Temporary equity classification is required for redeemable instruments for which redemption triggers are outside of the issuer’s control. ETFS Capital has the right to redeem all the Preferred Shares specified to be converted during the period of time specified in the Certificate of Designations in the event that: (a) the number of shares of the Company’s common stock authorized by its certificate of incorporation is insufficient to permit the Company to convert all of the Preferred Shares requested by ETFS Capital to be converted; or (b) ETFS Capital does not, upon completion of a change of control of the Company, receive the same amount per Preferred Share as it would have received had each outstanding Preferred Share been converted into common stock immediately prior to the change of control. However, the Company will not be obligated to make any such redemption payments to the extent such payments would be a breach of any covenant or obligation the Company owes to any of its secured creditors or is otherwise prohibited by applicable law.false2020Q10000880631--12-31The gross unrecognized tax benefits were accrued in British pounds sterling.Gains/(losses) arise due to (decreases)/increases in the forward-looking price of gold and the magnitude of any gain or loss is highly correlated to the magnitude of the change in the forward-looking price of gold. See Note 4 for significant unobservable assumption and a reconciliation of changes in the deferred consideration balances.Excludes participating securities as the Company reported a net loss for the period.Recorded as an income tax benefit along with an equal and offsetting amount recorded in other losses, net, to recognize a reduction in the indemnification asset. During the three months ended March 31, 2019 a $4,309 income tax benefit was recorded along with an equal and offsetting amount in other losses, net.WTJ also recognized an impairment expense of $572 in connection with the termination of its office lease on March 31, 2019Derecognized upon the sale of the Company’s Canadian ETF business (Note 24). 0000880631 2020-03-31 0000880631 2019-12-31 0000880631 2020-01-01 2020-03-31 0000880631 2019-01-01 2019-03-31 0000880631 2019-01-01 2019-12-31 0000880631 2016-05-21 2016-06-20 0000880631 2018-04-11 0000880631 2019-03-31 0000880631 2020-04-24 0000880631 2018-12-31 0000880631 wetf:TwoFinancialInstitutionsMember 2020-03-31 0000880631 wetf:FederalAgencyMember 2020-03-31 0000880631 wetf:WisdomtreeETFMember 2020-03-31 0000880631 us-gaap:SeriesAPreferredStockMember 2020-03-31 0000880631 wetf:ThesysGroupIncMember 2020-03-31 0000880631 wetf:TradingSecuritiesMember 2020-03-31 0000880631 wetf:AdvisorEngineMember us-gaap:ConvertiblePreferredStockMember 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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form
10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended March 31, 2020
or
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
001-10932
 
WisdomTree Investments, Inc.
(Exact name of registrant as specified in its charter)
 
     
Delaware
 
13-3487784
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
     
245 Park Avenue, 35
th
Floor
New York, New York
 
10167
(Address of principal executive offices)
 
(Zip Code)
 
 
 
212-801-2080
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  
    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  
    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
             
Large accelerated filer
 
 
Accelerated filer
 
             
Non-accelerated
filer
 
 
Smaller reporting company
 
             
 
 
Emerging growth company
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  
    No  
Securities registered pursuant to Section 12(b) of the Exchange Act:
         
Title of each class
 
Trading 
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, $0.01 par value
 
WETF
 
The NASDAQ Stock Market LLC
 
 
 
As of April 2
4
, 2020, there were 156,424,840 shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.
 
 

Table of Contents
WISDOMTREE INVESTMENTS, INC.
Form
10-Q
For the Quarterly Period Ended March 31, 2020
TABLE OF CONTENTS
         
 
Page
Number
 
   
4
 
         
   
4
 
         
   
31
 
         
   
46
 
         
   
47
 
         
   
47
 
         
   
47
 
         
   
47
 
         
   
48
 
         
   
49
 
         
   
49
 
         
   
49
 
         
   
50
 
Unless otherwise indicated, references to “the Company,” “we,” “us,” “our” and “WisdomTree” mean WisdomTree Investments, Inc. and its subsidiaries.
WisdomTree
®
and Modern Alpha
®
are trademarks of WisdomTree Investments, Inc. in the United States and in other countries. All other trademarks are the property of their respective owners.
2

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect our results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the section entitled “Risk Factors” included in this Report and in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2019. If one or more of these or other risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission, or the SEC, as exhibits to this Report, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.
In particular, forward-looking statements in this Report may include statements about:
  the
COVID-19
pandemic;
 
 
 
  anticipated trends, conditions and investor sentiment in the global markets and exchange traded products, or ETPs;
 
 
 
  anticipated levels of inflows into and outflows out of our ETPs;
 
 
 
  our ability to deliver favorable rates of return to investors;
 
 
 
  competition in our business;
 
 
 
  our ability to develop new products and services;
 
 
 
  our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;
 
 
 
  our ability to successfully operate and expand our business in
non-U.S.
markets; and
 
 
 
  the effect of laws and regulations that apply to our business.
 
