What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-06 compared with 2020-11-06 · 353 added, 522 removed, 623 unchanged (58% of the section changed)

4 unchanged sentences

(In Thousands, Except Per Share Amounts)

September 30,

Current assets:

Cash and cash equivalents

Securities owned, at fair value (including $ 23,906 and $ 16,886 invested in WisdomTree ETFs at September 30, 2020 and December 31, 2019, respectively)

Accounts receivable (including $ 23,420 and $ 25,667 due from related parties at September 30, 2020 and December 31, 2019, respectively)

Securities owned, at fair value (including $ 23,626 and $ 23,932 invested in WisdomTree ETFs at March 31, 2021 and December 31, 2020, respectively)

Accounts receivable (including $ 27,258 and $ 26,884 due from related parties at March 31, 2021 and December 31, 2020, respectively)

Income taxes receivable

3 unchanged sentences

Fixed assets, net

Notes receivable, net

Indemnification receivable (Note 19)

11 unchanged sentences

Deferred consideration – gold payments (Note 9)

Securities sold, but not yet purchased, at fair value

Operating lease liabilities (Note 12)

3 unchanged sentences

Convertible notes (Note 10)

Debt (Note 12)

Deferred consideration – gold payments (Note 9)

4 unchanged sentences

Convertible, par value $ 0.01 ;

14.750 shares authorized, issued and

redemption value of $ 50,690 and $ 71,630 at September 30, 2020 and December 31, 2019,

respectively) (Note 14)

14.750 shares authorized, issued and outstanding;

redemption value of $ 88,642 and $ 72,667 at March 31, 2021 and December 31, 2020, respectively) (Note 11)

Contingencies (Note

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issued and outstanding:

148,782 and 155,264 at September 30, 2020 and December 31, 2019, respectively

149,811 and 148,716 at March 31, 2021 and December 31, 2020, respectively

Additional paid-in

8 unchanged sentences

(In Thousands, Except Per Share Amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Operating Revenues:

7 unchanged sentences

Contractual gold payments (Note 9)

Professional and consulting fees

Professional fees

Occupancy, communications and equipment

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Interest expense

Loss on revaluation of deferred consideration – gold payments (Note 11)

Gain/(loss) on revaluation of deferred consideration – gold payments (Note 9)

Interest income

Impairments (Note 26)

Loss on extinguishment of debt (Note 12)

Other gains and losses, net

Impairments (Notes 12 and 22)

Other losses, net

Income/(loss) before income taxes

Income tax expense/(benefit)

Net (loss)/income

(Loss)/earnings per share—basic

(Loss)/earnings per share—diluted

Weighted-average common shares—basic

Weighted-average common shares—diluted

Income tax benefit

Net income/(loss)

Earnings/(loss) per share – basic (Note 18)

Earnings/(loss) per share – diluted (Note 18)

Weighted-average common shares – basic (Note 18)

Weighted-average common shares – diluted (Note 18)

Cash dividends declared per common share

4 unchanged sentences

(In Thousands)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net (loss)/income

Other comprehensive income/(loss)

Reclassification of foreign currency translation adjustment to other gains and losses, net, upon the sale of WisdomTree Asset Management Canada Inc.

Three Months Ended March 31,

Net income/(loss)

Other comprehensive loss

Reclassification of foreign currency

translation adjustment to other losses, net, upon the sale of WisdomTree Asset Management Canada, Inc.

(“WTAMC” or “Canadian ETF business”) (Note 22)

Reclassification of foreign currency translation adjustment to other gains and losses, net, upon the liquidation of WisdomTree Japan Inc.

Foreign currency translation adjustment

Other comprehensive income/(loss)

Foreign currency translation adjustment, net of income taxes

Other comprehensive loss

Comprehensive income/(loss)

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(In Thousands)

For the Three Months Ended September 30, 2020

Comprehensive

Balance—July 1, 2020

Restricted stock issued and vesting of restricted stock units, net

Shares repurchased

Stock-based compensation

Allocation of equity component related to convertible notes, net of issuance costs of $ 29 and deferred taxes of $ 222

