Debt Obligation, Current Portion
|
163
|
|
|
-
|
|
-
|
|
163
|
|
||
|
|
|
|
|
|
|
|
||||
Total current liabilities
|
|
$257,787
|
|
|
$(219,309)
|
|
|
|
|
$38,478
|
|
|
|
|
|
|
|
|
|
||||
Long term tax liabilities
|
9,361
|
|
|
(1,115)
|
|
-
|
|
8,246
|
|
||
Debt obligations, net of current portion
|
8,741
|
|
|
-
|
|
-
|
|
8,741
|
|
||
Other Long Term Liabilities
|
1,829
|
|
|
-
|
|
-
|
|
1,829
|
|
||
|
|
|
|
|
|
|
|
||||
Total liabilities
|
277,718
|
|
|
(220,424)
|
|
-
|
|
57,294
|
|
||
|
|
|
|
|
|
|
|
||||
Redeemable noncontrolling interest
|
119
|
|
|
-
|
|
-
|
|
119
|
|
||
|
|
|
|
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
|
|
|
|
||||
Preferred stock, $.01 par value, authorized 40,000 shares;
|
-
|
|
|
-
|
|
-
|
|
-
|
|
||
issued and outstanding none
|
|
|
|
|
|
|
|
||||
Common stock, $.01 par value, authorized 40,000 shares;
|
|
|
|
|
|
|
|
||||
issued and outstanding: 30,848 (as reported) and 31 (pro forma adjusted) at September 30, 2013
|
308
|
|
|
(308)
|
(d)
|
-
|
|
-
|
|
||
Additional paid in- capital
|
206,687
|
|
|
308
|
(d)
|
-
|
|
206,995
|
|
||
Repurchase of treasury stock
|
-
|
|
|
-
|
|
(293)
|
|
(293)
|
|
||
Accumulated other comprehensive income
|
6,605
|
|
|
-
|
|
-
|
|
6,605
|
|
||
Accumulated deficit/(Retained earnings) - Ending balance
|
(133,981)
|
|
|
(35,641)
|
|
-
|
|
(169,622)
|
|
||
|
|
|
|
|
|
|
|
||||
Total stockholders' equity
|
79,619
|
|
|
(35,641)
|
|
(293)
|
|
43,685
|
|
||
|
|
|
|
|
|
|
|
||||
Total liabilities and stockholders' equity
|
|
$357,456
|
|
|
$(256,065)
|
|
$(293)
|
|
|
$101,098
|
|
(Thousands of dollars except per share and average share amounts)
|
Historical
|
|
Separation of A-Mark (b)
|
|
Pro Forma
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Sales of precious metals
|
|
$1,492,113
|
|
|
|
$1,492,113
|
|
|
$ -
|
|
|
Collectibles revenues:
|
|
|
|
|
|
||||||
Sales of inventory
|
35,131
|
|
|
-
|
|
|
35,131
|
|
|||
Auction Services
|
7,556
|
|
|
-
|
|
|
7,556
|
|
|||
|
|
|
|
|
|
||||||
Total revenue
|
1,534,800
|
|
|
1,492,113
|
|
|
42,687
|
|
|||
|
|
|
|
|
|
||||||
Cost of sales:
|
|
|
|
|
|
||||||
Cost of precious metals sold
|
1,484,940
|
|
|
1,484,940
|
|
|
-
|
|
|||
Cost of collectibles sold
|
33,729
|
|
|
-
|
|
|
33,729
|
|
|||
Auction Services Expenses
|
2,802
|
|
|
-
|
|
|
2,802
|
|
|||
|
|
|
|
|
|
||||||
Total cost of sales
|
1,521,471
|
|
|
1,484,940
|
|
|
36,531
|
|
|||
|
|
|
|
|
|
||||||
Gross profit
|
13,329
|
|
|
7,173
|
|
|
6,156
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
General and administrative
|
5,397
|
|
|
1,167
|
|
|
4,230
|
|
|||
Salaries and wages
|
6,269
|
|
|
2,462
|
|
|
3,807
|
|
|||
Depreciation and amortization
|
557
|
|
|
220
|
|
|
337
|
|
|||
|
|
|
|
|
|
||||||
Total operating expenses
|
12,223
|
|
|
3,849
|
|
|
8,374
|
|
|||
|
|
|
|
|
|
||||||
Operating (loss) income
|
1,106
|
|
|
3,324
|
|
|
(2,218)
|
|
|||
Interest and other income (expense):
|
|
|
|
|
|
||||||