 
 
The forward-looking statements in this Report represent our views as of the date of this Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this Report.
3

Table of Contents
PART I: FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
 
 
 
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)
                 
 
March 31,
2020
 
 
December 31,
2019
 
 
(unaudited)
 
 
 
Assets
 
 
 
 
 
 
Current assets:
   
     
 
Cash and cash equivalents
  $
68,429
    $
74,972
 
Securities owned, at fair value (including $19,636 and $16,886 invested in WisdomTree ETFs at March 31, 2020 and December 31, 2019, respectively)
   
20,261
     
17,319
 
Accounts receivable (including $20,169 and $25,667 due from related parties at March 31, 2020
and
December 31,
2019, respectively)
   
22,728
     
26,838
 
Prepaid expenses
   
4,221
     
3,724
 
Other current assets
   
171
     
207
 
                 
Total current assets
   
115,810
     
123,060
 
Fixed assets, net
   
7,914
     
8,127
 
Notes receivable, net (Note 8)
   
8,500
     
28,172
 
Indemnification receivable (Note 21)
   
24,429
     
32,101
 
Securities
held-to-maturity
   
10,864
     
16,863
 
Deferred tax assets, net
   
2,863
     
7,398
 
Investments (Note 9)
   
11,192
     
11,192
 
Right of use assets – operating leases (Note 14)
   
17,680
     
18,161
 
Goodwill (Note 23)
   
85,856
     
85,856
 
Intangible assets (Note 23)
   
601,247
     
603,294
 
Other noncurrent assets
   
750
     
983
 
                 
Total assets
  $
887,105
    $
935,207
 
                 
Liabilities and stockholders’ equity
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
Current liabilities:
   
     
 
Fund management and administration payable
  $
22,053
    $
22,021
 
Compensation and benefits payable
   
3,424
     
26,501
 
Deferred consideration – gold payments (Note 11)
   
14,500
     
13,953
 
Securities sold, but not yet purchased, at fair value
   
469
     
582
 
Operating lease liabilities (Note 14)
   
3,470
     
3,682
 
Income taxes payable
   
1,284
     
3,372
 
Accounts payable and other liabilities
   
9,129
     
8,930
 
                 
Total current liabilities
   
54,329
     
79,041
 
Debt (Note 12)
   
171,548
     
175,956
 
Deferred consideration – gold payments (Note 11)
   
160,800
     
159,071
 
Operating lease liabilities (Note 14)
   
18,661
     
19,057
 
Other noncurrent liabilities (Note 21)
   
24,429
     
32,101
 
                 
Total liabilities
   
429,767
     
465,226
 
                 
Preferred stock – Series A
Non-Voting
Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding
; redemption value of $50,003 and $71,980 at March 31, 2020 and December 31, 2019, respectively (Note 13)
   
132,569
     
132,569
 
Contingencies (Note 15)
   
     
 
Stockholders’ equity
 
 
 
 
 
 
Preferred stock, par value $0.01; 2,000 shares authorized:
   
—  
     
—  
 
Common stock, par value $0.01; 250,000 shares authorized; issued and outstanding: 156,424 and 155,264 at March 31, 2020 and December 31, 2019, respectively
   
1,564
     
1,553
 
Additional
paid-in
capital
   
349,495
     
352,658
 
Accumulated other comprehensive income
   
92
     
945
 
Accumulated deficit
   
(26,382
)    
(17,744
)
                 
Total stockholders’ equity
   
324,769
     
337,412
 
                 
Total liabilities and stockholders’ equity
  $
887,105
    $
935,207
 
                 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements
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WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
                 
 
Three Months Ended March 31,
 
 
2020
 
 
2019
 
Operating Revenues:
 
 
 
 
 
 
Advisory fees
  $
62,950
    $
64,840
 
Other income
   
924
     
645
 
                 
Total revenues
   
63,874
     
65,485
 
Operating Expenses:
 
 
 
 
 
 
Compensation and benefits
   
17,295
     
21,301
 
Fund management and administration
   
14,485
     
15,166
 
Marketing and advertising
   
2,468
     
2,680
 
Sales and business development
   
3,417
     
4,422
 
Contractual gold payments (Note 11)
   
3,760
     
3,098
 
Professional and consulting fees
   
1,273
     
1,482
 
Occupancy, communications and equipment
   
1,551
     
1,618
 
Depreciation and amortization
   
256
     
269
 
Third-party distribution fees
   
1,355
     
2,400
 
Acquisition and disposition-related costs
   
383
     
313
 
Other
   
1,997
     
2,053
 
                 
Total expenses
   
48,240
     
54,802
 
                 
Operating income
   
15,634
     
10,683
 
Other Income/(Expenses):
 
 
 
 
 
 
Interest expense
   
(2,419
)    
(2,892
)
(Loss)/gain on revaluation of deferred consideration – gold payments (Note 11)
   
(2,208
)    
4,404
 
Interest income
   
163
     
779
 
Impairments (Notes 7 and 24)
   
(19,672
)    
(572
)
Other losses, net
   
(2,507
)    
(4,627
)
                 
(Loss)/income before income taxes
   
(11,009
)    
7,775
 
Income tax benefit
   
(2,371
)    
(1,049
)
                 
Net (loss)/income
  $
(8,638
)   $
8,824
 
                 
(Loss)/earnings per share – basic (Note 20)
  $
(0.06
)   $
0.05
 
                 
(Loss)/earnings per share – diluted (Note 20)
  $
(0.06
)   $
0.05
 
                 
Weighted-average common shares – basic (Note 20)
   