Other comprehensive income

Balance—September 30, 2020

For the Three Months Ended September 30, 2019

Comprehensive

Balance—July 1, 2019

Restricted stock issued and vesting of restricted stock units, net

Shares repurchased

Exercise of stock options, net

Stock-based compensation

Other comprehensive loss

Balance—September 30, 2019

The accompanying notes are an integral part of these consolidated financial statements

WisdomTree Investments, Inc.

and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity (Continued)

(In Thousands)

For the Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Comprehensive

Balance—January 1, 2021

Reclassification of equity component related to convertible notes, net of

deferred taxes of $ 1,022 , upon the implementation of ASU

Balance—January 1, 2021 (as adjusted)

Restricted stock issued and vesting of restricted stock units, net

2 unchanged sentences

Stock-based compensation

Allocation of equity component related to convertible notes, net of issuance costs of $ 157 and deferred taxes of $ 1,239

Other comprehensive loss

Balance—September 30, 2020

For the Nine Months Ended September 30, 2019

Balance—March 31, 2021

For the Three Months Ended March 31, 2020

Comprehensive

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Other comprehensive loss

Balance—September 30, 2019

Balance—March 31, 2020

The accompanying notes are an integral part of these consolidated financial statements

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(In Thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net (loss)/income

Adjustments to reconcile net (loss)/income to net cash provided by operating activities:

Advisory fees received in gold and other precious metals

Loss on revaluation of deferred consideration – gold payments (Note 11)

Contractual gold payments (Note 11)

Net income/(loss)

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

Advisory fees received in gold, other precious metals and bitcoin

Contractual gold payments

Stock-based compensation

Gain on sale – Canadian ETF business

Loss on extinguishment of debt

Amortization of right of use asset

Amortization of issuance costs – former credit facility

Deferred income taxes

(Gain)/loss on revaluation of deferred consideration – gold payments

Amortization of right of use asset

Amortization of issuance costs – convertible notes

Depreciation and amortization

interest income

Gain on sale – Canadian ETF business

Amortization of issuance costs - former credit facility

Changes in operating assets and liabilities:

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Accounts receivable

Income taxes receivable/payable

Prepaid expenses

Gold and other precious metals

Gold, other precious metals and bitcoin

Fund management and administration payable

Compensation and benefits payable

Income taxes receivable/payable

Securities sold, but not yet purchased, at fair value

1 unchanged sentence

Accounts payable and other liabilities

Net cash provided by operating activities

Net cash provided by/(used in) operating activities

Cash flows from investing activities:

Purchase of investments

Purchase of fixed assets

Funding of notes receivable

Proceeds from held-to-maturity

securities maturing or called prior to maturity

Proceeds from the sale of the Company’s financial interests in AdvisorEngine Inc.

Proceeds from sale of Canadian ETF business, net

Net cash provided by investing activities

Net cash (used in)/provided by investing activities

Cash flows from financing activities:

Repayment of long-term debt

Shares repurchased

Dividends paid

Convertible notes issuance costs

Proceeds from the issuance of convertible notes (Note 13)

Shares repurchased

Repayment of debt

Proceeds from exercise of stock options

1 unchanged sentence

Decrease in cash flow due to changes in foreign exchange rate

(Decrease)/increase in cash and cash equivalents

Cash and cash equivalents—beginning of period

Decrease in cash and cash equivalents

Cash and cash equivalents—beginning of year

Cash and cash equivalents—end of period

2 unchanged sentences

Cash paid for interest

On January 1, 2021, the Company reclassified the equity component related to the convertible notes, net of deferred taxes, increasing retained earnings by $ 616 , increasing the carrying value of the convertible notes by $ 4,088 , reducing additional paid-in capital by

$ 3,682 and reducing deferred tax liabilities by $ 1,022 , upon the implementation of Accounting Standards Update (“ASU”) 2020-06,

Debt – Debt with Conversion and Other Options

The accompanying notes are an integral part of these consolidated financial statements

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WisdomTree offers ETPs covering equity, commodity, fixed income, leveraged-and-inverse,

currency and alternative strategies.

currency, cryptocurrency and alternative strategies.

