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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from
 to
 Commission File Number: 1-11988
 SPECTRUM GROUP INTERNATIONAL, INC.
  Delaware
    
    22-2365834(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 
 (Registrants telephone number, including area code)
    o þ
 o þ
 o þ
 o
 o o
  Large accelerated filer o
    
    Accelerated Filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



SPECTRUM GROUP INTERNATIONAL, INC.
FORM 10-K ANNUAL REPORT
For the Fiscal Year Ended June 30, 2009
 Table of Contents
 PagePART I
    
    
    3Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    11Item 1B. Unresolved Staff Comments
    
    
    19Item 2. Properties
    
    
    19Item 3. Legal Proceedings
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22PART II
    
    
    22Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    22Item 6. Selected Financial Data
    
    
    24Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 8. Financial Statements and Supplementary Data
    
    
    39Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    40Item 9A(T). Controls and Procedures
    
    
    40Item 9B. Other Information
    
    
    43PART III
    
    
    43Item 10. Directors, Executive Officers and Corporate Governance
    
    
    43Item 11. Executive Compensation
    
    
    45Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    45Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    45Item 14. Principal Accountant Fees and Services
    
    
    45PART IV
    
    
    45Item 15. Exhibits and Financial Statement Schedules
    
    
    45Signatures
    
    
    46EX-3.1.1Exhibit 3.2EX-10.1EX-10.4EX-10.5EX-10.7Exhibit 21Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  2




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FORWARD-LOOKING STATEMENTS
  PART I
 
 ITEM 1. DESCRIPTION OF BUSINESS
 Company Overview
  www.spectrumgi.com.
     3




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Trading Operations
 Overview
         4




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Supplier and Customer Concentrations
  Trading Competition
  Seasonality
  5




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Collectibles Operations
 Overview
  DateCompany
    
    Primary Activity
    
    Location
    
    Acquired/FormedBowers and Merena Auctions
    
    Auctions of coins  primarily high value and rare; and coin
retailer  primarily catalogue and Internet
    
    USA
    
    February 2004Ponterio & Associates
    
    Auction of world and ancient coins and currency
    
    USA
    
    December 2008Spectrum Numismatics Intl
    
    Wholesaler of coins, currency and other collectibles
    
    USA
    
    December 1999Teletrade
    
    Coin and currency auctions via the Internet and telephone  all
price points but primarily mid-level
    
    USA
    
    October 1998Greg Martin Auctions
    
    Auctions of arms and armor and historical memorabilia
    
    USA
    
    October 2005H.R. Harmer Nutmeg
    
    Auctions of stamps  entry, mid-level and high-level
    
    USA
    
    July 2004Corinphila Auktionen
    
    Auction of stamps  primarily high level and rare (single items)
    
    Switzerland
    
    September 2003Heinrich
Köhler Briefmarkenhandel
    
    Wholesaler of stamps 
primarily high level
    
    Germany
    
    September 2003Heinrich Köhler Auktionshaus
    
    Auctions of stamps  primarily high level (collections and
single items)
    
    Germany
    
    September 2003John Bull Stamp Auctions
    
    Auctions of stamps  entry, mid-level and high level
    
    Hong Kong
    
    January 2005Spectrum Wine Auctions
    
    Auctions of rare and fine vintage wines
    
    USA
    
    February 2009
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7




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Consignor
Advances
    Complementary
Merchant Dealer Operations; Private Treaty Sales
      Collectibles
Competition
  8




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Seasonality
  Financial and Geographical Information About Segments
  Government Regulation
  Employees
  June 30, 2009
    
    June 30, 2008Trading
    
    
    20
    
    
    
    16Collectibles
    
    
    119
    
    
    
    115Corporate
    
    
    3
    
    
    
    3Total
    
    
    142
    
    
    
    134
 Website Address
 www.spectrumgi.com
 9




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istorical
Financial Statements/Reports under the Exchange Act
          10




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ITEM 1A. RISK FACTORS.
 We face risks and uncertainties in connection with the bankruptcy proceedings of Afinsa, our
majority shareholder.
    11




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We face potential liability as a result of ongoing proceedings against certain of the Companys
former officers and directors
    12




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We are subject to ongoing obligations in connection with the SEC Settlement, and our failure to
comply with those obligations, including the obligation to file our Exchange Act reports for prior
periods, could adversely affect our business and the liquidity of our common stock.
    Greg Manning has commenced an arbitration against the Company.
  13




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We are the subject of examinations by U.S., New York and Spanish tax authorities.
    We have incurred and expect to continue to incur substantial legal, accounting and other costs and
expenses arising from our relationship with Afinsa.
  Our trading business is exposed to commodity price risks and to risks of default of our
counterparties.
   There can be no assurance that A-Marks future performance will equal or exceed its
performance in fiscal 2009.
  A-Marks business is heavily dependent on its heavily concentrated customer base.
  A-Marks business is heavily dependent on its credit facility and its banking relationships.
  14




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The loss of a government purchaser/distributorship arrangement could materially adversely affect
A-Marks business and results of operations.
  A-Marks business is heavily influenced by volatility in commodities prices.
  The materials held by A-Mark and our collectibles companies is subject to loss, damage, theft or
restriction on access.
  Our stock is not currently traded on a recognized exchange.
  Our business is influenced by political conditions and world events.
  Our business is subject to the risk of fraud, forgery, fakes, lack of provenance and
counterfeiting.
  We have significant operations outside the United States.
  15




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We could suffer losses with our financing operations, which could affect our liquidity and results
of operations.
     Changes in our liquidity and capital requirements could limit our ability to achieve our plans.
   We are dependent on our key management personnel and our  Trading and Collectibles
experts.
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We have made numerous acquisitions, which entail certain risks, as do our other growth initiatives.
   We may not have successfully remediated previously identified material weaknesses in our internal
controls and we may identify additional material weaknesses in the future.
  The imposition of government regulations could increase our costs of doing business.
   17




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The weak economy has had a negative impact on our Collectibles operations.
  We operate in highly competitive industries.
  Our stock price may fluctuate .
   We have not paid dividends on our common stock in the past and do not anticipate paying dividends on our common stock in the foreseeable future.
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
   19




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ITEM 3.
    
    LEGAL PROCEEDINGS
 Ongoing Legal Proceedings Against Certain of the Companys Former Officers and Directors Relating
to the Companys Transactions with Afinsa
 Spanish Criminal Investigation
      SEC Action
     20




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Tax Investigation in Spain
  Greg Manning v. SGI
    IRS and New York State Tax Audits
   21




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Securities Class Action and Shareholder Derivative Lawsuit
 In Re Escala Group, Inc. Derivative
Litigation, In re Escala Group, Inc. Securities Litigation
       Seymour
Ehrenpreis v. Nutmeg Stamps, et al
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II.
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
 ISSUER REPURCHASES OF EQUITY SECURITIES
    22




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2009Quarter
    
    High Bid
    
    Low BidFirst
    
    $
    2.80
    
    
    $
    1.65Second
    
    $
    2.65
    
    
    $
    1.70Third
    
    $
    2.95
    
    
    $
    0.86Fourth
    
    $
    2.99
    
    
    $
    1.85
 2008Quarter
    
    High Bid
    
    Low BidFirst
    
    $
    2.65
    
    
    $
    1.60Second
    
    $
    2.49
    
    
    $
    1.90Third
    
    $
    3.15
    
    
    $
    2.09Fourth
    
    $
    3.10
    
    
    $
    2.67
 Dividend Policy
   Issuer Repurchases of Equity Securities
  Equity Compensation Plan Information
  (c)Number of securities(a)
    
    
    (b)
    
    
    remaining available forNumber of securities
    
    
    Weighted average
    
    
    future issuance underto be issued upon
    
    
    exercise price of
    
    
    equity compensationexercise of
    
    
    outstanding options,
    
    
    plans (excludingoutstanding options,
    
    
    warrants and rights
    
    
    securities reflected inPlan category
    
    warrants and rights
    
    
    ($)
    
    
    column (a))Equity compensation plans approved by security holders (1)
    
    
    1,281,007
    
    
    $
    4.22
    
    
    
    3,718,993Equity compensation plans not approved by security holders (2)
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,281,007
    
    
    $
    4.22
    
    
    
    3,718,993
 
 (1)
    
    Consists of stock options and restricted stock granted under the 1993 Stock Option Plan, as
amended (the 1993 Plan), and the 1997 Stock Incentive Plan, as amended
(the 1997 Plan). Spectrums stockholders previously
approved the 1993 and 1997 Plans. Under the 1997 Plan, SGI has granted options and other equity awards as a means
of attracting and retaining officers, employees, non-employee directors and
consultants, to provide incentives to such persons, and to align the
interests of such persons with the interests of stockholders by
providing compensation based on the value of  SGIs  stock. Awards under the
1997 Plan may be granted in the form of non-qualified stock options, stock appreciation rights (SARs), restricted stock, restricted stock
units, dividend equivalent rights and other stock-based awards (which may include outright grants of shares). The 1997 Plan currently is administered by the Board of Directors, which may in its discretion select officers and other employees,
directors (including non-employee directors) and consultants to

SGI   and its subsidiaries to receive grants of awards.  At June 30, 2009,
there were 3,718,993 shares remaining available for future awards
under the 1997 Plan. Under the 1997 Plan, the
exercise price of options and base price of SARs may be set in the discretion of the Board, and stock options and SARs may have any term. The 1997 Plan limits the number of
stock options and SARs that may be granted to any one employee to 550,000 in any year. The 1997 Plan will terminate when no shares remain available for issuance and no awards remain outstanding.(2)
    
    Does not include an aggregate of 37,500 Stock Appreciation Awards and Long-Term Incentive
Awards. The shares of common stock issuable upon the exercise of these rights cannot be
determined until the applicable measurement date. These awards generally provide for the
recipient to receive an amount, payable in stock (in certain cases upon the payment of an
exercise price), equal to the appreciation in value of a specified number of shares of common
stock. 23




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ITEM 6.
    
    SELECTED FINANCIAL DATA
  
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
    INTRODUCTION
  
    
    Overview.This section provides a general description of our business, as well as
recent significant transactions and events that we believe are important in understanding
the results of operations, as well as to anticipate future trends in those operations.
 
    
    Results of operations.This section provides an analysis of our results of operations
presented in the accompanying consolidated statements of operations by comparing the
results for fiscal 2009 to fiscal 2008.
 
    
    Financial condition, liquidity and capital resources.This section provides an analysis
of our cash flows, working capital and financial commitments, as well as a discussion of
our outstanding debt that existed as of June 30, 2009. Included in the discussion of
outstanding debt is a discussion of the amount of financial capacity available to fund our
future commitments, as well as a discussion of other financing arrangements.
 