152,519
     
151,625
 
                 
Weighted-average common shares – diluted (Note 20)
   
152,519
     
166,811
 
                 
Cash dividends declared per common share
  $
0.03
    $
0.03
 
                 
The accompanying notes are an integral part of these consolidated financial statements
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WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Comprehensive (Loss)/Income
(In Thousands)
(Unaudited)
                 
 
Three Months Ended March 31,
 
 
2020
 
 
2019
 
Net (loss)/income
  $
(8,638
)   $
8,824
 
Other comprehensive (loss)/income
 
 
 
 
 
 
Reclassification of foreign current translation adjustment to other losses, net, upon the sale of WisdomTree Asset Management Canada, Inc. (“WTAMC” or “Canadian ETF business”) (Note 24)
   
(167
)    
—  
 
Foreign currency translation adjustment
   
(686
)    
291
 
                 
Other comprehensive (loss)/income
   
(853
)    
291
 
                 
Comprehensive (loss)/income
  $
(9,491
)   $
9,115
 
                 
The accompanying notes are an integral part of these consolidated financial statements
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WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(In Thousands)
(Unaudited)
                                                 
 
For the Three Months Ended March 31, 2020
 
 
Common Stock
   
Additional
Paid-In
Capital
 
 
Accumulated
Other
 
 
Accumulated
Deficit
 
 
Total
 
 
Shares
Issued
 
 
Par
Value
 
Comprehensive
Income
 
Balance
 
 
January 1, 2020
   
155,264
    $
1,553
    $
352,658
    $
945
    $
(17,744
)   $
337,412
 
Restricted stock issued and vesting of restricted stock units, net
   
1,438
     
14
     
(14
)    
—  
     
—  
     
—  
 
Shares repurchased
   
(385
)    
(3
)    
(1,492
)    
—  
     
—  
     
(1,495
)
Exercise of stock options, net
   
107
     
—  
     
240
     
—  
     
—  
     
240
 
Stock-based compensation
   
—  
     
—  
     
3,239
     
—  
     
—  
     
3,239
 
Other comprehensive loss
   
—  
     
—  
     
—  
     
(853
)    
—  
     
(853
)
Dividends
   
—  
     
—  
     
(5,136
)    
—  
     
—  
     
(5,136
)
Net
loss
   
—  
     
—  
     
—  
     
—  
     
(8,638
)    
(8,638
)
                                                 
Balance
 
 
March 31, 2020
   
156,424
    $
1,564
    $
349,495
    $
92
    $
(26,382
)   $
324,769
 
                                                 
 
 
                                                 
 
For the Three Months Ended March 31, 2019
 
 
Common Stock
   
Additional
Paid-In
Capital
 
 
Accumulated
Other
 
 
Accumulated Deficit
 
 
Total
 
 
Shares
Issued
 
 
Par
Value
 
Comprehensive
Income
 
Balance
 
 
January 1, 2019
   
153,202
    $
1,532
    $
363,655
    $
467
    $
(7,319
)   $
358,335
 
Restricted stock issued and vesting of restricted stock units, net
   
2,145
     
21
     
(21
)    
—  
     
—  
     
—  
 
Shares repurchased
   
(311
)    
(2
)    
(2,003
)    
—  
     
—  
     
(2,005
)
Exercise of stock options, net
   
20
     
—  
     
14
     
—  
     
—  
     
14
 
Stock-based compensation
   
—  
     
—  
     
3,072
     
—  
     
—  
     
3,072
 
Other comprehensive income
   
—  
     
—  
     
—  
     
291
     
—  
     
291
 
Dividends
   
—  
     
—  
     
  
     
—  
     
(5,097
)    
(5,097
)
Net income
   
—  
     
—  
     
—  
     
—  
     
8,824
     
8,824
 
                                                 
Balance
 
 
March 31, 2019
   
155,056
    $
1,551
    $
364,717
    $
758
    $
(3,592
)   $
363,434
 
                                                 
 
 
The accompanying notes are an integral part of these consolidated financial statements
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WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
                 
 
Three Months Ended March 31,
 
 
2020
 
 
2019
 
Cash flows from operating activities:
 
 
 
 
 
 
Net (loss)/income
  $
(8,638
)   $
8,824
 
Adjustments to reconcile net
(loss)/
income to net cash (used in)/provided by operating activities:
   
     
 
Impairments
   
19,672
     
572
 
Advisory fees received in gold and other precious metals
   
(13,860
)    
(11,389
)
Deferred income taxes
   
4,526
     
3,048
 
Contractual gold payments
   
3,760
     
3,098
 
Stock-based compensation
   
3,239
     
3,072
 
Gain on sale – Canadian ETF business
   
(2,877
)    
 
(Loss)/gain on revaluation of deferred consideration
   
2,208
     
(4,404
)
Amortization of right of use asset
   
798
     
798
 
Amortization of credit facility issuance costs
   
723
     
711
 
Paid-in-kind
interest income
   
  
     
(595
)
Depreciation and amortization
   
256
     
269
 
Other
   
(31
)    
3
 
Changes in operating assets and liabilities:
   