The Company has the following wholly-owned operating subsidiaries:

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WisdomTree Management Jersey Limited

(“ManJer”) is a Jersey based management company providing management services to seven

issuers (the “ManJer Issuers”) in respect of the ETPs issued and listed by the ManJer Issuers covering commodity, currency, cryptocurrency and leveraged-and-inverse

(“ManJer”) is a Jersey based management company providing management services to seven issuers (the “ManJer Issuers”) in respect of the ETPs issued and listed by the ManJer Issuers covering commodity, currency, cryptocurrency and leveraged-and-inverse

WisdomTree Multi Asset Management Limited

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These services are now provided directly by WTUK.

WisdomTree Europe Limited is no longer regulated and does not provide any regulated services.

WisdomTree Europe Limited is no longer r e

gulated and does not provide any regulated services.

WisdomTree Ireland Limited

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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.

(“WTCS”) is a New York based company that served as the managing owner and commodity pool operator of the WisdomTree Continuous Commodity Index Fund (“GCC”) until December 2020 when GCC was reorganized into the WisdomTree Enhanced Commodity Strategy Fund under WTT.

Significant Accounting Policies

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Segment and Geographic Information

Effective January 1, 2020, the Company, through its subsidiaries in the U.S.

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

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Marketing and Advertising

Advertising costs, including media advertising and production costs, are expensed when incurred.

Marketing and advertising costs, including media advertising and production costs, are expensed when incurred.

Depreciation and Amortization

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Third-Party Distribution Fees

The Company pays a percentage of its advisory fee revenues based on incremental growth in assets under management (“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

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The Company maintains deposits with financial institutions in an amount that is in excess of federally insured limits.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable

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 reasonable and supportable forecasts to amounts outstanding using the aging method.

The Company measures credit losses, if any, by applying historical loss rates, adjusted for current conditions and reasonable 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

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.

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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.

Credit-related impairments are recognized in earnings with a corresponding adjustment to the security’s amortized cost basis if the Company intends to sell the impaired AFS debt security or it is more likely than not the Company will be required to sell the security before recovering its amortized cost basis.

Other credit-related impairments are recognized as an allowance with a corresponding adjustment to earnings.

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.

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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.

The Company reviews its portfolio of held-to-maturity

securities for impairment on a quarterly basis, recognizing an allowance, if any, 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.

Investments in pass-through government-sponsored enterprises (“GSEs”) are determined to have an estimated loss rate of zero due to an implicit U.S.

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, 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 issuer.

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 issuer.

In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee.

8 unchanged sentences

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.

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.

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 a quantitative assessment using the market approach and its market capitalization when determining the fair value of the reporting units, in the aggregate.

Intangible Assets

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The annual impairment testing date for all of the Company’s intangible assets is November 30 th

Effective January 1, 2019, the Company accounts for its lease obligations in accordance with Accounting Standards Codification (“ASC”) Topic 842, Leases

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

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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.

Convertible Notes and Debt

Convertible notes and debt are carried at amortized cost, net of debt discounts and debt issuance costs.

The convertible notes are required to be separated into their liability and equity components by allocating the issuance proceeds to each of these components.

The liability component for convertible instruments that qualify for a derivative scope exception (applicable to the convertible notes) is allocated proceeds equal to the estimated fair value of similar debt instruments without the conversion option.

The difference between the gross proceeds received from the issuance of the convertible notes and the proceeds allocated to the liability component represents the residual amount that is recorded in additional paid-in

Interest expense is recognized using the effective interest method and includes amortization of debt discounts and debt issuance costs over the life of the debt.

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 observed on the CMX exchange, a selected discount rate and perpetual growth rate (Note 9).

Changes in the fair value of this obligation are reported as gain/(loss) on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations.

Convertible Notes

Convertible notes are carried at amortized cost, net of issuance costs.

Effective January 1, 2021, the Company early adopted ASU 2020-06

Debt – Debt with Conversion and Other Options

under the modified retrospective approach.

provides for convertible instruments being reported as a single liability (applicable to the convertible notes) or equity with no separate accounting for embedded conversion features unless the conversion feature meets the criteria for accounting under the substantial premium model or does not qualify for a derivative scope exception.

Previously, the convertible notes were required to be separated into their liability and equity components by allocating the issuance proceeds to each of those components.

The liability component was allocated proceeds equal to the estimated fair value of similar debt instruments without the conversion option.

