QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
th Streetrd Floor |
||
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
WISDOMTREE INVESTMENTS, INC.
Form 10-Q
For the Quarterly Period Ended September 30, 2022
TABLE OF CONTENTS
PART I: |
FINANCIAL INFORMATION | 4 | ||||
ITEM 1. |
Financial Statements | 4 | ||||
ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 | ||||
ITEM 3. |
Quantitative and Qualitative Disclosures About Market Risk | 51 | ||||
ITEM 4. |
Controls and Procedures | 52 | ||||
PART II: |
OTHER INFORMATION | 52 | ||||
ITEM 1. |
Legal Proceedings | 52 | ||||
ITEM 1A. |
Risk Factors | 52 | ||||
ITEM 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 52 | ||||
ITEM 3. |
Default Upon Senior Securities | 53 | ||||
ITEM 4. |
Mine Safety Disclosures | 53 | ||||
ITEM 5. |
Other Information | 53 | ||||
ITEM 6. |
Exhibits | 54 |
Unless otherwise indicated, references to “the Company,” “we,” “us,” “our” and “WisdomTree” mean WisdomTree Investments, Inc. and its subsidiaries.
WisdomTree®, WisdomTree Prime™ 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
• | the ultimate duration of the COVID-19 pandemic, or the war in Ukraine, and their short-term and long-term impact on our business and the global economy; |
• | 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; |
• | whether we will experience future growth; |
• | our ability to develop new products and services and their success; |
• | our ability to maintain current vendors or find new vendors to provide services to us at favorable costs; |
• | our ability to successfully implement our strategy relating to digital assets and blockchain-enabled financial services, including WisdomTree Prime ™ , and achieve its objectives; |
• | 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. |
ITEM 1. |
FINANCIAL STATEMENTS |
September 30, 2022 |
December 31, 2021 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Securities owned, at fair value (including $ |
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Accounts receivable (including $ |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Fixed assets, net |
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Indemnification receivable (Note 19) |
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Securities held-to-maturity |
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Deferred tax assets, net |
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Investments (Note 7) |
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Right of use assets—operating leases (Note 12) |
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Goodwill (Note 21) |
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Intangible assets (Note 21) |
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Other noncurrent assets |
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Total assets |
$ | $ | ||||||
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Liabilities and stockholders’ equity |
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Liabilities |
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Current liabilities: |
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Convertible notes—current (Note 10) |
$ | $ | ||||||
Fund management and administration payable |
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Compensation and benefits payable |
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Deferred consideration—gold payments (Note 9) |
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Operating lease liabilities (Note 12) |
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Income taxes payable |
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Accounts payable and other liabilities |
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Total current liabilities |
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Convertible notes—long term (Note 10) |
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Deferred consideration—gold payments (Note 9) |
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Operating lease liabilities (Note 12) |
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Other noncurrent liabilities (Note 19) |
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Total liabilities |
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Preferred stock—Series A Non-Voting Convertible, par value $ |
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Contingencies (Note 13) |
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Stockholders’ equity |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
( |
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Retained earnings/(accumulated deficit) |
( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ | |
$ | |
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Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||||||||||
2022 |
2021 |
2022 |
2021 | |||||||||||||
Operating Revenues: |
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Advisory fees |
$ | $ | $ | $ | ||||||||||||
Other income |
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Total revenues |
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Operating Expenses: |
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Compensation and benefits |
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Fund management and administration |
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Marketing and advertising |
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Sales and business development |
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Contractual gold payments (Note 9) |
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Professional fees |
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Occupancy, communications and equipment |
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Depreciation and amortization |
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Third-party distribution fees |