     
 
Securities owned, at fair value
   
(2,942
)    
2,454
 
Accounts receivable
   
5,850
     
(1,939
)
Income taxes payable
   
(2,032
)    
(604
)
Prepaid expenses
   
(616
)    
419
 
Gold and other precious metals
   
9,838
     
7,975
 
Other assets
   
139
     
182
 
Fund management and administration payable
   
537
     
4,274
 
Compensation and benefits payable
   
(22,688
)    
(9,250
)
Securities sold, but not yet purchased, at fair value
   
(112
)    
(360
)
Operating lease liabilities
   
(926
)    
(881
)
Accounts payable and other liabilities
   
542
     
1,575
 
                 
Net cash (used in)/provided by operating activities
   
(2,634
)    
7,852
 
                 
Cash flows from investing activities:
 
 
 
 
 
 
Purchase of fixed assets
   
(50
)    
(7
)
Proceeds from
held-to-maturity
securities maturing or called prior to maturity
   
6,030
     
18
 
Proceeds from sale of Canadian ETF business, net
   
2,774
     
 
                 
Net cash provided by investing activities
   
8,754
     
11
 
                 
Cash flows from financing activities:
 
 
 
 
 
 
Dividends paid
   
(5,136
)    
(5,097
)
Repayment of debt
   
(5,000
)    
  
 
Shares repurchased
   
(1,495
)    
(2,005
)
Proceeds from exercise of stock options
   
240
     
14
 
                 
Net cash used in financing activities
   
(11,391
)    
(7,088
)
                 
(Decrease)/increase in cash flow due to changes in foreign exchange rate
   
(1,272
)    
383
 
                 
Net (decrease)/increase in cash and cash equivalents
   
(6,543
)    
1,158
 
Cash and cash equivalents
 
 
beginning of period
   
74,972
     
77,784
 
                 
Cash and cash equivalents
 
 
end of period
  $
68,429
    $
78,942
 
                 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
Cash paid for taxes
  $
1,147
    $
707
 
                 
Cash paid for interest
  $
2,312
    $
2,224
 
                 
 
 
 
The accompanying notes are an integral part of these consolidated financial statements
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Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In Thousands, Except Share and Per Share Amounts)
1. Organization and Description of Business
WisdomTree Investments, Inc., through its global subsidiaries (collectively, “WisdomTree” or the “Company”), is an exchange-traded product (“ETP”) sponsor and asset manager headquartered in New York. WisdomTree offers ETPs covering equity, commodity, fixed income, leveraged and inverse, currency and alternative strategies. The Company has the following wholly-owned operating subsidiaries:
 
WisdomTree Asset Management, Inc.
is a New York based investment adviser registered with the SEC, providing investment advisory and other management services to the WisdomTree Trust (“WTT”) and WisdomTree exchange-traded funds (“ETFs”). The WisdomTree ETFs are issued in the U.S. by WTT. WTT, a
non-consolidated
third party, is a Delaware statutory trust registered with the SEC as an
open-end
management investment company. The Company has licensed to WTT the use of certain of its own indexes on an exclusive basis for the WisdomTree ETFs in the U.S.
 
WisdomTree Management Jersey Limited
(“ManJer”) is a Jersey based management company providing management services to eight issuers (the “ManJer Issuers”) in respect of the ETPs issued and listed by the ManJer Issuers covering commodity, currency, cryptocurrency and
leveraged-and-inverse
strategies.
 
WisdomTree Multi Asset Management Limited
(“WTMAML”) is a Jersey based management company providing management services to WisdomTree Multi Asset Issuer PLC (“WMAI”) in respect of the ETPs issued by WMAI. WMAI, a
non-consolidated
third party, is a public limited company domiciled in Ireland.
 
WisdomTree Management Limited
(“WML”)
is an Ireland based management company providing management services to WisdomTree Issuer plc (“WTI”) in respect of the WisdomTree UCITS ETFs issued by WTI. WTI, a
non-consolidated
third party, is a public limited company domiciled in Ireland.
 
WisdomTree UK Limited
(“WTUK”)
is a U.K. based company registered with the Financial Conduct Authority currently providing distribution and support services to ManJer, WTMAML and WML.
 
WisdomTree Europe Limited
is a U.K. based company which is the legacy distributor of the WMAI ETPs and WisdomTree UCITS ETFs. These services are now provided directly by WTUK. WisdomTree Europe Limited is no longer regulated and does not provide any regulated services.
 
WisdomTree Ireland Limited
is an Ireland based company authorized by the Central Bank of Ireland providing distribution services to ManJer, WTMAML and WML.
 