The difference between the gross proceeds received from the issuance of the convertible notes and the proceeds allocated to the liability component represented the residual amount that was recorded in additional paid-in

Interest expense is recognized using the effective interest method and includes amortization of issuance costs over the life of the debt.

Contingencies

The Company may be subject to reviews, inspections and investigations by regulatory authorities as well as legal proceedings arising in the ordinary course of business.

The Company evaluates the likelihood of an unfavorable outcome of all legal or regulatory proceedings to which it is a party and accrues a loss contingency when the loss is probable and reasonably estimable.

Contingent Payments

The Company recognizes contingent payments when the contingency is resolved and the gain is realized.

Earnings per Share

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Potential common shares associated with the Series A non-voting

convertible preferred stock and the convertible notes are computed under the if-converted

convertible preferred stock and the convertible notes are co m

puted under the if-converted

Potential common shares associated with the conversion option embedded in the convertible notes are dilutive when the Company’s average stock price exceeds the conversion price.

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The Company records interest expense and penalties related to tax expenses as income tax expense.

The Global Intangible Low-Taxed

Income (“GILTI”) provisions of the Tax Reform Act requires the Company to include in its U.S.

income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.

An accounting policy election is available to either account for the tax effects of GILTI in the period that is subject to such taxes or to provide deferred taxes for book and tax basis differences that upon reversal may be subject to such taxes.

The Company accounts for the tax effects of these provisions in the period that is subject to such tax.

based taxes are recorded as part of other liabilities and other expenses.

Recently Issued Accounting

Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued

Recently Adopted Accounting Pronouncements

On January 1, 202 1

, the Company early adopted ASU 2020-06,

Debt – Debt with Conversion and Other Options

(ASU 2020-06)

Under the ASU, the accounting for convertible instruments will be simplified by removing major separation models required under current GAAP.

Accordingly, more convertible instruments will be reported as a single liability or equity with no separate accounting for embedded conversion features.

Certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception will be removed and, as a result, more equity contracts will qualify for the scope exception.

The ASU will also simplify the diluted earnings-per-share

under the modified retrospective approach.

Under the ASU, the accounting for convertible instruments was simplified by removing major separation models required under current GAAP.

Accordingly, more convertible instruments are reported as a single liability or equity with no separate accounting for embedded conversion features.

Certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception are removed and, as a result, more equity contracts will qualify for the scope exception.

The ASU also simplifies the diluted earnings-per-share

calculation in certain areas.

The ASU will be effective for years beginning after December 31, 2021, including interim periods within those fiscal years.

Early adoption is permitted for fiscal periods

beginning after December 15, 2020 (including interim periods within the same fiscal year).

The adoption of this ASU will result in a reduction

of interest expense recognized on the Company’s recently issued convertible notes (Note 13) of approximately $ 420 per quarter.

The Company expects to early adopt the ASU.

In December 2019, the FASB issued ASU 2019-12,

Upon the adoption of this ASU,

the Company reclassified the equity component related to the convertible notes, net of deferred taxes, increasing retained earnings by $ 616 , increasing the carrying value of the convertible notes by $ 4,088 , reducing additional paid-in capital

by $ 3,682 and reducing deferred tax liabilities by $ 1,022 .

These updates also reduced interest expense recognized on the Company’s convertible notes by approximately $ 420 per quarter (Note 10).

On January 1, 2021, the Company adopted ASU 2019-12,

Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes

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(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

period when a year-to-date loss exceeds the anticipated loss for the year.

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

(a) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and accoun t

for any incremental amount as a non-income-based

(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;

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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.

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 and has not early adopted this ASU

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 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.

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.

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.

The Company has determined that the adoption of this standard did not have a material impact on its financial statements.

Table of Content s

Cash and Cash Equivalents

Of the total cash and cash equivalents of

63,561 and $ 74,972 at September 30, 2020 and December 31, 2019, respectively, $ 59,038 and $ 72,120 were held at two financial institutions.

At September 30, 2020 and December 31, 2019, cash equivalents were approximately $ 2,577 and $ 317 , respectively.

Of the total cash and cash equivalents of $ 62,302 and $ 73,425 at March 31, 2021 and December 31, 2020, respectively, $ 59,919 and $ 70,911 were held at two financial institutions.