Interest income
|
1,634
|
|
|
1,496
|
|
|
138
|
|
|||
Interest expense
|
(1,199)
|
|
|
(988)
|
|
|
(211)
|
|
|||
Other income (expense), net
|
49
|
|
|
-
|
|
|
49
|
|
|||
Unrealized (losses) gains on foreign exchange
|
25
|
|
|
36
|
|
|
(11)
|
|
|||
|
|
|
|
|
|
||||||
Total interest and other income (expense)
|
509
|
|
|
544
|
|
|
(35)
|
|
|||
|
|
|
|
|
|
||||||
(Loss) income before taxes on income from continuing operations
|
1,615
|
|
|
3,868
|
|
|
(2,253)
|
|
|||
(Benefit) taxes on income
|
700
|
|
|
1,639
|
|
|
(939)
|
|
|||
|
|
|
|
|
|
||||||
Net income from continuing operations
|
915
|
|
|
2,229
|
|
|
(1,314)
|
|
|||
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Basic and diluted income(loss) per share attributable to Spectrum Group International, Inc.:
|
|
|
|
|
|
||||||
Basic - continuing operations
|
$
|
0.03
|
|
|
|
|
$
|
(42.850
|
)
|
||
Diluted - continuing operations
|
$
|
0.03
|
|
|
|
|
$
|
(42.850
|
)
|
||
|
|
|
|
|
|
||||||
Weighted Average Shares Outstanding:
|
|
|
|
|
|
||||||
Basic
|
30,918,000
|
|
|
(30,887,337)
|
|
(c)
|
30,663
|
|
|||
Diluted
|
31,501,000
|
|
|
(31,470,337)
|
|
(c)
|
30,663
|
|
(Thousands of dollars except per share and average share amounts)
|
Historical
|
|
Separation of A-Mark (b)
|
|
Pro Forma
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Sales of precious metals
|
|
$1,613,615
|
|
|
|
$1,613,615
|
|
|
|
$0
|
|
Collectibles revenues:
|
|
|
|
|
|
||||||
Sales of inventory
|
46,274
|
|
|
-
|
|
|
46,274
|
|
|||
Auction Services
|
4,978
|
|
|
-
|
|
|
4,978
|
|
|||
|
|
|
|
|
|
||||||
Total revenue
|
1,664,867
|
|
|
1,613,615
|
|
|
51,252
|
|
|||
|
|
|
|
|
|
||||||
Cost of sales:
|
|
|
|
|
|
||||||
Cost of precious metals sold
|
1,608,451
|
|
|
1,608,451
|
|
|
-
|
|
|||
Cost of collectibles sold
|
43,417
|
|
|
-
|
|
|
43,417
|
|
|||
Auction Services Expenses
|
2,819
|
|
|
-
|
|
|
2,819
|
|
|||
|
|
|
|
|
|
||||||
Total cost of sales
|
1,654,687
|
|
|
1,608,451
|
|
|
46,236
|
|
|||
|
|
|
|
|
|
||||||
Gross profit
|
10,180
|
|
|
5,164
|
|
|
5,016
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
General and administrative
|
5,128
|
|
|
1,008
|
|
|
4,120
|
|
|||
Arbitration settlement
|
-
|
|
|
-
|
|
|
-
|
|
|||
Salaries and wages
|
5,784
|
|
|
2,002
|
|
|
3,782
|
|
|||
Depreciation and amortization
|
505
|
|
|
197
|
|
|
308
|
|
|||
|
|
|
|
|
|
||||||
Total operating expenses
|
11,417
|
|
|
3,207
|
|
|
8,210
|
|
|||
|
|
|
|
|
|
||||||
Operating (loss) income
|
(1,237)
|
|
|
1,957
|
|
|
(3,194)
|
|
|||
Interest and other income (expense):
|
|
|
|
|
|
||||||
Interest income
|
2,188
|
|
|
2,043
|
|
|
145
|
|
|||
Interest expense
|
(1,082)
|
|
|
(929)
|
|
|
(153)
|
|
|||
Other income (expense), net
|
139
|
|
|
-
|
|
|
139
|
|
|||
Unrealized (losses) gains on foreign exchange
|
(675)
|
|
|
(26)
|
|
|
(649)
|
|
|||
|
|
|
|
|
|
||||||
Total interest and other income (expense)
|
570
|
|
|
1,088
|
|
|
(518)
|
|
|||
|
|
|
|
|
|
||||||