WisdomTree Commodity Services, LLC
(“WTCS”) is a New York based company that serves as the managing owner and commodity pool operator of the WisdomTree Continuous Commodity Index Fund. WTCS is registered with the Commodity Futures Trading Commission and is a member of the National Futures Association.
Sale of Canadian ETF Business
On February 19, 2020, the Company completed the sale of WTAMC to CI Financial Corp. (See Note 24).
2. Significant Accounting Policies
Basis of Presentation
These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and in the opinion of management reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of financial condition, results of operations, and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company’s wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Consolidation
The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). The usual condition for a controlling financial interest in a VOE is ownership of a majority voting interest. If the Company has a majority voting interest in a VOE, the entity is consolidated. The Company has a controlling financial interest in a VIE when the Company has a variable interest that provides it with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
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The Company reassesses its evaluation of whether an entity is a VIE when certain reconsideration events occur.
Segment and Geographic Information
Effective January 1, 2020, the Company, through its subsidiaries in the U.S. and Europe, conducts business as a single operating segment as an ETP sponsor and asset manager which is based upon the Company’s current organizational and management structure, as well as information used by the chief operating decision maker to allocate resources and other factors. Previously, the Company’s financial results were reported in its U.S. Business and International Business reportable segments.
Foreign Currency Translation
Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar are translated based on the end of period exchange rates from local currency to U.S. dollars. Results of operations are translated at the average exchange rates in effect during the period. The impact of the foreign currency translation adjustment is included in the Consolidated Statements of Comprehensive (Loss)/Income as a component of other comprehensive (loss)/income.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses for the periods presented. Actual results could differ materially from those estimates.
Revenue Recognition
The Company earns substantially all of its revenue in the form of advisory fees from its ETPs and recognizes this revenue over time, as the performance obligation is satisfied. Advisory fees are based on a percentage of the ETPs’ average daily net assets. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice.
Contractual Gold Payments
Contractual gold payments are measured and paid monthly based upon the average daily spot price of gold (Note 11).
Marketing and Advertising
Advertising costs, including media advertising and production costs, are expensed when incurred.
Depreciation and Amortization
Depreciation is provided for using the straight-line method over the estimated useful lives of the related assets as follows:
Equipment
 