At March 31, 2021 and December 31, 2020, cash equivalents were approximately $ 502 and $ 660 , respectively.

Certain of the Company’s international subsidiaries are required to maintain a minimum level of regulatory capital, which was $ 12,222

10,644 and $ 12,312 at September 30, 2020 and December 31, 2019, respectively.

and $ 10,745 at March 31, 2021 and December 31, 2020, respectively.

These requirements are generally satisfied by cash on hand.

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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

ASC 820, Fair Value Measurement

, 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.

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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.

Quoted prices for identical instruments in active markets.

Quoted prices for similar instruments in active markets;

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The tables below summarize the categorization of the Company’s assets and liabilities measured at fair value.

During the three and nine months ended September 30, 2020 and 2019 there were no transfers between Levels 2 and 3.

September 30, 2020

During the three months ended March 31, 2021 and 2020 there were no transfers between Levels 2 and 3.

March 31, 2021

Recurring fair value measurements:

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Securities owned, at fair value

Recurring fair value measurements:

Deferred consideration (Note 11)

Pass-through GSEs

Corporate bonds

Non-recurring

fair value measurements:

Convertible notes (1)

Fair value determined on August 13, 2020 (Note 13)

Securrency, Inc.

– Series A convertible preferred stock (1)

Recurring fair value measurements:

Deferred consideration (Note 9)

Fair value determined on March 8, 2021 (Note 7).

December 31, 2020

Recurring fair value measurements:

Cash equivalents

Securities owned, at fair value

Pass-through GSEs

Corporate bonds

Non-recurring

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AdvisorEngine Inc.

– Financial interests (1)

(“AdvisorEngine”) – Financial interests (1)

Thesys Group, Inc.

(“Thesys”) – Series Y Preferred Stock (1)

Recurring fair value measurements:

Deferred consideration (Note 12)

Securities sold, but not yet purchased

Fair value determined on December 31, 2019 (Note 7).

Non-recurring

fair value measurements:

Convertible notes (2)

The fair value of the AdvisorEngine financial interests of $ 9,592 was determined on May 4, 2020, the date in which these financial interests were sold (Note 22).

Thesys was written down to zero on September 30, 2020.

Fair value of $ 145,847 and $ 24,344 determined on June 16, 2020 and August 13, 2020, respectively (Note 10).

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

These investments are valued at par, which approximates fair value, and are c

onsidered Level 1.

Securities Owned/Sold but Not Yet Purchased (Note 5)

– Securities owned and sold, but not yet purchased are investments in ETFs, pass-through GSEs and corporate bonds.

– These financial assets represent cash invested in highly liquid investments with ori g

inal maturities of less than 90 days.

These investments are valued at par, which approximates fair value, and are classified as Level 1 in the fair value hierarchy.

Securities Owned (Note 5)

– Securities owned are investments in ETFs, pass-through GSEs and corporate bonds.

ETFs are generally traded in active, quoted and highly liquid markets and are therefore classified as Level 1 in the fair value hierarchy.

Pricing of pass-through GSEs and corporate bonds include consideration given to collateral characteristics and market assumptions related to yields, credit risk and prepayments and are therefore classified as Level 2.

Deferred Consideration (Note 9)

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Deferred consideration (Note 9)

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Net realized losses (1)

Net unrealized losses/(gains) (2)

Ending balance

Net unrealized (gains)/losses (2)

Ending balanc e

Recorded as contractual gold payments expense on the Company’s Consolidated Statements of Operations.

Recorded as loss on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations.

Securities Owned/Sold, but Not Yet Purchased

Recorded as gain/(loss) on revaluation of deferred consideration – gold payments on the Company’s Consolidated Statements of Operations.

Securities Owned

These securities consist of the following:

September 30,

Securities Owned

Trading securities

Securities Sold, but not yet Purchased

Trading securities

The Company had no AFS debt securities at September 30, 2020 and December 31, 2019.

During the three months ended March 31, 2021 and 2020, the Company recognized trading losses of $ 561 and $ 196 ,

respectively on securities owned that were still held at the reporting dates.

The Company had no AFS debt securities at March 31, 2021 and December 31, 2020.