    
    Critical accounting estimates.This section discusses those accounting policies that
both are considered important to our financial condition and results, and require
significant judgment and estimates on the part of management in their application. In
addition, all of our significant accounting policies, including critical accounting
policies, are summarized in Note 2 to the accompanying consolidated financial statements.
 
    
    Recent accounting pronouncements.This section discusses new accounting pronouncements,
dates of implementation and impact on our accompanying consolidated financial statements,
if any.
 OVERVIEW
 Business
  24




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Trading
   Collectibles
  RESULTS OF OPERATIONS
 Year ended June 30, 2009 Compared to Year Ended June 30, 2008
 Consolidated Results of Operations
  % of
    
    
    2008(1)
    
    
    % of
    
    
    $ Increase/
    
    
    % of Increase/(thousands of dollars)
    
    2009
    
    
    revenue
    
    
    (as restated)
    
    
    revenue
    
    
    (decrease)
    
    
    (decrease)Revenue
    
    
    4,293,342
    
    
    
    100.0
    %
    
    
    2,856,981
    
    
    
    100.0
    %
    
    
    1,436,361
    
    
    
    50.3
    %Gross profit
    
    
    70,334
    
    
    
    1.6
    
    
    
    56,731
    
    
    
    2.0
    
    
    
    13,603
    
    
    
    24.0General and administrative expenses
    
    
    30,169
    
    
    
    0.7
    
    
    
    33,051
    
    
    
    1.2
    
    
    
    (2,882
    )
    
    
    (8.7
    )Salaries and wages
    
    
    29,814
    
    
    
    0.7
    
    
    
    22,140
    
    
    
    0.8
    
    
    
    7,674
    
    
    
    34.7Impairment of goodwill and intangible assets
    
    
    860
    
    
    
    0.0
    
    
    
    
    
    
    
    0.0
    
    
    
    860
    
    
    
    100.0Depreciation and amortization
    
    
    1,807
    
    
    
    0.0
    
    
    
    1,911
    
    
    
    0.1
    
    
    
    (104
    )
    
    
    (5.4
    )Litigation settlement
    
    
    
    
    
    
    0.0
    
    
    
    9,020
    
    
    
    0.3
    
    
    
    (9,020
    )
    
    
    (100.0
    )Operating income (loss)
    
    
    7,684
    
    
    
    0.2
    
    
    
    (9,391
    )
    
    
    (0.4
    )
    
    
    17,075
    
    
    
    181.8Interest income
    
    
    5,614
    
    
    
    0.2
    
    
    
    3,504
    
    
    
    0.1
    
    
    
    2,110
    
    
    
    60.2Interest expense
    
    
    (2,373
    )
    
    
    (0.1
    )
    
    
    (3,683
    )
    
    
    (0.1
    )
    
    
    1,310
    
    
    
    (35.6
    )Other income (expense), net
    
    
    279
    
    
    
    0.0
    
    
    
    80
    
    
    
    0.0
    
    
    
    199
    
    
    
    248.8Unrealized gains(loss) on foreign exchange
    
    
    3,068
    
    
    
    0.1
    
    
    
    (3,251
    )
    
    
    (0.1
    )
    
    
    6,319
    
    
    
    194.4Income (loss) before income taxes and
minority interest
    
    
    14,272
    
    
    
    0.4
    
    
    
    (12,741
    )
    
    
    (0.5
    )
    
    
    27,013
    
    
    
    212.0Income taxes
    
    
    (3,137
    )
    
    
    (0.1
    )
    
    
    (1,230
    )
    
    
    0.0
    
    
    
    (1,907
    )
    
    
    155.0Minority interests
    
    
    (3,999
    )
    
    
    (0.1
    )
    
    
    (673
    )
    
    
    0.0
    
    
    
    (3,326
    )
    
    
    494.2Net income (loss)
    
    
    7,136
    
    
    
    0.2
    %
    
    
    (14,644
    )
    
    
    (0.5
    )%
    
    
    21,780
    
    
    
    148.7Earnings
(loss) per shareBasic
    
    $
    0.23
    
    
    
    
    
    
    $
    (0.52
    )
    
    
    
    
    
    $
    0.75
    
    
    
    144.2
    %Diluted
    
    $
    0.23
    
    
    
    
    
    
    $
    (0.52
    )
    
    
    
    
    
    $
    0.75
    
    
    
    144.2
    %Weighted
average shares outstandingBasic
    
    
    30,934
    
    
    
    
    
    
    
    28,138Diluted
    
    
    31,649
    
    
    
    
    
    
    
    28,138
 
 (1)
    
    The 2008 consolidated statement of operations has been restated for certain errors
in classification. Such reclassifications did not result in an adjustment to the Companys reported net loss.
See further discussion at Note 3 to the consolidated financial statements. Revenues and Gross Profit
  25




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Operating Expenses
      26




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Interest Income
  Interest Expense
  Other Income
  Provision for Income Taxes
  2009
    
    
    2008(in thousands)
    
    
    (in thousands)Amount computed at statutory rate
    
    $
    4,852
    
    
    $
    (4,332
    )State income tax, net of federal tax benefit
    
    
    1,132
    
    
    
    (1,040
    )U.S. vs. foreign tax rate differential
    
    
    68
    
    
    
    (565
    )Non-deductible expenses
    
    
    81
    
    
    
    55Tax on unrepatriated foreign earnings
    
    
    (10
    )
    
    
    184Change in valuation allowance
    
    
    (3,298
    )
    
    
    7,159Other
    
    
    312
    
    
    
    (231
    )$
    3,137
    
    
    $
    1,230
 Minority Interests
  Net Income
  Earnings per Share
  Trading Operations
  % of
    
    
    2008(1)
    
    
    % of
    

    $
    
    
    %(thousands of dollars)
    
    2009
    
    
    revenue
    
    
    (as restated)
    
    
    revenue
    

    Increase/(decrease)
    
    
    Increase/(decrease)Trading revenues
    
    $
    4,126,909
    
    
    
    100.0
    %
    
    $
    2,681,031
    
    
    
    100.0
    %

    $
    1,445,878
    
    
    
    53.9
    %Gross profit
    
    
    42,489
    
    
    
    1.0
    
    
    
    14,076
    
    
    
    0.5
    

    
    28,413
    
    
    
    201.9General and administrative expenses
    
    
    2,838
    
    
    
    0.1
    
    
    
    2,605
    
    
    
    0.1
    

    
    233
    
    
    
    8.9Salaries and
wages
    
    
    13,082
    
    
    
    0.3
    
    
    
    4,619
    
    
    
    0.2
    

    
    8,463
    
    
    
    183.2Depreciation and amortization
    
    
    997
    
    
    
    0.0
    
    
    
    989
    
    
    
    0.0
    

    
    8
    
    
    
    0.8Operating income (loss)
    
    $
    25,572
    
    
    
    0.6
    %
    
    $
    5,863
    
    
    
    0.2
    %

    $
    19,709
    
    
    
    336.2
 
 (1)
    
    The 2008 consolidated statement of operations and related segment disclosures have been restated for certain errors
in classification. Such reclassifications did not result in an adjustment to the Companys reported net loss.
See further discussion at Note 3 to the consolidated financial statements. 27




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Trading revenues
  Gross
profit
  General and administrative expenses
  Salaries and wages
  Depreciation and amortization
  Collectibles Operations
  For the Years Ended June 30,2009
    
    
    2008(1)(as
restated)(thousands of dollars)
    
    $
    
    % to total
    
    $
    
    % to total
    
    $
Increase/
(decrease)
    
    % of
Increase/
(decrease)Collectibles Revenues
    
    $
    166,433
    
    
    
    100.0
    %
    
    $
    175,950
    
    
    
    100.0
    %
    
    $
    (9,517
    )
    
    
    (5.4
    )%Revenues by Collectible Type:Philatelic
    
    $
    31,024
    
    
    
    18.6
    %
    
    $
    51,066
    
    
    
    29.0
    %
    
    $
    (20,042
    )
    
    
    (39.2
    )%Numismatics
    
    
    133,633
    
    
    
    80.3
    
    
    
    121,753
    
    
    
    69.2
    
    
    
    11,880
    
    
    
    9.8Arms and
Armor
    
    
    1,776
    
    
    
    1.1
    
    
    
    3,131
    
    
    
    1.8
    
    
    
    (1,355
    )
    
    
    (43.3
    )$
    166,433
    
    
    
    100.0
    %
    
    $
    175,950
    
    
    
    100.0
    %
    
    $
    (9,517
    )
    
    
    (5.4
    )%
 
 (1)
    
    The 2008 consolidated statement of operations and related segment disclosures have been restated for certain errors
in classification. Such reclassifications did not result in an adjustment to the Companys reported net loss.
See further discussion at Note 3 to the consolidated financial statements. Collectibles revenue
    (thousands of dollars)
    
    2009
    
    

%
ofrevenue
    
    
    2008(1)
(as restated)
    
    

%
of 
revenue
    
    

$
Increase/
(decrease)
    
    

%
Increase/
(decrease)Collectibles revenue
    
    $
    166,433
    
    
    
    100.0
    %
    
    $
    175,950
    
    
    
    100.0
    %
    
    $
    (9,517
    )
    
    
    (5.4
    )%Gross profit
    
    
    27,845
    
    
    
    16.7
    
    
    
    42,655
    
    
    
    24.2
    
    
    
    (14,810
    )
    
    
    (34.7
    )General and administrative expenses
    
    
    19,515
    
    
    
    11.7
    
    
    
    20,991
    
    
    
    11.9
    
    
    
    (1,476
    )
    
    
    (7.0
    )Salaries and
wages
    
    
    14,262
    
    
    
    8.6
    
    
    
    15,530
    
    
    
    8.8
    
    
    
    (1,268
    )
    
    
    (8.2
    )Impairment of goodwill and intangible assets
    
    
    860
    
    
    
    0.5
    
    
    
    
    
    
    
    0.0
    
    
    
    860
    
    
    
    Depreciation and amortization
    
    
    802
    
    
    
    0.5
    
    
    
    922
    
    
    
    0.5
    
    
    
    (120
    )
    
    
    (13.1
    )Operating income (loss)
    
    $
    (7,594
    )
    
    
    (4.6
    )%
    
    $
    5,212
    
    
    
    3.0
    %
    
    $
    (12,806
    )
    
    
    (245.7
    )%
 
 (1)
    
    The 2008 consolidated statement of operations and related segment disclosures have been restated for certain errors
in classification. Such reclassifications did not result in an adjustment to the Companys reported net loss.
See further discussion at Note 3 to the consolidated financial statements. 28




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##### Table of Contents



Gross Profit
  General and administrative expense
  Salaries and wages
  Impairment of goodwill and intangible assets
  Depreciation and amortization
  29




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##### Table of Contents



FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
  (thousands of dollars)
    