 
5 years
 
Furniture and fixtures
 
 
15 years
 
Leasehold improvements are amortized over the term of their respective leases or service lives of the improvements, whichever is shorter. Fixed assets are recorded at cost less accumulated depreciation and amortization.
Stock-Based Awards
Accounting for stock-based compensation requires the measurement and recognition of compensation expense for all equity awards based on estimated fair values. Stock-based compensation is measured based on the grant-date fair value of the award and is amortized over the relevant service period. Forfeitures are recognized when they occur.
Third-Party Distribution Fees
The Company pays a percentage of its advisory fee revenues based on incremental growth in AUM, subject to caps or minimums, to marketing agents to sell WisdomTree ETFs and for including WisdomTree ETFs on third-party customer platforms.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be classified as cash equivalents. The Company maintains deposits with financial institutions in an amount that is in excess of federally insured limits.
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Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are customer and other obligations due under normal trade terms. The Company measures credit losses by applying historical loss rates, adjusted for current conditions and supportable forecasts to amounts outstanding using the aging method.
Impairment of Long-Lived Assets
The Company performs a review for the impairment of long-lived assets when events or changes in circumstances indicate that the estimated undiscounted future cash flows expected to be generated by the assets are less than their carrying amounts or when other events occur which may indicate that the carrying amount of an asset may not be recoverable.
Notes Receivable
Notes receivable are accounted for on an amortized cost basis, including accrued interest and net of original issue discount and impairments, if any. Interest income is accrued over the term of the notes using the effective interest method. Notes receivable are placed on
non-accrual
status when the Company is in receipt of information indicating collection of interest is doubtful. Cash received on notes receivable placed on
non-accrual
status is recognized on a cash basis as interest income if and when received.
Effective January 1, 2020, the Company performs a review for the impairment of the notes receivable and accrued interest on a quarterly basis using the current expected credit loss model and provides for an allowance for credit losses by applying an estimated loss rate to amounts outstanding at the balance sheet date. Previously, credit losses were measured using an incurred loss approach.
Securities Owned and Securities Sold, but not yet Purchased (at fair value)
Securities owned and securities sold, but not yet purchased are securities classified as either trading or
available-for-sale
(“AFS”). These securities are recorded on their trade date and are measured at fair value. All equity securities are classified by the Company as trading. Debt securities are classified based primarily on the Company’s intent to hold or sell the security. Changes in the fair value of debt securities classified as trading and AFS are reported in other income and other comprehensive income, respectively, in the period the change occurs. Debt securities classified as AFS are assessed for impairment on a quarterly basis and an estimate for credit loss is provided when the fair value of the AFS debt security is below its amortized cost basis. Credit-related impairments are recognized as an allowance with a corresponding adjustment to earnings, while impairments resulting from noncredit-related factors are recognized in other comprehensive income. Amounts recorded in other comprehensive income are reclassified into earnings upon sale of the AFS debt security using the specific identification method.
Securities
Held-to-Maturity
The Company accounts for certain of its securities as
held-to-maturity
on a trade date basis, which are recorded at amortized cost. For
held-to-maturity
securities, the Company has the intent and ability to hold these securities to maturity and it is not more-likely-
than-not
that the Company will be required to sell these securities before recovery of their amortized cost bases, which may be maturity.
Held-to-maturity
securities are placed on
non-accrual
status when the Company is in receipt of information indicating collection of interest is doubtful. Cash received on
held-to-maturity
securities placed on
non-accrual
status is recognized on a cash basis as interest income if and when received.
Effective January 1, 2020, the Company reviews its portfolio of
held-to-maturity
securities for impairment on a quarterly basis by applying an estimated loss rate after consideration for the nature of collateral securing the financial asset as well as potential future changes in collateral values and historical loss information for financial assets secured with similar collateral. Previously, these securities were evaluated for impairment on a quarterly basis and if a decline in fair value was deemed to be other-than-temporary, the securities was written down to its fair value through earnings.
Investments in pass-through government-sponsored enterprises (“GSEs”) are determined to have an estimated loss rate of zero due to an implicit U.S. government guarantee.
Investments
The Company accounts for equity investments that do not have a readily determinable fair value under the measurement alternative prescribed within Accounting Standards Update (“ASU”)
2016-01,
Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities
, to the extent such investments are not subject to consolidation or the equity method. Under the measurement alternative, these financial instruments are carried at cost, less any impairment (assessed quarterly), plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same
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issuer. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment.
Goodwill
Goodwill is the excess of the fair value of the purchase price over the fair values of the identifiable net assets at the acquisition date. The Company tests goodwill for impairment at least annually and at the time of a triggering event requiring
re-evaluation,
if one were to occur. Goodwill is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value. If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying amount of goodwill. A reporting unit is an operating segment or a component of an operating segment provided that the component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that component.
Goodwill is allocated to the Company’s U.S. Business and European Business components. Effective January 1, 2020, for impairment testing purposes, these components are aggregated as a single reporting unit as they fall under the same operating segment and have similar economic characteristics. Previously, these components were tested separately for impairment when Company was operating as more than one operating segment.
Goodwill is assessed for impairment annually on November 30
th
. When performing its goodwill impairment test, the Company considers a qualitative assessment, when appropriate, and the market approach and its market capitalization when determining the fair value of the reporting units, in the aggregate.
Intangible Assets
Indefinite-lived intangible assets are tested for impairment at least annually and are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are impaired if their estimated fair values are less than their carrying values.
Finite-lived intangible assets, if any, are amortized over their estimated useful life, which is the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the Company. These intangible assets are tested for impairment at the time of a triggering event, if one were to occur. Finite-lived intangible assets may be impaired when the estimated undiscounted future cash flows generated from the assets are less than their carrying amounts.
The Company may rely on a qualitative assessment when performing its intangible asset impairment test. Otherwise, the impairment evaluation is performed at the lowest level of reasonably identifiable cash flows independent of other assets. The annual impairment testing date for all of the Company’s intangible assets is November 30
th
.
Leases
Effective January 1, 2019, the Company accounts for its lease obligations in accordance with Accounting Standards Codification (“ASC”) Topic 842,
Leases
(ASC 842), which requires the recognition of both (i) a lease liability equal to the present value of the remaining lease payments and (ii) an offsetting
right-of-use
asset. The remaining lease payments are discounted using the rate implicit in the lease, if known, or otherwise the Company’s incremental borrowing rate. After lease commencement,
right-of-use
assets are assessed for impairment and otherwise are amortized over the remaining lease term on a straight-line basis. These recognition requirements are not applied to short-term leases which are those with a lease term of 12 months or less. Instead, lease payments associated with short-term leases are recognized as an expense on a straight-line basis over the lease term.
ASC 842 also provides a practical expedient which allows for consideration in a contract to be accounted for as a single lease component rather than allocated between lease and
non-lease
components. The Company has elected to apply this practical expedient to all lease contracts, where applicable.
Upon adoption of ASC 842 on January 1, 2019, the Company applied the transitional practical expedients to its outstanding leases and therefore the Company did not reassess (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The Company also elected to apply the new lease requirements at the effective date, rather than the beginning of the earliest comparative period presented.
Deferred Consideration – Gold Payments
Deferred consideration represents the present value of an obligation to pay gold to a third party into perpetuity and is measured using forward-looking gold prices and a selected discount rate (Note 11). Changes in the fair value of this obligation are reported as (loss)/gain on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations.
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Debt
Debt is carried at amortized cost, net of debt issuance costs. Interest expense is recognized using the effective interest method and includes amortization of debt issuance costs over the life of the debt.
Earnings per Share
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Net income available to common stockholders represents net income of the Company reduced by an allocation of earnings to participating securities. The Series A
non-voting
convertible preferred stock (Note 20) and unvested share-based payment awards that contain
non-forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of EPS pursuant to the
two-class
method. Share-based payment awards that do not contain such rights are not deemed participating securities and are included in diluted shares outstanding (if dilutive).
Diluted EPS is calculated under the treasury stock and
if-converted
method and the
two-class
method. The calculation that results in the lowest diluted EPS amount for the common stock is reported in the Company’s consolidated financial statements.
Income Taxes
The Company accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is
more-likely-than-not
that some portion or all the deferred tax assets will not be realized.
Tax positions are evaluated utilizing a
two-step
process. The Company first determines whether any of its tax positions are more-
likely-than-not
to be sustained upon examination, based solely on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company records interest expense and penalties related to tax expenses as income tax expense.
Non-income
based taxes are recorded as part of other liabilities and other expenses.
Going Concern
The Company performs a quarterly assessment of its ability to continue as a going concern within one year of the date the financial statements are issued. This assessment include
s
 evaluating the impact of outstanding debt of $174,000 which is scheduled to mature on April 11, 2021. The Company is actively exploring refinancing and extension alternatives to mitigate the risk that it will be unable to satisfy its outstanding debt at maturity.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU
2019-12,
Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes
(ASU
2019-12).
The main objective of the standard is to reduce complexity in the accounting for income taxes by removing the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income)
;
(2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment
;
 (3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary
;
and (4) exception to the general methodology for calculating income taxes in an interim period when a
year-to-date
loss exceeds the anticipated loss for the year. The standard also simplifies the accounting for income taxes by enacting the following: (a) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount as a
non-income-based
tax
;
(b) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered as a separate transaction
;
(c) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements
;
and (d) requiring that an entity reflect the enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. ASU
2019-12
is effective for years beginning after December 15, 2020, including the interim periods within those reporting periods. Early adoption is permitted. The Company has determined that this standard will not have a material impact on its financial statements.
Recently Adopted Accounting Pronouncements
On January 1, 2020, the Company adopted ASU
2016-13,
Financial Instruments-Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments
(ASU
2016-13).
The main objective of the standard is to provide financial statement users
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with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. In issuing this standard, the FASB is responding to criticism that prior guidance delayed recognition of credit losses. The standard replaced the prior guidance’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, applies to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain
off-balance
sheet credit exposures. The standard is applicable to loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, loan commitments and certain other
off-balance
sheet credit exposures, debt securities (including those
held-to-maturity)
and other financial assets measured at fair value through other comprehensive income, and beneficial interests in securitized financial assets. The CECL model does not apply to AFS debt securities. For AFS debt securities with unrealized losses, entities measure credit losses in a manner similar to prior guidance, except that the credit losses are recognized as allowances rather than reductions in the amortized cost of the securities. Accordingly, the new methodology is utilized when assessing the Company’s financial instruments for impairment. As a result, entities recognize improvements to estimated credit losses immediately in earnings rather than as interest income over time. The ASU also simplified the accounting model for purchased credit-impaired debt securities and loans.
ASU
 