Securities Held-to-Maturity

The following table is a summary of the Company’s securities held-to-maturity:

September 30,

Debt instruments:

Pass-through GSEs (amortized cost)

During the nine months ended September 30, 2020 and 2019, the Company received proceeds of $ 16,441

and $ 2,313 , respectively, from held-to-maturity

During the three months ended March 31, 2021 and 2020, the Company received proceeds of $ 38 and $ 6,030 , respectively, 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:

September 30,

Cost/amortized cost

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government guarantee.

In addition, no securities were determined to be other-than-temporarily impaired at December 31, 2019.

The following table sets forth the maturity profile of the securities held-to-maturity;

however, these securities may be called prior to maturity date:

September 30,

Due within one year

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Due over ten years

AdvisorEngine Inc.

– Sale of Financial Interests

On May 4, 2020, the Company closed a transaction to exit its investment in AdvisorEngine Inc.

(“AdvisorEngine”).

The fair value of upfront consideration paid to the Company was $ 9,592 .

Consideration also includes contingent payments totaling up to $ 10,408 which will be payable only upon AdvisorEngine achieving certain revenue milestones during the first through fourth anniversaries of such exit.

The fair value of the contingent payments was determined to be insignificant at closing and was measured using a Monte-Carlo simulation whereby forecasted revenue assumed during the first, second, third and fourth years was simulated forward in a risk-neutral framework to determine whether the revenues would exceed the pre-defined

revenue targets.

The table below presents the range and weighted averages of significant unobservable inputs utilized in the Monte-Carlo simulation (classified as Level 3 in the fair value hierarchy):

Unobservable Inputs (Initial Recognition – May 4, 2020

Forecasted revenue simulated forward as a percentage of the pre-defined

revenue targets

34 % - 71 % ( 47 % weighted average)

Revenue volatility

The weighted-average forecasted revenue simulated forward as a percentage of the pre-defined

revenue targets represents the arithmetic average of the percentages for each of the four years.

An increase in the forecasted revenue percentages and revenue volatility input would result in a higher fair value.

The contingent payments are subsequently remeasured when the contingency is resolved and the gain is realized.

Summarized below are the financial interests previously held:

September 30, 2020

December 31, 2019

Unsecured convertible note

Unsecured non-convertible

Subtotal—Notes receivable

Preferred stock

Net of an impairment of $ 30,138 at December 31, 2019.

During the nine months ended September 30, 2020, the Company recorded an impairment of $ 19,672 on the carrying value of the notes receivable.

During the three and nine months ended September 30, 2020, the Company recognized a gain of $ 225 and $ 1,093 , respectively, arising from an adjustment to the estimated fair value of consideration received from the sale of its

financial interests in AdvisorEngine.

These gains were included in other gains and losses, net on the Consolidated Statements of Operations.

Notes Receivable

On May 4, 2020, the Company closed a transaction to exit its investment in AdvisorEngine.

See Note 7 for additional information.

Accrued Interest

Effective January 1, 2020, notes receivable were placed on non-accrual

The Company recognized no interest income on notes receivable during the three and nine months ended September 30, 2020.

During the three and nine months ended September 30, 2019, the Company recognized interest income of $ 633 and $ 1,856 , respectively.

The following table sets forth the Company’s investments:

September 30,

Securrency – Preferred stock

Thesys Group, Inc.

March 31, 2021

December 31, 2020

Securrency, Inc.

– Series A convertible preferred stock

Securrency, Inc.

– Series B convertible preferred stock

Securrency, Inc.

– Preferred Stock

On December 27, 2019, the Company made a $ 8,112 strategic investment in Securrency, Inc.

(“Securrency”), a leading developer of institutional-grade blockchain-based financial and regulatory technology.

In consideration of its investment, the Company received 5,178,488 shares of Series A convertible preferred stock representing approximately 25 % ownership of Securrency (or approximately 20 % on a fully diluted basis).

The shares of Series A preferred stock are convertible into common stock at the option of the Company and contain various rights and protections including a non-cumulative

6.0 % dividend, payable if and when declared by the board of directors of Securrency, and a liquidation preference that is senior to the holders of common stock.

In addition, the Company has redemption rights which provide that, at any time on or after December 31, 2029, upon approval by holders of at least 60 % of the Series A preferred stock then outstanding, Securrency will be required to redeem all of the outstanding shares of Series A preferred stock for the original issue price thereof, plus all declared and unpaid dividends.