    2009
    
    
    2008Cash provided by(used in) operating activities
    
    $
    13,022
    
    
    $
    (14,700
    )Cash provided by (used in) investing activities
    
    
    (8,321
    )
    
    
    (816
    )Cash provided by (used in) financing activities
    
    
    (17,981
    )
    
    
    23,066
         30




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##### Table of Contents



Contractual Obligations, Contingent Liabilities, and Commitments
  Payment due by period5 years and(thousands of dollars)
    
    Total
    
    
    1 year
    
    
    2 years
    
    
    3 years
    
    
    4 years
    
    
    thereafterBorrowings under line of credit
    
    $
    52,750
    
    
    $
    52,750
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating lease obligations
    
    
    3,193
    
    
    
    1,281
    
    
    
    1,190
    
    
    
    483
    
    
    
    239
    
    
    
    Total
    
    $
    55,943
    
    
    $
    54,031
    
    
    $
    1,190
    
    
    $
    483
    
    
    $
    239
    
    
    $
    
    31




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##### Table of Contents



CRITICAL ACCOUNTING ESTIMATES
  Basis of Presentation and Significant
Accounting Policies Financial Statements and Supplementary Data
 32




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##### Table of Contents



Revenue Recognition
 Trading.
 settlement date accounting.
 Collectibles.
 Auction Sales. In its role as auctioneer, the Company generally functions as an agent accepting
property on consignment from its selling clients. The Company sells property as agent of the
consignor, billing the buyer for property purchased, receiving payment from the buyer and
remitting to the consignor the consignors portion of the buyers payment after deducting the
Companys commissions, expenses and applicable taxes. The Companys commissions include those
earned from the buyer (buyers premium revenue) and those earned from the consignor (sellers
commission revenue), both of which are calculated as a percentage of the value of the final bid
at auction (the hammer price) of property sold at auction. The Company recognizes revenues from
the buyers premium and sellers commission upon receipt of cash, which generally occurs upon
delivery of the property sold at auction.The Company also sells its own inventory at auction. Revenue from the sales of owned inventory at
auction is recognized upon receipt of cash and is recorded at the hammer price on a gross basis,
with corresponding product cost recorded as a direct cost of sale. In addition, the Company
recognizes a commission on the hammer price, which is paid by the buyer. Sales returns have not
been material.
 33




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##### Table of Contents



The Company does not provide any guarantee with respect to the authenticity of property offered
for sale at its live auctions; however it does authenticate the materials sold via Internet
auction. All property presented for sale at live auction is sold as genuine and as described by
the Company in its auction catalogues. In the event that auctioned property is deemed to be other
than authentic (in the opinion of a competent authority mutually acceptable to the buyer and the
Company), the Company refunds the purchase price if returned within a specified time period.
Historically, returns have not been material and the Company generally sells large collections on
an as is basis. Critical estimates related to revenue recognition are not considered
significant because the Company recognizes revenue from auction sales upon receipt of cash, which
generally occurs upon delivery of the property.Private Treaty Sales.The Company engages in private treaty sales of both consigned property and
sales of owned inventory to third parties (merchant/dealer relationships and direct to consumer
sales). Private treaty sales of consigned property occur when an owner of property arranges with
the Company to sell such consigned property to a third party at a privately negotiated price. In
such a transaction, the owner may set selling price parameters for the Company or the Company may
solicit selling prices for the owner, and the owner may reserve the right to reject any selling
price. The Company does not guarantee a fixed price to the owner, which would be payable
regardless of the actual sales price ultimately received. The Company recognizes private treaty
sales of consigned property at an amount equal to a percentage of the sales price. Such amounts
of revenue are recorded on a net basis as commission revenue and are recognized upon receipt of
cash, which generally occurs upon delivery of the property. Critical estimates related to revenue
recognition are not considered significant because the Company recognizes private treaty sales of
owned property upon receipt of cash, which generally occurs upon delivery of the property.
 Stock Based Compensation
  Share-Based Payment,
 Income Taxes
 Income Taxes.
 34




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##### Table of Contents



Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Fair
Value Measurements
    Financial
Derivatives
  35




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##### Table of Contents



Goodwill and Intangible Assets
 Business
Combinations Goodwill and Other Intangible Assets
 Long-Lived Assets
  RECENT
ACCOUNTING PRONOUNCEMENTS
 Business Combinations Business Combinations
 36




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##### Table of Contents



Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies Accounting for Contingencies Reasonable Estimation of the Amount of a Loss Business Combinations
 Non-controlling Interests in Consolidated Financial
Statements Consolidated Financial Statements
 Disclosures About Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No. 133
 Subsequent Events
  Amendments to FASB Interpretation No. 46(R Accounting for Transfers of Financial Assets  an amendment of FASB
Statement No. 140
 37




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##### Table of Contents



ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  38




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##### Table of Contents



ITEM 8.
    
    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 SPECTRUM GROUP INTERNATIONAL, INC.
 FINANCIAL STATEMENTS
 INDEX
 PageReports of Independent Registered Public Accounting Firms
    
    
    F-1Consolidated Balance Sheets as of June 30, 2009 and 2008
    
    
    F-3Consolidated Statements of Operations for the years ended June 30, 2009 and 2008
    
    
    F-4Consolidated Statements of Stockholders Equity and Comprehensive Income (Loss)
for te years ended June 30, 2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended June 30, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7-41
 39




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109
    F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109
    F-2




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##### Table of Contents



SPECTRUM GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 June 30,
    
    
    June 30,2009
    
    
    2008(as restated)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    17,545
    
    
    $
    35,860Restricted cash
    
    
    650
    
    
    
    Short-term investments and marketable securities
    
    
    8,175
    
    
    
    Accounts receivable and consignor advances, net  collectibles operations (Notes 5 and 18)
    
    
    7,006
    
    
    
    7,014Receivables and secured loans, net  trading operations (Notes 4, 5, 11, 12 and 18)
    
    
    46,214
    
    
    
    25,874Litigation settlement receivable (Note 15)
    
    
    
    
    
    
    5,975Inventory, net (Notes 6, 11, 12 and 18)
    
    
    115,654
    
    
    
    130,653Deferred income taxes (Note 10)
    
    
    
    
    
    
    189Prepaid expenses and other assets
    
    
    2,028
    
    
    
    4,355Total current assets
    
    
    197,272
    
    
    
    209,920Long term inventory, net (Notes 6, 11 and 12)
    
    
    
    
    
    
    297Property and equipment, net (Note 7)
    
    
    2,668
    
    
    
    1,767Real estate held for sale (Note 7)
    
    
    
    
    
    
    1,640Goodwill (Note 8)
    
    
    5,960
    
    
    
    6,525Other purchased intangibles, net (Note 8)
    
    
    8,301
    
    
    
    8,673Other  assets
    
    
    126
    
    
    
    108Income taxes receivable (Note 10)
    
    
    3,424
    
    
    
    3,725Deferred tax asset (Note 10)
    
    
    398
    
    
    
    Total assets(Note 17)
    
    $
    218,149
    
    
    $
    232,655LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable, customer deposits and consignor payables (Notes 9 and 18)
    
    $
    20,788
    
    
    $
    29,570Liability on borrowed metals (Notes 11 and 12)
    
    
    15,100
    
    
    
    18,789Accrued expenses, accrued compensation and other current liabilities (Note 13)
    
    
    22,970
    
    
    
    15,737Accrued litigation settlement (Note 15)
    
    
    6,556
    
    
    
    14,995Income taxes payable (Note 10)
    
    
    6,582
    
    
    
    2,232Line of credit (Note 11)
    
    
    52,750
    
    
    
    65,747Other current liabilities
    
    
    191
    
    
    
    454Deferred tax liability
    
    
    1,920
    
    
    
    Total current liabilities
    
    
    126,857
    
    
    
    147,524Deferred tax liability (Note 10)
    
    
    189
    
    
    
    1,704Total liabilities
    
    
    127,046
    
    
    
    149,228Minority interests (Note 14)
    
    
    10,314
    
    
    
    6,315Commitments, contingencies and subsequent events  (Notes 15 and 19)Stockholders equity (Note 16):Preferred stock, $.01 par value, authorized 10,000 shares; issued and outstanding: none
    
    
    
    
    
    
    Common stock, $.01 par value, authorized 40,000 shares; issued and outstanding: 28,309
and 28,209 at June 30, 2009 and 2008, respectively
    
    
    283
    
    
    
    282Additional paid-in capital
    
    
    233,385
    
    
    
    232,123Accumulated other comprehensive income
    
    
    8,419
    
    
    
    13,141Accumulated deficit
    
    
    (161,298
    )
    
    
    (168,434
    )Total stockholders equity
    
    
    80,789
    
    
    
    77,112Total liabilities and stockholders equity
    
    $
    218,149
    
    
    $
    232,655
  F-3




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##### Table of Contents



SPECTRUM GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 Year Ended June 30,
    
    
    Year Ended June 30,2009
    
    
    2008(as restated)Revenues (Notes 4 and 17):Sales of precious metals
    
    $
    4,126,909
    
    
    $
    2,681,031Collectibles revenues:Sales of inventory
    
    
    144,320
    
    
    
    148,152Auction commissions earned
    
    
    22,113
    
    
    
    27,798Total revenue
    
    
    4,293,342
    
    
    
    2,856,981Cost of sales:Cost of precious metals sold (Note 12)
    
    
    4,084,419
    
    
    
    2,666,955Cost of collectibles sold
    
    
    138,589
    
    
    
    133,295Total cost of sales
    
    
    4,223,008
    
    
    
    2,800,250Gross profit
    
    
    70,334
    
    
    
    56,731Operating expenses:General and administrative (Notes 7, 15 and 16)
    
    
    30,169
    
    
    
    33,051Salaries and wages
    
    
    29,814
    
    
    
    22,140Depreciation and amortization (Notes 7 and 8)
    
    
    1,807
    
    
    
    1,911Goodwill and
intangible asset impairments
    
    
    860
    
    
    
    Litigation settlement (Note 15)
    
    
    
    
    
    
    9,020Total operating expenses
    
    
    62,650
    
    
    
    66,122Operating income (loss)
    
    
    7,684
    
    
    
    (9,391
    )Interest and other income (expense):Interest income (Note 5)
    
    
    5,614
    
    
    
    3,504Interest expense (Note 11)
    
    
    (2,373
    )
    
    
    (3,683
    )Other income (expense), net (Note 7)
    
    
    279
    
    
    
    80Unrealized gains (loss) on foreign exchange (Note 2)
    
    
    3,068
    
    
    
    (3,251
    )Interest and other income (expense)
    
    
    6,588
    
    
    
    (3,350
    )Income (loss) before income taxes and minority interest
    
    
    14,272
    
    
    
    (12,741
    )Income taxes (Note 10)
    
    
    (3,137
    )
    
    
    (1,230
    )Minority interests (Note 14)
    