2016-13
also expanded the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. The adoption of this standard, which is applicable to the Company’s trade receivables
, notes receivable
and
held-to-maturity
securities did not have a material impact on the Company’s consolidated financial statements.
On January 
1
,
2020
, the Company adopted ASU
2018-13,
Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
(ASU
2018-13),
which modified the disclosure requirements on fair value measurements, including removing the requirement to disclose
(1)
 the amount of and reasons for transfers between Level 
1
and Level 
2
of the fair value hierarchy,
(2)
 the policy for timing of transfers between levels and
(3)
 the valuation processes for Level 
3
fair value measurements. ASU
2018-13
also added new disclosures including the requirement to disclose (a) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 
3
fair value measurements held at the end of the reporting period and (b) the range and weighted average of significant unobservable inputs used to develop Level 
3
fair value measurements. This standard only impacted the disclosures pertaining to fair value measurements and were incorporated into the notes to the Company’s consolidated financial statements.
 
3. Cash and Cash Equivalents
Of the total cash and cash equivalents of $68,429 and $74,972 at March 31, 2020 and December 31, 2019, respectively, $62,655 and $72,120 were held at two financial institutions. At March 31, 2020 and December 31, 2019, cash equivalents were approximately $3,885 and $317, respectively.
Certain of the Company’s international subsidiaries are required to maintain a minimum level of regulatory capital, which was $10,398 and $12,312 at March 31, 2020 and December 31, 2019, respectively. These requirements are generally satisfied by cash on hand.
In addition, the Company collateralized its U.S. office lease through a standby letter of credit totaling $1,384 which is restricted from further use.
4. Fair Value Measurements
The fair value of financial instruments is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., “the exit price”) in an orderly transaction between market participants at the measurement date. ASC 820,
Fair Value Measurements
, establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the transparency of inputs as follows:
         
Level 1
 
 
Quoted prices for identical instruments in active markets.
 
 
 
 
 
Level 2
 
 
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
 
 
 
 
 
Level 3
 
 
Instruments whose significant drivers are unobservable.
 
The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may
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fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The tables below summarize the categorization of the Company’s assets and liabilities measured at fair value. During the three months ended March 31, 2020 and 2019, there were no transfers between Levels 2 and 3.
 
 
March 31, 2020
 
 
Total
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Recurring fair value measurements:
   
     
     
     
 
Cash equivalents
  $
3,885
    $
3,885
    $
 —  
    $
—  
 
Securities owned, at fair value
   
20,261
     
20,261
     
—  
     
—  
 
                                 
Total
  $
24,146
    $
24,146
    $
—  
    $
—  
 
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-recurring
fair value measurements:
   
     
     
     
 
AdvisorEngine
,
Inc. – Financial interests
(1)
  $
8,500
    $
—  
    $
—  
    $
8,500
 
                                 
Total
  $
8,500
    $
—  
    $
—  
    $
8,500
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Recurring fair value measurements:
   
     
     
     
 
Deferred consideration (Note 11)
  $
175,300
    $
—  
    $
—  
    $
175,300
 
Securities sold, but not yet purchased
   
469
     
469
     
—  
     
—  
 
                                 
Total
  $
175,769
    $
469
    $
—  
    $
175,300
 
                                 
 
(1) Fair value determined on March 31, 2020 (Note 7).
 