(Loss) income before taxes on income from continuing operations
|
(667)
|
|
|
3,045
|
|
|
(3,712)
|
|
|||
(Benefit) taxes on income
|
(16)
|
|
|
1,209
|
|
|
(1,225)
|
|
|||
|
|
|
|
|
|
||||||
Net income from continuing operations
|
(651)
|
|
|
1,836
|
|
|
(2,487)
|
|
|||
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Basic and diluted income(loss) per share attributable to Spectrum Group International, Inc.:
|
|
|
|
|
|
||||||
Basic - continuing operations
|
$
|
(0.020
|
)
|
|
|
|
$
|
(81.110
|
)
|
||
Diluted - continuing operations
|
$
|
(0.020
|
)
|
|
|
|
$
|
(81.110
|
)
|
||
|
|
|
|
|
|
||||||
Weighted Average Shares Outstanding:
|
|
|
|
|
|
||||||
Basic
|
32,783,000
|
|
|
(32,752,337)
|
|
(c)
|
30,663
|
|
|||
Diluted
|
32,783,000
|
|
|
(32,752,337)
|
|
(c)
|
30,663
|
|
(Thousands of dollars except per share and average share amounts)
|
Historical
|
|
Separation of A-Mark (b)
|
|
Pro Forma
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Sales of precious metals
|
|
$7,223,750
|
|
|
|
$7,223,750
|
|
|
$ -
|
|
|
Collectibles revenues:
|
|
|
|
|
|
||||||
Sales of inventory
|
164,733
|
|
|
-
|
|
|
164,733
|
|
|||
Auction Services
|
17,560
|
|
|
-
|
|
|
17,560
|
|
|||
|
|
|
|
|
|
||||||
Total revenue
|
7,406,043
|
|
|
7,223,750
|
|
|
182,293
|
|
|||
|
|
|
|
|
|
||||||
Cost of sales:
|
|
|
|
|
|
||||||
Cost of precious metals sold
|
7,192,672
|
|
|
7,192,672
|
|
|
-
|
|
|||
Cost of collectibles sold
|
156,803
|
|
|
-
|
|
|
156,803
|
|
|||
Auction Services Expenses
|
5,705
|
|
|
-
|
|
|
5,705
|
|
|||
|
|
|
|
|
|
||||||
Total cost of sales
|
7,355,180
|
|
|
7,192,672
|
|
|
162,508
|
|
|||
|
|
|
|
|
|
||||||
Gross profit
|
50,863
|
|
|
31,078
|
|
|
19,785
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
General and administrative
|
19,649
|
|
|
3,606
|
|
|
16,043
|
|
|||
Arbitration settlement
|
-
|
|
|
-
|
|
|
-
|
|
|||
Salaries and wages
|
25,572
|
|
|
10,208
|
|
|
15,364
|
|
|||
Depreciation and amortization
|
2,226
|
|
|
824
|
|
|
1,402
|
|
|||
Goodwill Impairment
|
1,102
|
|
|
-
|
|
|
1,102
|
|
|||
|
|
|
|
|
|
||||||
Total operating expenses
|
48,549
|
|
|
14,638
|
|
|
33,911
|
|
|||
|
|
|
|
|
|
||||||
Operating (loss) income
|
2,314
|
|
|
16,440
|
|
|
(14,126)
|
|
|||
Interest and other income (expense):
|
|
|
|
|
|
||||||
Interest income
|
8,357
|
|
|
7,938
|
|
|
419
|
|
|||
Interest expense
|
(4,404)
|
|
|
(3,579)
|
|
|
(825)
|
|
|||
Other income (expense), net
|
368
|
|
|
-
|
|
|
368
|
|
|||
Unrealized (losses) gains on foreign exchange
|
(1,496)
|
|
|
30
|
|
|
(1,526)
|
|
|||
|
|
|
|
|
|
||||||
Total interest and other income (expense)
|
2,825
|
|
|
4,389
|
|
|
(1,564)
|
|
|||
|
|
|
|
|
|
||||||
(Loss) income before taxes on income from continuing operations
|
5,139
|
|
|
20,829
|
|
|
(15,690)
|
|
|||
(Benefit) taxes on income
|
1,754
|
|
|
8,737
|
|
|
(6,983)
|
|
|||
|
|
|
|
|
|
||||||
Net income from continuing operations
|
|
$3,385
|
|
|
|
$12,092
|
|
|