    
    (3,999
    )
    
    
    (673
    )Net income (loss)
    
    $
    7,136
    
    
    $
    (14,644
    )Earnings (loss) per shareBasic
    
    $
    0.23
    
    
    $
    (0.52
    )Diluted
    
    $
    0.23
    
    
    $
    (0.52
    )Weighted average shares outstandingBasic
    
    
    30,934
    
    
    
    28,138Diluted
    
    
    31,649
    
    
    
    28,138
  F-4




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##### Table of Contents



SPECTRUM GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME/(LOSS)
(in thousands)
 AccumulatedCommon
    
    
    Common
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    TotalStock
    
    
    Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Shareholders
    
    
    Comprehensivein shares
    
    
    in $
    
    
    Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Equity
    
    
    Income/(Loss)Balance, as previously reported, June 30, 2007
    
    
    28,135
    
    
    $
    281
    
    
    $
    231,562
    
    
    $
    6,048
    
    
    $
    (152,607
    )
    
    $
    85,284Restatement adjustment (Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    888
    
    
    
    888Balance, as restated, June 30, 2007
    
    
    28,135
    
    
    
    281
    
    
    
    231,562
    
    
    
    6,048
    
    
    
    (151,719
    )
    
    
    86,172Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,644
    )
    
    
    (14,644
    )
    
    $
    (14,644
    )Unrealized loss from marketable
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    (49
    )
    
    
    (49
    )Change in cumulative foreign
currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,142
    
    
    
    
    
    
    
    7,142
    
    
    
    7,142Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (7,551
    )Share based compensation (Note 16)
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    
    
    
    
    
    
    
    
    562Issuance of common stock for 
restricted stock grants (Note 16)
    
    
    74
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Cumulative adjustment for FIN 48
adoption (Note 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,071
    )
    
    
    (2,071
    )Balance, as restated, June 30, 2008
    
    
    28,209
    
    
    
    282
    
    
    
    232,123
    
    
    
    13,141
    
    
    
    (168,434
    )
    
    
    77,112Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,136
    
    
    
    7,136
    
    
    $
    7,136Unrealized gain on marketable
securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    313
    
    
    
    
    
    
    
    313
    
    
    
    313Change in cumulative foreign
currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,035
    )
    
    
    
    
    
    
    (5,035
    )
    
    
    (5,035
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,414Issuance of shares for class
action settlement (Note 15)
    
    
    772
    
    
    
    8
    
    
    
    1,437
    
    
    
    
    
    
    
    
    
    
    
    1,445Repurchase of shares issued for 
class action settlement (Note 15)
    
    
    (772
    )
    
    
    (8
    )
    
    
    (1,190
    )
    
    
    
    
    
    
    
    
    
    
    (1,198
    )Taxes paid in exchange for
cancellation of restricted shares
    
    
    
    
    
    
    
    
    
    
    (98
    )
    
    
    
    
    
    
    
    
    
    
    (98
    )Share based compensation (Note 16)
    
    
    
    
    
    
    
    
    
    
    1,114
    
    
    
    
    
    
    
    
    
    
    
    1,114Issuance of common stock for 
restricted stock grants (Note 16)
    
    
    100
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Balance, June 30, 2009
    
    
    28,309
    
    
    $
    283
    
    
    $
    233,385
    
    
    $
    8,419
    
    
    $
    (161,298
    )
    
    $
    80,789
  F-5




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##### Table of Contents



SPECTRUM GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Year Ended June 30,
    
    
    Year Ended June 30,2009
    
    
    2008(as restated)Cash flows from operating activities:Net income (loss)
    
    $
    7,136
    
    
    $
    (14,644
    )Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activitiesDepreciation and amortization (Notes 7 and 8)
    
    
    1,807
    
    
    
    1,911Goodwill and other purchased intangibles impairment charge (Note 8)
    
    
    860
    
    
    
    Provision for bad debts (Note 5)
    
    
    440
    
    
    
    66Provision for inventory reserve (Note 6)
    
    
    1,356
    
    
    
    322Stock based compensation (Note 16)
    
    
    1,115
    
    
    
    562Provision (benefit) for deferred income taxes (Note 10)
    
    
    (12
    )
    
    
    17Minority interests (Note 14)
    
    
    3,999
    
    
    
    673Gain on sale of building (Note 7)
    
    
    (432
    )
    
    
    Gain on sale of marketable securities
    
    
    (254
    )
    
    
    Changes in assets and liabilities:Accounts receivable and consignor advances
    
    
    (432
    )
    
    
    (860
    )Receivables and secured loans
    
    
    (20,340
    )
    
    
    (7,472
    )Litigation settlement receivable
    
    
    5,975
    
    
    
    (5,975
    )Inventory
    
    
    13,911
    
    
    
    (17,942
    )Prepaid expenses and other assets
    
    
    2,309
    
    
    
    (174
    )Accounts payable, accrued expenses and other liabilities
    
    
    (1,826
    )
    
    
    15,879Income taxes, net
    
    
    4,651
    
    
    
    (2,058
    )Accrued litigation settlement
    
    
    (7,241
    )
    
    
    14,995Net cash provided by (used in) operating activities
    
    
    13,022
    
    
    
    (14,700
    )Cash flows from investing activities:Capital expenditures for property and equipment
    
    
    (1,595
    )
    
    
    (830
    )Proceeds from disposition of assets (Note 7)
    
    
    2,072
    
    
    
    14Cash paid for acquisition, net of cash acquired (Note 8)
    
    
    (592
    )
    
    
    Purchases of short-term investments and marketable securities
    
    
    (8,734
    )
    
    
    Sales of marketable securities
    
    
    1,178
    
    
    
    Increase in restricted cash
    
    
    (650
    )
    
    
    Net cash used in investing activities
    
    
    (8,321
    )
    
    
    (816
    )Cash flows from financing activities:Minority interest contribution
    
    
    
    
    
    
    450Borrowings under lines of credit, net
    
    
    (12,997
    )
    
    
    15,383Liability on borrowed metals
    
    
    (3,688
    )
    
    
    7,233Repurchase of shares issued for class action settlement (Note 15)
    
    
    (1,198
    )
    
    
    Taxes paid on behalf of employees with respect to vesting of restricted shares
    
    
    (98
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (17,981
    )
    
    
    23,066Effects of exchange rates on cash
    
    
    (5,035
    )
    
    
    7,142Net (decrease) increase in cash and cash equivalents
    
    
    (18,315
    )
    
    
    14,692Cash and cash equivalents, beginning of year
    
    
    35,860
    
    
    
    21,168Cash and cash equivalents, end of year
    
    $
    17,545
    
    
    $
    35,860Supplemental disclosures of cash flow information:Cash paid during the year for:Interest expense
    
    $
    2,159
    
    
    $
    3,701Income taxes
    
    $
    4,582
    
    
    $
    1,032
  F-6




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##### Table of Contents



SPECTRUM GROUP INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
 1. BASIS OF PRESENTATION
 Basis of Presentation
 Disclosures about Segments of an Enterprise and Related Information.
 Business Segments
 Trading
  Collectibles
  European Operations
  Reclassification
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
  F-7




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##### Table of Contents



Use of Estimates
  Concentrations of credit risk
   Trading
 Collectibles.
  F-8




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##### Table of Contents



Cash Equivalents
  Restricted Cash
  Short-Term Investments and Marketable Securities
  Accounting for Certain Investments in Debt and Equity Securities
 Inventory
 Trading Inventory
    Collectibles Inventory
  F-9




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##### Table of Contents



F-10




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##### Table of Contents



Derivative Financial Instruments
 Accounting for Derivative Instruments
and Hedging Activities (SFAS No. 133).
 Property and Equipment
 Accounting
for the Impairment or Disposal of Long-Lived Assets (SFAS No 144), held for sale
 Goodwill and Intangible Assets
 Business
Combinations Goodwill and Other Intangible Assets
  Long-Lived Assets
   F-11




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##### Table of Contents



Consolidated Joint Venture
  Consolidation of Variable
Interest Entities (FIN 46)  an Interpretation of ARB 51, as Revised in December 2003
 Consignor Advances and Payables
  Accrued Compensation
  Fair Value Measurements
 Fair Value Measurements
 Fair Value of Financial Instruments
  Revenue Recognition
 Trading.
 settlement date accounting.
 Collectibles.
 Auction Sales .
 F-12




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Private Treaty Sales.
 Commodity Contracts
   Foreign Currency Translation
   F-13




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Comprehensive Income (Loss)
  Stock Based Compensation
  Share-Based Payment,
 Marketing
  Shipping and Handling
  Income Taxes
 Income Taxes.
 F-14




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F-15




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Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Earnings Per Share
   (thousands of shares)
    
    (thousands of shares)Year ended June 30, 2009
    
    Year ended June 30, 2008Basic weighted average shares outstanding(1)
    
    
    30,934
    
    
    
    28,138Effect of common stock equivalents  stock
options and stock issuable under employee
compensation plans
    
    
    715
    
    
    
    Diluted weighted average shares outstanding
    
    
    31,649
    
    
    
    28,138
 
 (1)
    
    Basic weighted average shares outstanding include the full effect of shares issuable pursuant to the litigation settlement
(Note 15) as of the date the settlement agreement was executed. Supplemental Disclosure of Noncash Investing and Financing Activities
  Subsequent Events
 Subsequent Events
 F-16




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Recent Accounting Pronouncements
 Business Combinations Business Combinations
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies
 Accounting for Contingencies Reasonable Estimation of the Amount of a Loss Business Combinations
  Non-controlling Interests in Consolidated
Financial Statements Consolidated Financial Statements
 Disclosures About Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No. 133
 Subsequent Events
  Amendments to FASB Interpretation No. 46(R Accounting for Transfers of Financial Assets  an amendment of FASB
Statement No. 140
 F-17




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3. RESTATEMENTS OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
 Correction
of Errors to 2008 Consolidated Financial Statements
     Correction
of Errors to 2007 and Prior Consolidated Financial Statements
 Overview
         Transactions with Afinsa
 Revenue recognition.
  F-18




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1.
    
    Afinsa and the Company were parties under common control.
 2.
    
    The Company purchased the philatelic material and transferred it to Afinsa to enable Afinsa
to conduct its business.
 3.
    
    The business of Afinsa was to enter into transactions with its customers which, under U.S.
generally accepted accounting principles, constituted financing transactions rather than
sales. In reaching this conclusion, the Company relied upon the facts developed in the Audit
Committee Investigation and in the Afinsa Report. Among those facts are these: Afinsas
customers would deposit funds with Afinsa for a specified period of years, and at the end of
an agreed-upon contract term the investors would have the option of receiving either (i) the
specified stamps or other philatelic material set forth in the contract, or (ii) the principal
sum invested, plus a contractually specified interest rate. In effect, this gave to the
investors a guaranteed right to return the philatelic materials to Afinsa. According to the
Audit Committee investigation and the Afinsa Report, most  if not all  of them exercised
this right, opting to receive the principal and fixed interest on their investment rather than
the philatelic material itself. In addition, in most cases, Afinsa maintained physical
possession of the philatelic material until the end of the contract term. In light of those
facts, the Company does not believe that those transactions met the criteria for recognizing
sales under U.S. generally accepted accounting principles, but rather constituted financing
transactions, with the philatelic material serving as collateral.
 4.
    