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Other |
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Total operating expenses |
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Operating income |
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Other Income/(Expenses): |
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Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Gain on revaluation of deferred consideration—gold payments (Note 9) |
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Interest income |
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Impairments (Notes 8, 12 and 23) |
( |
) | ( |
) | ||||||||||||
Other losses, net |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
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Income before income taxes |
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Income tax expense/(benefit) |
( |
) | ||||||||||||||
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Net income |
$ | $ | $ | $ | ||||||||||||
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Earnings per share—basic |
$ | $ | $ | $ | ||||||||||||
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Earnings per share—diluted |
$ | $ | $ | $ | ||||||||||||
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Weighted-average common shares—basic |
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Weighted-average common shares—diluted |
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Cash dividends declared per common share |
$ | $ | $ | $ | ||||||||||||
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Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
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Net income |
$ | $ | $ | $ | ||||||||||||
Other comprehensive loss |
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Foreign currency translation adjustment, net of income taxes |
( |
( |
( |
( |
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Other comprehensive loss |
( |
( |
( |
( |
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Comprehensive income |
$ | |
$ | |
$ | |
$ | |
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For the Three Months Ended September 30, 2022 | ||||||||||||||||||||||||
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income |
(Accumulated Deficit)/Retained Earnings |
Total | ||||||||||||||||||||
Shares Issued |
Par Value | |||||||||||||||||||||||
Balance—July 1, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
Restricted stock issued and vesting of restricted stock units, net |
|
|||||||||||||||||||||||
Shares repurchased |
( |
) |
( |
) |
( |
) | ||||||||||||||||||
Stock-based compensation |
— | |||||||||||||||||||||||
Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||
Dividends |
— | ( |
) |
( |
) | |||||||||||||||||||
Net income |
— | |||||||||||||||||||||||
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Balance—September 30, 2022 |
|
$ | |
$ | |
$ | ( |
) | $ | |
$ | |
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For the Three Months Ended September 30, 2021 |
||||||||||||||||||||||||
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income |
Accumulated Deficit |
Total |
||||||||||||||||||||
Shares Issued |
Par Value |
|||||||||||||||||||||||
Balance—July 1, 2021 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
Restricted stock issued and vesting of restricted stock units, net |
||||||||||||||||||||||||
Stock-based compensation |
— | |||||||||||||||||||||||
Other comprehensive loss |
— | ( |
) |
( |
) | |||||||||||||||||||
Dividends |
— | ( |
) |
( |
) | |||||||||||||||||||
Net income |
— | |||||||||||||||||||||||
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Balance—September 30, 2021 |
|
$ | |
$ | |
$ | |
$ | ( |
) | $ | |
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For the Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income |
(Accumulated Deficit)/Retained Earnings |
Total | ||||||||||||||||||||
Shares Issued |
Par Value | |||||||||||||||||||||||
Balance—January 1, 2022 |
$ | $ | $ | $ | ( |
) |
|
$ | ||||||||||||||||
Restricted stock issued and vesting of restricted stock units, net |
|
( |
) | |||||||||||||||||||||
Shares repurchased |
( |
) |
( |
) |
( |
) | ( |
) | ||||||||||||||||
Stock-based compensation |
— | |||||||||||||||||||||||
Other comprehensive loss |
— | ( |
) |
( |
) | |||||||||||||||||||
Dividends |
— | ( |
) |
( |
) |
( |
) | |||||||||||||||||
Net income |
— | |||||||||||||||||||||||
|
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|
Balance—September 30, 2022 |
|
$ | $ | |
$ | ( |
) | $ | |
$ | ||||||||||||||
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| |||||||
For the Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income |
Accumulated Deficit |
Total | ||||||||||||||||||||
Shares Issued |
Par Value | |||||||||||||||||||||||
Balance—January 1, 2021 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
Reclassification of equity component related to convertible notes, net deferred taxes of $ of Accounting Standards Update 2020-06 (Note 10) |
— | ( |
) | ( |
) | |||||||||||||||||||
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|
Balance—January 1, 2021 (as adjusted) |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
Restricted stock issued and vesting of restricted stock units, net |
( |
) | ||||||||||||||||||||||
Shares repurchased |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Exercise of stock options, net |
||||||||||||||||||||||||
Stock-based compensation |
— | |||||||||||||||||||||||
Other comprehensive loss |
— | ( |
) | ( |
) | |||||||||||||||||||
Dividends |
— | ( |
) |
( |
) | |||||||||||||||||||
Net income |
— | |||||||||||||||||||||||
|
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Balance—September 30, 2021 |
|
$ | |
$ | $ | |
$ | ( |
) | $ | |
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Nine Months Ended September 30, | ||||||||
2022 |