The Company owns approximately 25 % (or 20 % on a fully-diluted basis) of the capital stock of Securrency, Inc.

(“Securrency”), a leading developer of institutional-grade blockchain-based financial and regulatory technology, issued as a result of strategic investments totaling $ 13,612 .

In consideration of such investments, the Company received 5,178,488 shares of Series A convertible preferred stock (“Series A Shares”) and 2,004,665 shares of Series B convertible preferred stock (“Series B Shares”).

The Series B Shares contain a liquidation preference that is pari passu with shares of Series B-1

convertible preferred stock (which is substantially the same as the Series B Shares except that it has l i

mited voting rights) and senior to that of the holders of the Series A Shares, which is senior to the holders of common stock.

Otherwise, the Series A Shares and Series B Shares have substantially the same terms

, are convertible into common stock at the option of the Company and contain various rights and protections including a non-cumulative

6.0 % dividend, payable if and when declared by the board of directors of Securrency.

In addition, the Series A Shares and Series B Shares (together with the Series B-1

convertible preferred stock) are separately redeemable, with respect to all of the shares outstanding of the applicable series of preferred stock ( subject to certain regulatory restrictions of certain investors), for the original issue price thereof, plus all declared and unpaid dividends, upon approval by holders of at least

60 % of the Series A Shares (at any time on or after December 31, 2029) and

of the Series B Shares (at any time on or after March 31, 2031).

The investment is accounted for under the measurement alternative prescribed within ASU 2016-01,

as it is not considered to be in-substance

common stock and is assessed for impairment and similar observable transactions on a quarterly basis.

There was no impairment recognized during the three and nine months ended September 30, 2020 based upon a qualitative assessment.

In addition, there were no observable price changes during the reporting period.

On June 20, 2017, the Company was issued 7,797,533 newly authorized shares of Series Y preferred stock (“Series Y Preferred”) of Thesys in connection with the resolution of a dispute related to the Company’s ownership stake in Thesys.

The Series Y Preferred represents current ownership of approximately 19 % of Thesys on a fully diluted basis.

The Series Y Preferred is accounted for under the measurement alternative prescribed within ASU 2016-01

as it is not considered to be in-substance

common stock and is assessed for impairment and similar observable transactions on a quarterly basis.

During the three and nine months ended September 30, 2020, the Company recognized an impairment of $ 3,080 on its Series Y Preferred as Thesys has underperformed financially when assessed against prior expectations.

The carrying value of the Series Y Preferred was $ 0 and $ 3,080 at September 30, 2020 and December 31, 2019, respectively.

as it does not have a readily determinable fair value and is not considered to be in-substance

common stock.

The investment is assessed for impairment and similar observable transactions on a quarterly basis.

On March 8, 2021, the Company recognized a gain of $ 237 on its Series A Shares, which was re-measured to fair value upon the issuance of Securrency’s Series B Shares.

Fair value was determined using the backsolve method, a valuation approach that determines the value of shares for companies with complex capital structures based upon the price paid for shares recently issued.

Fair value is allocated across the capital structure using the Black-Scholes option pricing model.

The table below presents the inputs used in backsolve valuation approach (classified as Level 3 in the fair value hierarchy):

Inputs (Initial Recognition – March 8, 2021)

Expected volatility

Time to exit (in years)

There was no impairment recognized during the three months ended March 31, 2020 based upon a qualitative assessment.

Fixed Assets, net

The following table summarizes fixed assets:

September 30,

Furniture and fixtures

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(a physically backed gold ETP issuer) if the Company fails to remit any amounts due.

The Company determined the present value of the deferred consideration of $ 207,748 and $ 173,024 at September 30, 2020 and December 31, 2019 using the following assumptions:

September 30,

The Company determined the present value of the deferred consideration of $ 227,146 and $ 230,137 at March 31, 2021 and December 31, 2020 using the following assumptions:

Forward-looking gold price (low) – per ounce

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Perpetual growth rate

The forward-looking gold prices at September 30, 2020 were extrapolated from the last observable price (beyond 2026) and 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.