    Both Afinsa and the Company were involved in determining the prices that Afinsa would pay for
the material, as well as (in certain cases), the catalogue values upon which those prices were
based.
  Transfer of Net Assets and Exchange of Shares between the Company and Auctentia.
  F-19




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Other Restatements
 Revenue Recognition
  
    
    Auction Sales of Company Owned Producthave historically been recognized as revenue upon
hammer fall. Management determined that one of the criteria for recording revenue, primarily
transfer of ownership through delivery, had generally not occurred until the cash was
received. Accordingly, all auction sales of Company owned product have been restated to
recognize revenue upon receipt of cash.
 
    
    Auction Sales of Consigned Producthave historically resulted in the recognition of the
Companys commission upon hammer fall. Management determined that its auction contracts do
not obligate the Company to pay the consignor, and the Company does not earn its commission,
until the cash from the sale of the consigned materials has been collected. Accordingly, all
auction sales of consigned product have been restated to recognize the Companys commission
upon the collection of cash from the purchaser.
 
    
    Private Treaty Saleshave been historically recognized upon shipment of the product.
Management determined that certain of the terms of sale were not expressly provided for
certain sales transactions. For other sales, the transactions commenced with product being
placed on consignment with the customer and the customer subsequently electing to purchase the
product, for which evidence of such election has not been retained. Accordingly, all of these
sales transactions have been restated to reflect the recognition of revenue upon receipt of
cash.
 
    
    Like-Kind Exchanges, as defined in relevant accounting literature, have historically been
recognized as sales transactions. Like-kind exchanges generally relate to situations where the
Company enters into an arrangement to sell certain of its inventory to a party and
contemporaneously purchases inventory from the same party in order to facilitate sales to its
ultimate customers. Historically these transactions have been recorded as separate purchases
and sales, inclusive of any gross profit realized. Management has determined that the
transactions which do not have cash boot in excess of 25% should have been treated as
like-kind exchanges in which purchases are recorded at the historical cost of the inventory
exchanged, with gross profit being recognized upon sell-through of the inventory received.
Accordingly, the transactions were restated to reverse any gains recorded on the
contemporaneous delivery and receipt of inventories and the inventory received was recorded at
the historical cost of the inventory supplied in the exchange, as adjusted for cash boot.
 
    
    Transactions with a Controlled Entity. In 2001, the Company entered into an exclusive sales
agreement with the Spectrum Fund I, Ltd (the Fund). The operations of the Fund ceased in
2006. Pursuant to the terms of the agreement, the Company was the exclusive supplier of
investment grade Numismatic materials to the Fund. The Company also served as the exclusive
sales agent of the Fund. The Fund provided the Company with a profit sharing arrangement
whereby the Company would receive a specified percentage of the profits from the ultimate sale
of the Funds Numismatic materials above a specified minimum guaranteed return to the Fund.
Further, the Company managed the operations of the Fund, making investment and sales decisions
on behalf of the Fund. Lastly, the Company maintained the Funds books and records, handled
its cash accounts and held in its custody the Numismatic materials the Fund had purchased from
the Company.
  F-20




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Inventory.
  
    
    Inventory Reserves. The documentation maintained by the Company does not support its
recordation of loss reserves relating to Philatelic and Numismatic inventories. Accordingly,
the Company has restated its loss reserves based on an in-depth analysis of the inventories on
hand at each determination date.
 
    
    Inventory Costing. Historically inventories have been recorded under the specific
identification method. In instances where bulk purchases are made, it is the Companys policy
to allocate the cost based on the relative market values of the respective materials acquired.
As part of the restatement process, management reviewed the mechanics of the historical cost
allocation and determined that the methodology being applied for its Philatelic operations
required modification in order to more appropriately cost items acquired in bulk purchases
based on relative market values. The Company has reviewed and where necessary revised its
original cost allocations for the periods being restated.
 Stock-based compensation
  Purchase Accounting
  Impairment of Indefinite Lived Intangible and Long-Lived Assets
  Other
  F-21




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4. CUSTOMER CONCENTRATIONS
  2009
    
    
    2008(in thousands)
    
    
    (in thousands)In $s
    
    
    as a %
    
    
    in $s
    
    
    as a %Total Trading segment revenue
    
    $
    4,126,909
    
    
    
    100.0
    %
    
    $
    2,681,031
    
    
    
    100.0
    %Trading segment customer concentrationsCustomer A
    
    $
    953,278
    
    
    
    23.1
    %
    
    $
    521,723
    
    
    
    19.5
    %Customer B
    
    
    256,801
    
    
    
    6.2
    
    
    
    435,643
    
    
    
    16.3Total
    
    $
    1,210,079
    
    
    
    29.3
    %
    
    $
    957,366
    
    
    
    35.8
    %
  2009
    
    
    2008(in thousands)
    
    
    (in thousands)in $s
    
    
    as a %
    
    
    in $s
    
    
    as a %Trading segment accounts receivable
    
    $
    16,205
    
    
    
    100.0
    %
    
    $
    7,835
    
    
    
    100.0
    %Trading segment customer concentrationsCustomer A
    
    $
    3,894
    
    
    
    24.0
    %
    
    $
    1,798
    
    
    
    23.0
    %Customer B
    
    
    2,535
    
    
    
    15.6
    
    
    
    1,821
    
    
    
    23.2Total
    
    $
    6,429
    
    
    
    39.6
    %
    
    $
    3,619
    
    
    
    46.2
    %
  2009
    
    
    2008(in thousands)
    
    
    (in thousands)in $s
    
    
    as a %
    
    
    in $s
    
    
    as a %Trading segment secured loans
    
    $
    17,727
    
    
    
    100.0
    %
    
    $
    10,135
    
    
    
    100.0
    %Trading segment customer concentrationsCustomer A
    
    $
    3,043
    
    
    
    17.2
    %
    
    $
    2,000
    
    
    
    19.7
    %Customer B
    
    
    2,600
    
    
    
    14.7
    
    
    
    1,000
    
    
    
    9.9Customer C
    
    
    2,502
    
    
    
    14.1
    
    
    
    
    
    
    
    0.0Customer D
    
    
    1,724
    
    
    
    9.7
    
    
    
    1,750
    
    
    
    17.3Customer E
    
    
    1,402
    
    
    
    7.9
    
    
    
    1,463
    
    
    
    14.4Total
    
    $
    11,271
    
    
    
    63.6
    %
    
    $
    6,213
    
    
    
    61.3
    %
   5. RECEIVABLES
  June 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Customer trade receivables
    
    $
    9,138
    
    
    $
    3,972Wholesale trade advances
    
    
    3,493
    
    
    
    3,540Secured loans
    
    
    17,727
    
    
    
    10,135Due from brokers
    
    
    3,574
    
    
    
    323Subtotal
    
    
    33,932
    
    
    
    17,970Less: allowance for doubtful accounts
    
    
    (319
    )
    
    
    (30
    )Subtotal
    
    
    33,613
    
    
    
    17,940Derivative assets  futures contracts (Notes 12 and 18)
    
    
    10,875
    
    
    
    6,336Derivative assets  forward contracts (Notes 12 and 18)
    
    
    1,726
    
    
    
    Derivative
assets  open purchase and sales commitments (Notes 12 and 18)
    
    
    
    
    
    
    1,598Receivables, net
    
    $
    46,214
    
    
    $
    25,874
 F-22




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##### Table of Contents



June 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Auction and trade
    
    $
    7,555
    
    
    $
    7,505Less: allowance for doubtful accounts
    
    
    (549
    )
    
    
    (491
    )Accounts receivable from collectibles operations, net
    
    $
    7,006
    
    
    $
    7,014
   Year Ended
    
    
    Year EndedJune 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Beginning Balance
    
    $
    (521
    )
    
    $
    (509
    )Provision for loss
    
    
    (440
    )
    
    
    (66
    )Charge off to reserve
    
    
    39
    
    
    
    132Foreign currency exchange rate charges
    
    
    54
    
    
    
    (78
    )Ending Balance
    
    $
    (868
    )
    
    $
    (521
    )
 F-23




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##### Table of Contents



6. INVENTORIES
  June 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Trading segment inventory
    
    $
    92,043
    
    
    $
    96,401Less: provision for loss
    
    
    (104
    )
    
    
    (104
    )Trading, net
    
    $
    91,939
    
    
    $
    96,297Collectibles segment inventory
    
    $
    26,719
    
    
    $
    45,417Less: provision for loss
    
    
    (3,004
    )
    
    
    (10,764
    )Collectibles, net
    
    $
    23,715
    
    
    $
    34,653Total inventory, gross
    
    $
    118,762
    
    
    $
    141,818Less: provision for loss
    
    
    (3,108
    )
    
    
    (10,868
    )Net inventory
    
    
    115,654
    
    
    
    130,950Less: current inventory
    
    
    (115,654
    )
    
    
    (130,653
    )Long term inventory
    
    $
    
    
    
    $
    297
 F-24




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##### Table of Contents



Year Ended
    
    
    Year EndedJune 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Beginning balance
    
    $
    (10,868
    )
    
    $
    (11,204
    )Provision for loss
    
    
    (1,356
    )
    
    
    (322
    )Charge off to reserve
    
    
    7,867
    
    
    
    2,222Foreign currency exchange rate changes
    
    
    1,249
    
    
    
    (1,564
    )Ending balance
    
    $
    (3,108
    )
    
    $
    (10,868
    )
 7. PROPERTY AND EQUIPMENT
  June 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Equipment
    
    $
    2,753
    
    
    $
    3,465Furniture and fixtures
    
    
    1,458
    
    
    
    1,333Vehicles
    
    
    207
    
    
    
    304Software
    
    
    1,448
    
    
    
    1,802Leasehold improvements
    
    
    1,559
    
    
    
    1,7297,425
    
    
    
    8,633Less: accumulated depreciation and amortization
    
    
    (4,757
    )
    
    
    (6,866
    )Net property and equipment
    
    $
    2,668
    
    
    $
    1,767
   8. GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS
 Goodwill
  June 30, 2008
    
    
    Additions and
    
    
    
    
    
    
    June 30, 2009(in thousands)
    
    
    Adjustments
    
    
    Impairments
    
    
    (in thousands)Trading
    
    $
    4,884
    
    
    $
    
    
    
    $
    
    
    