2021 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Gain on revaluation of deferred consideration—gold payments |
( |
) |
( |
) | ||||
Advisory and license fees paid in gold, other precious metals and cryptocurrency |
( |
) | ( |
) | ||||
Losses on securities owned, at fair value |
||||||||
Contractual gold payments |
||||||||
Stock-based compensation |
||||||||
Deferred income taxes |
||||||||
Amortization of issuance costs—convertible notes |
||||||||
Amortization of right of use asset |
||||||||
Depreciation and amortization |
||||||||
Impairments |
||||||||
Gain on sale—Canadian ETF business, including remeasurement of contingent consideration |
( |
) | ||||||
Other |
( |
) | ( |
) | ||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ||||||
Prepaid expenses |
( |
) | ( |
) | ||||
Gold and other precious metals |
||||||||
Other assets |
( |
) | ( |
) | ||||
Intangibles—software development |
( |
) | ||||||
Fund management and administration payable |
||||||||
Compensation and benefits payable |
( |
) | ||||||
Income taxes payable |
( |
) | ( |
) | ||||
Operating lease liabilities |
( |
) | ( |
) | ||||
Accounts payable and other liabilities |
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| |||
Net cash provided by operating activities |
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Cash flows from investing activities: |
||||||||
Purchase of securities owned, at fair value |
( |
) | ( |
) | ||||
Purchase of investments |
( |
) | ( |
) | ||||
Purchase of fixed assets |
( |
) | ( |
) | ||||
Proceeds from the sale of securities owned, at fair value |
||||||||
Proceeds from held-to-maturity |
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Net cash used in investing activities |
( |
) | ( |
) | ||||
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Cash flows from financing activities: |
||||||||
Dividends paid |
( |
) | ( |
) | ||||
Shares repurchased |
( |
) | ( |
) | ||||
Convertible notes issuance costs |
( |
) | ||||||
Proceeds from the issuance of convertible notes |
||||||||
Proceeds from exercise of stock options |
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|
Net cash (used in)/provided by financing activities |
( |
) | ||||||
|
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|
|
Decrease in cash flow due to changes in foreign exchange rate |
( |
) | ( |
) | ||||
|
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|
|
|
|
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|
|
Net (decrease)/increase in cash and cash equivalents |
( |
) | ||||||
Cash and cash equivalents—beginning of year |
||||||||
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Cash and cash equivalents—end of period |
$ | $ | ||||||
|
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|
Supplemental disclosure of cash flow information: |
||||||||
Cash paid for income taxes |
$ | $ | ||||||
|
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|
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|
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|
|
Cash paid for interest |
$ | |
$ | |
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• | WisdomTree Asset Management, Inc. non-consolidated 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 leveraged-and-inverse |
• | WisdomTree Multi Asset Management Limited non-consolidated public limited company domiciled in Ireland. |
• | WisdomTree Management Limited non-consolidated public limited company domiciled in Ireland. |
• | WisdomTree UK Limited |
• | WisdomTree Europe Limited |
• | WisdomTree Ireland Limited |
• | WisdomTree Digital Commodity Services, LLC |
• | WisdomTree Digital Management, Inc. SEC-registered investment adviser and will provide investment advisory and other management services to blockchain-enabled mutual funds whose shares are secondarily recorded on a blockchain. |
• | WisdomTree Digital Movement, Inc |
• | WisdomTree Securities, Inc. |
Equipment |
||||
Internally-developed software |
September 30, 2022 |
||||||||||||||||
Total |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
Assets: |
||||||||||||||||
Recurring fair value measurements: |
||||||||||||||||
Cash equivalents |
$ | $ | $ | $ | ||||||||||||
Securities owned, at fair value |
||||||||||||||||
ETFs |
||||||||||||||||
U.S. treasuries |
||||||||||||||||
Pass-through GSEs |
||||||||||||||||
Corporate bonds |
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Investments in Convertible Notes |
||||||||||||||||
Securrency, Inc.—convertible note |
||||||||||||||||
Fnality International Limited—convertible note (Note 7) |
||||||||||||||||
Total |
$ | $ | |
$ | |
$ | ||||||||||
Non-recurring fair value measurements: |
||||||||||||||||
Onramp Invest, Inc.—preferred stock (Note 7) (1) |
$ | $ | $ | $ | ||||||||||||
Liabilities: |
||||||||||||||||
Recurring fair value measurements: |
||||||||||||||||
Deferred consideration (Note 9) |
$ | |
$ | $ | $ | |||||||||||
December 31, 2021 | ||||||||||||||||
Total |
Level 1 |
Level 2 |
Level 3 | |||||||||||||
Assets: |
||||||||||||||||
Recurring fair value measurements: |
||||||||||||||||
Cash equivalents |
$ | $ | $ | $ | ||||||||||||
Securities owned, at fair value |
||||||||||||||||
ETFs |
||||||||||||||||
Pass-through GSEs |
||||||||||||||||
Corporate bonds |
||||||||||||||||
|
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|
|
|
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|
|
|
|
|
|
|
|
|
Total |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recurring fair value measurements: |
||||||||||||||||
Securrency, Inc.—Series A convertible preferred stock (1) |
$ | $ | $ | $ | ||||||||||||
|
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|
|
|
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|
|
|
|
|
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|
|
|
Liabilities: |
||||||||||||||||
Recurring fair value measurements: |
||||||||||||||||
Deferred consideration (Note 9) |
$ | |
$ | |
$ | |
$ | |
||||||||
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