December 31, 2019
 
 
Total
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Recurring fair value measurements:
   
     
     
     
 
Cash equivalents
  $
317
    $
317
    $
—  
    $
—  
 
Securities owned, at fair value
   
17,319
     
17,319
     
—  
     
—  
 
                                 
Total
  $
17,636
    $
17,636
    $
—  
    $
—  
 
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-recurring
fair value measurements:
   
     
     
     
 
AdvisorEngine
,
Inc. – Financial interests
(2)
  $
28,172
    $
—  
    $
—  
    $
28,172
 
                                 
Total
  $
28,172
    $
—  
    $
—  
    $
28,172
 
                                 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Recurring fair value measurements:
   
     
     
     
 
Deferred consideration (Note 11)
  $
173,024
    $
—  
    $
—  
    $
173,024
 
Securities sold, but not yet purchased
   
582
     
582
     
—  
     
—  
 
                                 
Total
  $
173,606
    $
582
    $
 —  
    $
173,024
 
                                 
 
(2) Fair value determined on December 31, 2019.
Recurring Fair Value Measurements – Methodology
Cash Equivalents (Note 3)
– These financial assets represent cash invested in highly liquid investments with original maturities of less than 90 days. These investments are valued at par, which approximates fair value, and are considered Level 1.
Securities Owned/Sold but Not Yet Purchased (Note 5)
– Securities owned and sold, but not yet purchased are investments in ETFs. ETFs are generally traded in active, quoted and highly liquid markets and are therefore classified as Level 1 in the fair value hierarchy.
Deferred Consideration
– Deferred consideration represents the present value of an obligation to pay gold into perpetuity and was measured at March 31, 2020 using forward-looking gold prices ranging from $1,597 per ounce to $2,275 per ounce (weighted average of $1,775 per ounce) which are extrapolated from the last observable price (beyond 2025), discounted at a rate of 10% and includes a perpetual growth rate of 1.5%. Forward-looking gold prices ranged from $1,535 per ounce to $2,328 per ounce (weighted
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average of $1,757 per ounce) at December 31, 2019. The weighted-average price per ounce was derived from the relative present values of the annual payment obligations. This obligation is classified as Level 3 as the discount rate, perpetual growth rate and extrapolated forward-looking gold prices are significant unobservable inputs. An increase in forward-looking gold prices
and the perpetual growth rate 
would result in an increase in deferred consideration, whereas an increase in the discount rate would reduce the fair value. See Note 11 for additional information.
The following table presents a reconciliation of beginning and ending balances of recurring fair value measurements classified as Level 
3
:
 
Three Months Ended
March 31,
 
 
2020
 
 
2019
 
Deferred consideration (Note 11)
 
 
 
 
 
 
Beginning balance
  $
173,024
    $
161,540
 
Net realized losses
(1)
   
3,760
     
3,098
 
Net unrealized losses/(gains)
(2)
   
2,208
     
(4,404
)
Settlements
   
(3,692
)    
(3,087
)
                 
Ending balance
  $
175,300
    $
157,147
 
                 
 
(1) Recorded as contractual gold payments expense on the Company’s Consolidated Statements of Operations.
(2) Recorded as (loss)/gain on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations.
5. Securities Owned/Sold, but Not Yet Purchased
These securities consist of the following:
 
March 31,
2020
 
 
December 31,
2019
 
Securities Owned
 
 
 
 
 
 
Trading securities
  $
20,261
    $
17,319
 
                 
Securities Sold, but not yet Purchased
 
 
 
 
 
 
Trading securities
  $
469
    $
582
 
                 
The Company had no AFS debt securities at March 31, 2020 and December 31, 2019.
6. Securities
Held-to-Maturity
The following table is a summary of the Company’s securities
held-to-maturity:
 
March 31,
2020
 
 
December 31,
2019
 
Debt instruments: Pass-through GSEs (amortized cost)
  $
10,864
    $
16,863
 
                 
During the three months ended March 31, 2020, the Company received proceeds of $6,030 from
held-to-maturity
securities maturing or being called prior to maturity.
The following table summarizes unrealized gains, losses, and fair value (classified as Level 2 within the fair value hierarchy) of securities
held-to-maturity:
 
March 31,
2020
 
 
December 31,
2019
 
Cost/amortized cost
  $
10,864
    $
16,863
 
Gross unrealized gains
   
102
     
38
 
Gross unrealized losses
   
(17
)    
(297
)
                 
Fair value
  $
10,949
    $
16,604
 
                 
An allowance for credit losses was not provided on the Company’s
held-to-maturity
securities as all securities are investments in pass-through GSEs which are determined to have an estimated loss rate of zero due to an implicit U.S. government guarantee. In addition, no securities were determined to be other-than-temporarily impaired at December 31, 2019.
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The following table sets forth the maturity profile of the securities
held-to-maturity;
however, these securities may be called prior to maturity date:
                 
 
March 31,
2020
 
 
December 31,
2019
 
Due within one year
  $
—