    $
    4,884Collectibles
    
    
    1,641
    
    
    
    215
    
    
    
    (780
    )
    
    
    1,076Total
    
    $
    6,525
    
    
    $
    215
    
    
    $
    (780
    )
    
    $
    5,960
 June 30, 2007
    
    
    Additions and
    
    
    
    
    
    
    June 30, 2008(in thousands)
    
    
    Adjustments
    
    
    Impairments
    
    
    (in thousands)Trading
    
    $
    4,884
    
    
    $
    
    
    
    $
    
    
    
    $
    4,884Collectibles
    
    
    1,641
    
    
    
    
    
    
    
    
    
    
    
    1,641Total
    
    $
    6,525
    
    
    $
    
    
    
    $
    
    
    
    $
    6,525
 F-25




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##### Table of Contents



Other Purchased Intangibles
  Year Ended June 30, 2009
    
    
    Year Ended June 30, 2008Estimated
    
    
    (in thousands)
    
    
    (in thousands)Useful Lives
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Net Book
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Net Book(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Impairment
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    Impairment
    
    
    ValueTrademarks
    
    
    Indefinite
    
    $
    2,616
    
    
    $
    
    
    
    $
    (80
    )
    
    $
    2,536
    
    
    $
    2,033
    
    
    $
    
    
    
    
    
    
    
    $
    2,033Customer lists
    
    
    5 - 15
    
    
    
    9,161
    
    
    
    (3,500
    )
    
    
    
    
    
    
    5,661
    
    
    
    8,890
    
    
    
    (2,854
    )
    
    
    
    
    
    
    6,036Non-compete and other
    
    
    4
    
    
    
    2,302
    
    
    
    (2,198
    )
    
    
    
    
    
    
    104
    
    
    
    2,260
    
    
    
    (1,656
    )
    
    
    
    
    
    
    604$
    14,079
    
    
    $
    (5,698
    )
    
    $
    (80
    )
    
    $
    8,301
    
    
    $
    13,183
    
    
    $
    (4,510
    )
    
    
    
    
    
    $
    8,673
   Years ending June 30:
    
    (in thousands)2010
    
    $
    7492011
    
    
    6462012
    
    
    5752013
    
    
    5162014
    
    
    498Thereafter
    
    
    2,781Total
    
    $
    5,765
 9. ACCOUNTS PAYABLE
  June 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Trade payable to customers
    
    $
    5,696
    
    
    $
    13,330Advances from customers
    
    
    5,834
    
    
    
    6,165Net liability on margin accounts (Notes 12 and 18)
    
    
    3,041
    
    
    
    7,872Due to brokers
    
    
    648
    
    
    
    844Derivative liabilities  open purchase and sales commitments (Notes 12 and 18)
    
    
    5,356
    
    
    
    Derivative liabilities  forward contracts (Notes 12 and 18)
    
    
    
    
    
    
    531Other accounts payable
    
    
    213
    
    
    
    828Accounts payable
    
    $
    20,788
    
    
    $
    29,570
 10. INCOME TAXES
  Year Ended
    
    
    Year EndedJune 30,
    
    
    June 30,2009
    
    
    2008(in thousands)
    
    
    (in thousands)Current:Federal
    
    $
    1,845
    
    
    $
    State
    
    
    869
    
    
    
    51Foreign
    
    
    435
    
    
    
    1,162Total current tax expense (benefit)
    
    
    3,149
    
    
    
    1,213Deferred:Federal
    
    
    (61
    )
    
    
    5State
    
    
    42
    
    
    
    63Foreign
    
    
    7
    
    
    
    (51
    )Total deferred tax expense (benefit)
    
    
    (12
    )
    
    
    17Income tax expense
    
    $
    3,137
    
    
    $
    1,230
 F-26




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##### Table of Contents



Year Ended
    
    
    Year EndedJune 30,
    
    
    June 30,2009
    
    
    2008(in thousands)
    
    
    (in thousands)U.S.
    
    $
    13,173
    
    
    $
    (17,895
    )Foreign
    
    
    1,099
    
    
    
    5,154Income / (loss) before income taxes and minority interests
    
    $
    14,272
    
    
    $
    (12,741
    )
  Year Ended
    
    
    Year EndedJune 30,
    
    
    June 30,2009
    
    
    2008 (as restated)(in thousands)
    
    
    (in thousands)Deferred tax assets:Inventory
    
    $
    1,149
    
    
    $
    1,854Unrealized gain on futures contracts
    
    
    
    
    
    
    341Unrealized loss on open purchase and sales commitments
    
    
    1,444
    
    
    
    Investments
    
    
    263
    
    
    
    1,512Stock-based compensation
    
    
    235
    
    
    
    1,190Intangible assets
    
    
    1,797
    
    
    
    1,780Property, plant & equipment
    
    
    84
    
    
    
    205Accrued compensation
    
    
    1,399
    
    
    
    347Legal settlement
    
    
    2,611
    
    
    
    3,400Net operating loss carryforwards
    
    
    1,945
    
    
    
    2,900Charitable contribution carryforward
    
    
    2,894
    
    
    
    3,127Foreign tax credit carryforwards
    
    
    6,499
    
    
    
    2,968Accrual to cash adjustment
    
    
    1,295
    
    
    
    1,135Other
    
    
    844
    
    
    
    408Total deferred tax assets
    
    
    22,459
    
    
    
    21,167Less: valuation allowance
    
    
    (13,984
    )
    
    
    (14,066
    )Total deferred tax assets after valuation allowance
    
    
    8,475
    
    
    
    7,101Deferred tax liabilities:Inventory
    
    
    742
    
    
    
    856Unrealized gain on open purchase and sales contracts
    
    
    
    
    
    
    431Unrealized gain on futures contracts
    
    
    4,152
    
    
    
    Intangible assets
    
    
    136
    
    
    
    Unrepatriated foreign earnings
    
    
    738
    
    
    
    851Withholding tax on foreign earnings
    
    
    1,177
    
    
    
    1,170Unrealized foreign exchange gain
    
    
    3,241
    
    
    
    5,308Total deferred tax liabilities
    
    
    10,186
    
    
    
    8,616Net deferred tax (liabilities)
    
    $
    (1,711
    )
    
    $
    (1,515
    )
     F-27




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##### Table of Contents



2009
    
    
    2008(in thousands)
    
    
    (in thousands)Amount computed at statutory rate
    
    $
    4,852
    
    
    $
    (4,332
    )State income tax, net of federal tax benefit
    
    
    1,132
    
    
    
    (1,040
    )U.S. vs. foreign tax rate differential
    
    
    68
    
    
    
    (565
    )Non-deductible expenses
    
    
    81
    
    
    
    55Tax on unrepatriated foreign earnings
    
    
    (10
    )
    
    
    184Change in valuation allowance
    
    
    (3,298
    )
    
    
    7,159Other
    
    
    312
    
    
    
    (231
    )$
    3,137
    
    
    $
    1,230
  UTBs
    
    
    FIN 48 Payable(in thousands)
    
    
    (in thousands)Balance as of July 1, 2007
    
    $
    26,417
    
    
    $
    2,071Increase as a result of tax positions taken during the current period
    
    
    
    
    
    
    Decrease as a result of statute of limitations expirations during the current period
    
    
    
    
    
    
    Increase as a result of additional interest and penalties during the current period
    
    
    
    
    
    
    120Balance as of June 30, 2008
    
    
    26,417
    
    
    
    2,191Increase as a result of tax positions taken during the current period
    
    
    170
    
    
    
    170Decrease as a result of statute of limitations expirations during the current period
    
    
    
    
    
    
    Increase as a result of additional interest and penalties during the current period
    
    
    
    
    
    
    114Balance as of June 30, 2009
    
    $
    26,587
    
    
    $
    2,475
   11. FINANCING AGREEMENTS
    F-28




---



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F-29




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##### Table of Contents



12. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
        June 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Trading Inventory, net
    
    $
    91,939
    
    
    $
    96,297Less unhedgable inventory:Commemorative coins
    
    
    (3,620
    )
    
    
    (1,358
    )Premium on metals position
    
    
    (1,477
    )
    
    
    (719
    )Subtotal
    
    
    86,842
    
    
    
    94,220Commitments at market:Open inventory purchase commitments
    
    
    132,932
    
    
    
    105,163Open inventory sale commitments
    
    
    (38,370
    )
    
    
    (49,900
    )Margin sale commitments
    
    
    (7,358
    )
    
    
    (18,714
    )Inventory borrowed from suppliers
    
    
    (15,100
    )
    
    
    (18,789
    )Advances on industrial metals
    
    
    700
    
    
    
    385Inventory subject to price risk
    
    
    159,646
    
    
    
    112,365Inventory subject to derivative financial instruments:Precious metals forward contracts at market values
    
    
    27,731
    
    
    
    30,154Precious metals futures contracts at market values
    
    
    132,651
    
    
    
    82,431Total market value of derivative financial instruments
    
    
    160,382
    
    
    
    112,585Net inventory subject to price risk
    
    $
    (736
    )
    
    $
    (220
    )
 F-30




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##### Table of Contents



13. RELATED PARTY TRANSACTIONS
  14. MINORITY INTERESTS
   June 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Auctentia 20% interest in Spectrum PMI
    
    $
    9,167
    
    
    $
    5,820Winter Games Bullion Ventures, LLC. 50% outside interest
    
    
    1,147
    
    
    
    495Total
    
    $
    10,314
    
    
    $
    6,315
  Year Ended
    
    
    Year EndedJune 30, 2009
    
    
    June 30, 2008(in thousands)
    
    
    (in thousands)Auctentia 20% interest in Spectrum PMI
    
    $
    3,346
    
    
    $
    628Winter Games Bullion Ventures, LLC. 50% interest
    
    
    653
    
    
    
    45Total
    
    $
    3,999
    
    
    $
    673The following table summarizes the balance sheet of WGBV:June 30, 2009
    

June 30, 2008(in thousands)
    
    
    (in thousands)Cash
    
    $
    154
    
    
    $
    33Receivables
    
    
    21
    
    
    
    5Inventories
    
    
    3,516
    
    
    
    1,688Total assets
    
    $
    3,691
    
    
    $
    1,726Accounts payable
    
    $
    1,397
    
    
    $
    738Members equity
    
    
    2,294
    
    
    
    988Total liabilities and members equity
    
    $
    3,691
    
    
    $
    1,726The following table summarizes the statements of income of WGBV:For
the
    

For
theyear
ended
    

year
endedJune 30, 2009
    

June 30, 2008(in thousands)
    
    
    (in thousands)Sales
    
    $
    46,234
    
    
    $
    227Cost of products sold
    
    
    44,012
    
    
    
    89Gross profit
    
    
    2,222
    
    
    
    138Operating expenses
    
    
    916
    
    
    