$(8,707)
|
||
|
|
|
|
|
|
||||||
Basic and diluted income(loss) per share attributable to Spectrum Group International, Inc.:
|
|
|
|
|
|
||||||
Basic - continuing operations
|
$
|
0.15
|
|
|
|
|
$
|
(283.960
|
)
|
||
Diluted - continuing operations
|
$
|
0.15
|
|
|
|
|
$
|
(283.960
|
)
|
||
|
|
|
|
|
|
||||||
Weighted Average Shares Outstanding:
|
|
|
|
|
|
||||||
Basic
|
31,150,000
|
|
|
(31,119,337)
|
|
(c)
|
30,663
|
|
|||
Diluted
|
31,433,000
|
|
|
(31,402,337)
|
|
(c)
|
30,663
|
|
(Thousands of dollars except per share and average share amounts)
|
Historical
|
|
Separation of A-Mark (b)
|
|
Pro Forma
|
||||||
Revenues:
|
|
|
|
|
|
||||||
Sales of precious metals
|
|
$7,769,792
|
|
|
|
$7,769,792
|
|
|
$ -
|
||
Collectibles revenues:
|
|
|
|
|
|
||||||
Sales of inventory
|
174,674
|
|
|
-
|
|
|
174,674
|
|
|||
Auction Services
|
30,364
|
|
|
-
|
|
|
30,364
|
|
|||
|
|
|
|
|
|
||||||
Total revenue
|
7,974,830
|
|
|
7,769,792
|
|
|
205,038
|
|
|||
|
|
|
|
|
|
||||||
Cost of sales:
|
|
|
|
|
|
||||||
Cost of precious metals sold
|
7,742,972
|
|
|
7,742,972
|
|
|
-
|
|
|||
Cost of collectibles sold
|
167,824
|
|
|
-
|
|
|
167,824
|
|
|||
Auction Services Expenses
|
6,826
|
|
|
-
|
|
|
6,826
|
|
|||
|
|
|
|
|
|
||||||
Total cost of sales
|
7,917,622
|
|
|
7,742,972
|
|
|
174,650
|
|
|||
|
|
|
|
|
|
||||||
Gross profit
|
57,208
|
|
|
26,820
|
|
|
30,388
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
General and administrative
|
27,947
|
|
|
5,781
|
|
|
22,166
|
|
|||
M.F. Global, Inc. loss provision
|
1,016
|
|
|
-
|
|
|
1,016
|
|
|||
Salaries and wages
|
29,733
|
|
|
9,774
|
|
|
19,959
|
|
|||
Depreciation and amortization
|
2,050
|
|
|
734
|
|
|
1,316
|
|
|||
|
|
|
|
|
|
||||||
Total operating expenses
|
60,746
|
|
|
16,289
|
|
|
44,457
|
|
|||
|
|
|
|
|
|
||||||
Operating (loss) income
|
(3,538)
|
|
|
10,531
|
|
|
(14,069)
|
|
|||
Interest and other income (expense):
|
|
|
|
|
|
||||||
Interest income
|
12,727
|
|
|
12,025
|
|
|
702
|
|
|||
Interest expense
|
(4,940)
|
|
|
(4,248)
|
|
|
(692)
|
|
|||
Other income (expense), net
|
988
|
|
|
2
|
|
|
986
|
|
|||
Unrealized (losses) gains on foreign exchange
|
4,210
|
|
|
62
|
|
|
4,148
|
|
|||
|
|
|
|
|
|
||||||
Total interest and other income (expense)
|
12,985
|
|
|
7,841
|
|
|
5,144
|
|
|||
|
|
|
|
|
|
||||||
(Loss) income before taxes on income from continuing operations
|
9,447
|
|
|
18,372
|
|
|
(8,925)
|
|
|||
(Benefit) taxes on income
|
4,500
|
|
|
7,876
|
|
|
(3,376)
|
|
|||
|
|
|
|
|
|
||||||
Net income from continuing operations
|
|
$4,947
|
|
|
|
$10,496
|
|
|
(5,549)
|
|
|
|
|
|
|
|
|
||||||
Basic and diluted income(loss) per share attributable to Spectrum Group International, Inc.:
|
|
|
|
|
|
||||||
Basic - continuing operations
|
$
|
0.12
|
|
|
|
|
$
|
(181.000
|
)
|
||
Diluted - continuing operations
|
$
|
0.12
|
|
|
|
|
$
|
(181.000
|
)
|
||
|
|
|
|
|
|
||||||
Weighted Average Shares Outstanding:
|
|
|
|
|
|
||||||
Basic
|
32,678,000
|
|
|
(32,647,367)
|
|
(c)
|
30,663
|
|
|||
Diluted
|
32,865,000
|
|
|
(32,834,367)
|
|
(c)
|
30,663
|
|
(a)
|
Reflects the addition or removal of the assets and liabilities of A-Mark and the effect of the reverse split on the Company’s stockholders’ equity as if the spin-off was consummated on September 30, 2013. See (d) for further explanation.
|
(b)
|
Reflects the removal of results of operations of A-Mark as if the spin-off was consummated on July 1, 2011.
|
(c)
|
The computation of the pro forma basic earnings per share is based on the weighted average number of common shares outstanding after giving effect for the 1000 to 1 reverse stock split of SGI’s common stock.
|
(d)
|
At September 30, 2013, the pro forma common stock issued and outstanding was 30,848. Therefore, the common stock value as of September 30, 2013, based on a par value of $0.01, is $308. The difference between the historical common stock value and the pro forma adjusted value is included in additional paid in capital as an excess of par.
|
(e)
|
The reverse stock split assumes that 450,000 shares are purchased at a price of $0.65 per share (subject to any applicable U.S. federal, state and local withholding tax).
|
•
|
Annual Report on Form 10-K for the year ended June 30, 2013; and
|
•
|
Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.
|
|
BY ORDER OF THE BOARD OF
|
|
|
DIRECTORS
|
|
|
|
|
|
|
|
|
/s/ Carol Meltzer
|
|
|
Carol Meltzer
|
|
|
Secretary
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
(i)
|
reviewed A-Mark’s registration statement on Form S-1 (the “Registration Statement”) in connection with the Spin-Off, filed on November 12, 2013;
|
(ii)
|
reviewed a draft of Parent’s Schedule 14A proxy statement (the “Proxy Statement”) in connection with the Reverse Stock Split, received by us on November 9, 2013;
|
(iii)
|
reviewed certain publicly available business and financial information of Parent that we believe to be relevant to our inquiry;
|
(iv)
|
reviewed certain internal financial statements and other financial and operating data concerning Parent;
|
(v)
|
reviewed certain pro forma financial forecasts relating to Parent (giving effect to the Spin-Off) prepared by the management of Parent (the “Parent Forecasts”);
|
(vi)
|
discussed the past and current operations, financial condition and prospects of Parent with management of Parent;
|
(vii)
|
reviewed the reported prices and trading activity for Parent common stock;
|
(viii)
|
compared the financial performance of Parent, and the prices and trading activity of Parent common stock, with that of certain publicly traded companies we deemed relevant;
|
(ix)
|
considered publicly available financial terms of certain transactions we deemed relevant; and
|
(x)
|
performed such other analyses and considered such other factors as we have deemed appropriate.
|
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