    49Net income
    
    $
    1,306
    
    
    $
    89
 15. COMMITMENTS AND CONTINGENCIES
 Operating Leases
  OperatingLeasesFor years ending June 30:
    
    (in thousands)2010
    
    
    1,2812011
    
    
    1,1902012
    
    
    4832013
    
    
    2392014
    
    
    Total future minimum lease payments
    
    $
    3,193
 F-31




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##### Table of Contents



Contractual Obligations
   Consulting, Employment and Non-Compete Agreements
  Executive Severance Commitments
  Employee Benefit Plans
  Restricted Capital of Foreign Subsidiaries
  Registration Rights
  Legal Proceedings
 Ongoing Legal Proceedings Against Certain of the Companys Former Officers and Directors Relating
to the Companys Transactions with Afinsa
 Spanish Criminal Investigation
  F-32




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##### Table of Contents



IRS and New York State Tax Audits
   Tax Investigation in Spain
  SEC Action
   F-33




---



##### Table of Contents



Greg Manning v. Spectrum Group International, Inc.
    F-34




---



##### Table of Contents



Securities Class Action and Shareholder Derivative Lawsuit
 In Re Escala Group, Inc.
Derivative Litigation, In re Escala Group, Inc. Securities Litigation
       Seymour
Ehrenpreis v. Nutmeg Stamps, et al
  16. STOCKHOLDERS EQUITY
 Stock Option Plan
  F-35




---



##### Table of Contents



Employee Stock Options.
  WeightedAverageWeighted
    
    
    
    
    
    
    per shareAverage
    
    
    Intrinsic Value
    
    
    Grant DateOptions
    
    
    Exercise Price
    
    
    (in thousands)
    
    
    Fair ValueOutstanding at June 30, 2007
    
    
    921,075
    
    
    $
    6.10
    
    
    $
    142
    
    
    $
    3.12Granted through stock option plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (307,750
    )
    
    
    6.01
    
    
    
    (28
    )
    
    
    4.46Outstanding at June 30, 2008
    
    
    613,325
    
    
    
    6.14
    
    
    
    114
    
    
    
    4.69Granted through stock option plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (9,000
    )
    
    
    9.57
    
    
    
    (10
    )
    
    
    8.68Outstanding at June 30, 2009
    
    
    604,325
    
    
    
    6.09
    
    
    $
    104
    
    
    
    4.63Shares exercisable at June 30, 2008
    
    
    610,701
    
    
    
    6.12
    
    
    $
    114
    
    
    
    4.67Shares exercisable at June 30, 2009
    
    
    604,325
    
    
    
    6.09
    
    
    $
    104
    
    
    
    4.63
  Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    Weighted
    
    
    
    
    
    
    WeightedExercise Price
    
    
    Number of
    
    
    Average
    
    
    Average
    
    
    Number of
    
    
    AverageRanges
    
    
    Shares
    
    
    Remaining
    
    
    Exercise
    
    
    Shares
    
    
    ExerciseFrom
    
    To
    
    
    Outstanding
    
    
    Contractual Life
    
    
    Price
    
    
    Exercisable
    
    
    Price$
    1.00
    
    $
    5.00
    
    
    
    391,250
    
    
    
    3.8
    
    
    $
    2.29
    
    
    
    391,250
    
    
    $
    2.295.01
    
    
    10.00
    
    
    
    26,200
    
    
    
    4.4
    
    
    
    8.96
    
    
    
    26,200
    
    
    
    8.9610.01
    
    
    15.00
    
    
    
    186,875
    
    
    
    4.8
    
    
    
    13.65
    
    
    
    186,875
    
    
    
    13.65604,325
    
    
    
    4.10
    
    
    
    6.09
    
    
    
    604,325
    
    
    
    6.09
   WeightedAverage shareShares
    
    price at grant dateOutstanding as of June 30, 2007
    
    
    50,000
    
    
    $
    2.86Shares issued
    
    
    366,559
    
    
    
    2.66Shares exercised
    
    
    (73,213
    )
    
    
    2.88Shares forfeited
    
    
    (53,334
    )
    
    
    2.85Shares withheld for employee taxes
    
    
    (10,120
    )
    
    
    2.86Outstanding as of June 30, 2008
    
    
    279,892
    
    
    
    2.64
 F-36




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##### Table of Contents



WeightedAverage shareShares
    
    price at grant dateShares issued
    
    
    531,548
    
    
    
    2.51Shares exercised
    
    
    (99,838
    )
    
    
    2.66Shares forfeited
    
    
    Shares withheld for employee taxes
    
    
    (34,920
    )
    
    
    2.18Outstanding at June 30, 2009
    
    
    676,682
    
    
    
    2.54Vested but unissued  end of year
    
    
    123,199
 Stock Appreciation Rights.
 Certain Anti-Takeover Provisions
  17. SEGMENT AND GEOGRAPHIC INFORMATION
   Year Ended June 30,
    
    
    Year Ended June 30,2009
    
    

2008(in thousands)
    
    
    (in thousands)
(as restated)Revenue:Trading
    
    $
    4,126,909
    
    
    $
    2,681,031Collectibles:Coins
    
    
    133,633
    
    
    
    121,753Stamps
    
    
    31,024
    
    
    
    51,066Others
    
    
    1,776
    
    
    
    3,131Total Collectibles
    
    
    166,433
    
    
    
    175,950Total revenue
    
    $
    4,293,342
    
    
    $
    2,856,981
 Year Ended June 30,
    
    
    Year Ended June 30,2009
    
    
    2008(in thousands)
    
    
    (in thousands)
(as restated)Revenue by Geographic Region:United States
    
    $
    4,279,038
    
    
    $
    2,832,011Asia Pacific
    
    
    4,624
    
    
    
    2,427Europe
    
    
    9,680
    
    
    
    22,543Total revenue
    
    $
    4,293,342
    
    
    $
    2,856,981
 Year Ended June 30,
    
    
    Year Ended June 30,2009
    
    
    2008(in thousands)
    
    
    (in thousands)
(as restated)Operating income (loss):Trading
    
    $
    25,572
    
    
    $
    5,863Collectibles
    
    
    (7,594
    )
    
    
    5,212Corporate expenses
    
    
    (10,294
    )
    
    
    (20,466
    )Operating income (loss)
    
    $
    7,684
    
    
    $
    (9,391
    )
 F-37




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##### Table of Contents



Year Ended June 30,
    
    
    Year Ended June 30,2009
    
    
    2008(in thousands)
    
    
    (in thousands)Depreciation and amortization:TradingDepreciation and amortization
    
    $
    997
    
    
    $
    989CollectiblesDepreciation and amortization
    
    $
    802
    
    
    $
    922Impairment
of goodwill and intangibles
    
    
    860
    
    
    
    $
    1,662
    
    
    $
    922
 F-38




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##### Table of Contents



June 30,
    
    
    June 30,2009
    
    
    2008Inventories by segment/geographic region:
    
    (in thousands)
    
    
    (in thousands)Trading:United States
    
    $
    91,939
    
    
    $
    96,297Collectibles:United States
    
    
    22,256
    
    
    
    29,576Europe
    
    
    1,277
    
    
    
    4,981Asia
    
    
    182
    
    
    
    96Total Collectibles
    
    
    23,715
    
    
    
    34,653Total inventories
    
    $
    115,654
    
    
    $
    130,950
 June 30,
    
    
    June 30,2009
    
    
    2008Total assets by segment/geographic region:
    
    (in thousands)
    
    
    (in thousands)Trading:United States
    
    $
    151,986
    
    
    $
    136,638Collectibles:United States
    
    
    38,485
    
    
    
    54,360Europe
    
    
    19,791
    
    
    
    28,772Asia
    
    
    1,398
    
    
    
    2,131Total Collectibles
    
    
    59,674
    
    
    
    85,263Corporate
and Other
    
    
    6,489
    
    
    
    10,754Total assets
    
    $
    218,149
    
    
    $
    232,655
 June 30,
    
    
    June 30,2009
    
    
    2008Total long term assets by segment/geographic region:
    
    (in thousands)
    
    
    (in thousands)Trading:United States
    
    $
    10,451
    
    
    $
    11,808Collectibles:United States
    
    
    4,733
    
    
    
    5,325Europe
    
    
    638
    
    
    
    618Asia
    
    
    152
    
    
    
    154Total Collectibles
    
    
    5,523
    
    
    
    6,097Corporate and Other
    
    
    4,505
    
    
    
    4,533Total long term assets
    
    $
    20,479
    
    
    $
    22,438
 18. Fair Value Measurements
 Fair Value Measurements
  
    
    Defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date, and establishes a framework for measuring fair value;
 
    
    Establishes a three-level hierarchy for fair value measurements based upon the
transparency of inputs to the valuation of an asset or liability as of the measurement
date;
 
    
    Nullifies the guidance in Emerging Issues Task Force Issue 02-3, Issues Involved in
Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in
Energy Trading and Risk Management Activities, which required the deferral of profit at
inception of a transaction involving a derivative financial instrument in the absence of
observable data supporting the valuation technique;
 
    
    Eliminates large position discounts for financial instruments quoted in active markets
and requires consideration of the Companys creditworthiness when valuing liabilities; and
 F-39




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##### Table of Contents




    
    Expands disclosures about instruments measured at fair value.
 Valuation Hierarchy
  
    
    Level 1  inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets.
 
    
    Level 2  inputs to the valuation methodology include quoted prices for similar assets
and liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the financial
instrument.
    
    Level 3  inputs to the valuation methodology are unobservable and significant to the
fair value measurement.
  Assets and Liabilities Measured at Fair Value on a Recurring Basis
 June 30, 2009Quoted Price inActive Markets forIdentical
    
    
    Significant Other
    
    
    SignificantInstruments
    
    
    Observable Inputs
    
    
    Unobservable(in thousands)
    
    (Level 1)
    
    
    (Level 2)
    
    
    Inputs (Level 3)
    
    
    Total BalanceAssets:Commodities
    
    $
    88,319
    
    
    $
    
    
    
    $
    
    
    
    $
    88,319Marketable Securities
    
    
    914
    
    
    
    
    
    
    
    
    
    
    
    914Derivative assets  futures contracts
    
    
    
    
    
    
    10,875
    
    
    
    
    
    
    
    10,875Derivative assets  forward contracts
    
    
    
    
    
    
    1,726
    
    
    
    
    
    
    
    1,726Total assets valued at fair value:
    
    $
    89,233
    
    
    $
    12,601
    
    
    $
    
    
    
    $
    101,834Liabilities:Liability on borrowed metals
    
    $
    (15,100
    )
    
    $
    
    
    
    $
    
    
    
    $
    (15,100
    )Liability on margin accounts
    
    
    (3,041
    )
    
    
    
    
    
    
    
    
    
    
    (3,041
    )Derivative liabilities  open sales
and purchase commitments
    
    
    
    
    
    
    (5,356
    )
    
    
    
    
    
    
    (5,356
    )Total liabilities valued at fair value:
    
    $
    (18,141
    )
    
    $
    (5,356
    )
    
    $
    
    
    
    $
    (23,497
    )
  Marketable Securities
  Commodities
  Derivatives
  F-40




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##### Table of Contents



Margin Liability
  19. SUBSEQUENT EVENTS
     F-41




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 Not applicable.
 
 ITEM 9A(T). CONTROLS AND PROCEDURES
 (a) Evaluation of Disclosure Controls and Procedures
    
    
    We have formally adopted our Disclosure Controls and Procedures effective June 2, 2009
which is designed specifically to ensure that we record, process, summarize and report in
our public disclosures, including SEC reports, all information (a) required to be disclosed,
(b) within the time periods specified and (c) pursuant to processes that enable our
principal executive and financial officers to make timely decisions regarding disclosure.
    
    We have formed a Disclosure Committee with the mission of implementing internal policies
and procedures to review the accuracy of all information released to the public and
disclosed in our SEC filings.
    
    As prescribed within our Disclosure Controls and Procedures, our Audit Committee will
meet no less than quarterly to review (a) accounting considerations and financial results,
(b) drafts of periodic reports, (c) drafts of financial press releases and (4) hotline
reports regarding potential disclosure items
    
    Our Chief Financial Officer conducts a formal balance sheet and financial review with
executive operating and financial managers for each operating division and with corporate
accounting staff.
 (b) Managements Report on Internal Control over Financial Reporting
    40




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##### Table of Contents



Controls over period-end financial reporting were not designed effectively.
 The Company operated with inadequate and insufficient accounting and finance resources to ensure
timely and reliable financial reporting within the North American stamp division of the
Collectibles segment.
 The Company did not have adequate accounting policies that were formally and effectively
communicated to the Companys accounting and finance resources.
  The Company did not design formal controls to ensure that the financial positions and results of
operations of divisions were effectively consolidated on a timely basis.
 The Company did not consistently maintain documentation as evidence to verify that controls were
operating effectively.
 Transactions were not consistently approved by the appropriate level of management within the North
American stamp division of the Collectibles segment.
 41




---



##### Table of Contents



Proper segregation of duties was not maintained over the accounting functions within our
Collectibles operations.
 Management of the North American stamp division has not designed controls to ensure the proper
accounting for inventory.
 Management has not designed controls to ensure that the provision for income taxes is properly
prepared on a timely basis.
   Remediation of Material Weaknesses
  
    
    Assuming a more active role in implementing an effective control environment over
financial reporting to ensure reliable financial reporting going forward. This oversight
will include establishing formalized accounting policies and procedures across all divisions
as well as formalizing a financial reporting timeline for submission of financial results
for all divisions. Additionally, management will standardize the method and content of the
financial reports submitted by the divisions to ensure consistency and reliability.
    
    Enhance the corporate accounting group, which did not exist prior to 2006. The corporate
accounting group is being established to serve as a function separate from the operating
divisions and has the responsibility, among other things, for consolidating those results
and performing certain entity level accounting functions necessary to prepare consolidated
financial results. Since June 30, 2008, new staff have been hired into key accounting
functions within corporate accounting in order to elevate the depth of skills within this
area. Additionally, the corporate accounting function has been relocated from Bethel, CT to
Irvine, CA.
    
    Management has begun to implement standardized reporting templates which are intended to
improve the consistency and accuracy of financial reporting between the operating divisions
and corporate. This should compress the overall time required to complete the financial
closing process.
    
    The North American stamp division has been relocated to Irvine, CA, which will improve
the Companys ability to effectively oversee and manage the operations. This will also
provide management the opportunity to hire new accounting personnel with the requisite
skills to properly record transactions for this division and adequately control financial
reporting.
 42




---



##### Table of Contents




    
    Management intends to implement a finance and accounting policy manual that communicates
all relevant information related to significant accounting policies and required procedures
which heretofore were understood at best informally and which have contributed to the
material weaknesses identified.
    
    Management is implementing formal monthly accounting closing meetings wherein divisional
and corporate financial staff review results and accounting policy issues in detail.
    
    Increase in staffing levels by adding additional resources and consultants, with an
emphasis on completing the restatement process and developing reliable financial reporting
controls and procedures going forward.
    
    Creating an internal audit function whose primary focus will be to monitor disclosure and
financial reporting controls and to report its findings directly to the Audit Committee of
the Board of Directors.
    
    Hired a controller in the coin division in the Collectibles segment specifically to
address the segregation of duties conflicts in that division.
  
 ITEM 9B. OTHER MATTERS.
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   Name
    
    Age
    
    Position(s)Antonio Arenas
    
    
    53
    
    
    Executive Chairman and DirectorGregory N. Roberts
    
    
    47
    
    
    Chief Executive Officer, President and DirectorThor Gjerdrum
    
    
    42
    
    
    Chief Financial Officer and Executive Vice PresidentCarol Meltzer
    
    
    50
    
    
    Chief Administrative Officer, Executive Vice President,
General Counsel and Corporate SecretaryJeffrey D. Benjamin
    
    
    48
    
    
    DirectorJames M. Davin
    
    
    63
    
    
    DirectorGeorge Lumby
    
    
    64
    
    
    DirectorJohn Moorhead
    
    
    57
    
    
    DirectorChristopher W. Nolan, Sr.
    
    
    44
    
    
    Director
 Antonio Arenas
 43




---



##### Table of Contents



Gregory N. Roberts
 Thor Gjerdrum
 Carol Meltzer
 Jeffrey D. Benjamin
 James M. Davin
 George Lumby
 John (Jay) Moorhead
 Christopher W. Nolan, Sr .
  Compliance
  44




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##### Table of Contents



Code of Ethics
 www.spectrumgi.com
 
 Audit Committee
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    The following documents are filed as part of this report:
 1.
    
    Financial StatementsThe information called for by this item is incorporated
herein by reference to pages F-1 through F-41 of this report.2.
    
    Financial Statement SchedulesNone3.
    
    Exhibits required to be filed by Item 601 of Regulation S-KThe information called for by this item is incorporated herein by reference to the
Exhibit Index in this report.
 45




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##### Table of Contents



SIGNATURES
  Date: October 8, 2009
    
    SPECTRUM GROUP INTERNATIONAL, INC.By:
    
    /s/ Gregory N. RobertsName: Gregory N. RobertsTitle: President and Chief Executive Officer
  Signatures
    
    Title(s)
    
    Date/s/ Antonio Arenas

Antonio Arenas
    
    Chairman of the Board and Executive Chairman
    
    October 8, 2009/s/ Gregory N. Roberts

Gregory N. Roberts
    
    President, Chief Executive Officer and
Director (Principal Executive Officer)
    
    October 8, 2009/s/ Thor Gjerdrum

Thor Gjerdrum
    
    Chief Financial Officer and Executive Vice

President (Principal Financial Officer)
    
    October 8, 2009/s/ Jeffrey D. Benjamin

Jeffrey D. Benjamin
    
    Director
    
    October 8, 2009/s/ James M. Davin

James M. Davin
    
    Director
    
    October 8, 2009/s/ John Moorhead

John Moorhead
    
    Director
    
    October 8, 2009/s/ George Lumby

George Lumby
    
    Director
    
    October 8, 2009/s/ Christopher W. Nolan, Sr.

Christopher W. Nolan, Sr.
    
    Director
    
    October 8, 2009
 46




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##### Table of Contents



EXHIBIT INDEX
 Regulation S-KExhibit TableItem No.
    
    Description of Exhibit3.1.1
    
    Articles of Incorporation of the Registrant. Filed herewith.3.1.2
    
    Certificate of Ownership and Merger
of Escala Group, Inc. into and with Greg Manning Auctions, Inc.
Incorporated by reference to Exhibit 3.1 of the Companys
Current Report on Form 8-K filed October 3, 2005, Commission File
No.
1-11988.3.1.3
    
    Certificate of Ownership and Merger
of Spectrum Group International, Inc. with and into Escala Group,
Inc. Incorporated by reference to Exhibit 3.1 of the Companys
Current Report on Form 8-K filed on May 29, 2009, Commission File No.
1-11988.3.2
    
    Bylaws of Registrant. Filed herewith.10.1
    
    1997 Stock Incentive Plan. Filed herewith.10.2
    
    Employment Agreement between Registrant and Greg Roberts, dated as of December 28,
2007. Incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form
8-K filed on January 15, 2008, Commission File
No. 1-11988. *10.3
    
    Amendment to Employment Agreement between Registrant and Greg Roberts, dated as of
August 12, 2008. Incorporated by reference to Exhibit 10.1 of the Companys Current Report
on Form 8-K filed August 27, 2008, Commission File No. 1-11988. *10.4
    
    Employment Agreement between A-Mark Precious Metals, Inc. and Thor C. Gjerdrum, dated
July 2005. Filed herewith. *10.5
    
    Employment Agreement between A-Mark Precious Metals, Inc. and Rand LeShay, dated July
2005. Filed herewith. *10.6
    
    Amendment to Employment Agreement between Registrant and Carol Meltzer, dated August
12, 2008. Incorporated by reference to Exhibit 10.2 of the Companys Current Report on
Form 8-K filed August 27, 2008, Commission File No. 1-11988. *10.7
    
    Form of Restricted Stock Purchase Agreement for Employees under the 1997 Stock
Incentive Plan. Filed herewith.*10.8
    
    Registration Rights Agreement, dated as of September 8, 2003, between Registrant and
Auctentia, S.L. Incorporated by reference to Appendix E to the Companys Definitive Proxy
Statement filed August 13, 2003, Commission File No. 1-11988.10.9
    
    Agreement between Registrant and Virginia Retirement System, as Lead Plaintiff, et
al, dated May 30, 2008. Incorporated by reference to Exhibit 10.1 of the Companys
Current Report on Form 8-K filed June 6, 2008, Commission File No. 1-11988.10.10
    
    Consent of Escala Group, Inc. Incorporated by reference to Exhibit 10.1 of the
Companys Current Report on Form 8-K filed March 25, 2009, Commission File No. 1-11988.14
    
    Code of Ethics for Senior Financial
and Other Officers. Incorporated by reference to Exhibit 14 of the
Companys Current Report on Form 8-K filed on June 30, 2009,
Commission File No. 1-11988.21
    
    Subsidiaries of the Registrant. Filed herewith.31.1
    
    Certification by the Chief Executive Officer. Filed herewith31.2
    
    Certification by the Chief Financial Officer. Filed herewith.32.1
    
    Certification by Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. Filed herewith.32.2
    
    Certification by Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. Filed herewith.
 
 *
    
    Identifies Exhibit that consists of or includes a management contract or compensatory plan or arrangement.