Current amounts payable were $ 17,202 and $ 13,953 and long-term amounts payable were $ 190,546 and $ 159,071 , respectively, at September 30, 2020 and December 31, 2019, respectively.

During the three and nine months ended September 30, 2020 and 2019, the Company recognized the following in respect of deferred consideration:

The forward-looking gold prices at March 31, 2021 were extrapolated from the last observable CMX exchange price (beyond 2026) and the weighted-average price per ounce was derived from the relative present values of the annual payment obligations.

The perpetual growth rate was determined based upon the increase in observable forward-looking gold prices through 2026.

This obligation is classified as Level 3 as the discount rate and extrapolated forward-looking gold prices are significant unobservable inputs.

An increase in spot gold prices, 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.

Current amounts payable were $ 15,637 and $ 17,374 and long-term amounts payable were $ 211,509 and $ 212,763 , respectively, at March 31, 2021 and December 31, 2020, respectively.

During the three months ended March 31, 2021 and 2020, the Company recognized the following in respect of deferred consideration:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Contractual Gold Payments

Contractual Gold Payments – gold ounces paid

Loss on revaluation of deferred consideration – gold payments (1)

Losses arise due to 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.

Credit Facility

The following table provides a summary of the Company’s outstanding borrowings under its credit facility:

September 30, 2020

December 31, 2019

Amount borrowed

Amounts repaid

Amounts outstanding

Unamortized issuance costs

Carrying amount

Effective interest rate

Includes $ 5,000 and $ 174,000 repaid on March 31, 2020 and June 16, 2020, respectively.

On June 16, 2020, the Company terminated its credit facility by repaying $ 174,000 that was outstanding under its term loan and terminating the revolver.

A loss on extinguishment of debt of $ 2,387 was recognized during the nine months ended September 30, 2020, which represented the write-off

of the remaining unamortized issuance costs.

Interest expense recognized on the credit facility during the three months ended September 30, 2019 was $ 2,832 and during the nine months ended September 30, 2020 and 2019 was $ 4,086 and $ 8,634 , respectively.

Gain/(loss) on revaluation of deferred consideration – gold payments(1)

Gains on revaluation of deferred consideration – gold payments result from a decrease in spot gold prices, a decrease in the forward-looking price of gold, a decrease in the perpetual growth rate and an increase in the discount rate used to compute the present value of the annual payment obligations.

Losses on revaluation of deferred consideration – gold payments result from an increase in spot gold prices, an increase in the forward-looking price of gold, an increase in the perpetual growth rate and a decrease in the discount rate used to compute the annual payment obligations.

Convertible Notes

On August 13, 2020, the Company issued and sold $ 25,000 in aggregate principal amount of 4.25 % Convertible Senior Notes due 2023 (the “Additional Notes”) pursuant to an Indenture (the “Indenture”), dated June 16, 2020, between the Company and U.S.

On June 16, 2020, the

Company issued and sold $ 150,000 in aggregate principal amount of 4.25 % Convertible Senior Notes due 2023

(the “Existing Notes”) pursuant to an Indenture (the “Indenture”), dated June 16, 2020, between the Company and U.S.

Bank National Association, as trustee (the “Trustee”), in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The Additional Notes were issued at a price equal to 101% of the principal amount thereof, plus interest deemed to have accrued since June 16, 2020, and constitute a further issuance of, and form a single series with, the Company’s outstanding 4.25 % Convertible Senior Notes due 2023 issued on June 16, 2020 in the aggregate principal amount of $ 150,000 (the “Existing Notes” and together with the Additional Notes, the “Convertible Notes”).

Immediately after giving effect to the issuance of the Additional Notes, the Company had

On August 13, 2020, the Company issued and sold $ 25,000 in aggregate principal amount of 4.25 % Convertible Senior Notes due

2023 (the “Additional Notes”) at a price equal to 101% of the principal amount thereof, plus interest deemed to have accrued since June 16, 2020, and constitute a further issuance of, and form a single series with, the Company’s Existing Notes (the Additional Notes and together with the Existing Notes, the “Convertible Notes”).

After the issuance of the Additional Notes, the Company had

$ 175,000 aggregate principal amount of Convertible Notes outstanding.

The Company used approximately $ 28,297 of the net proceeds from the issuance of the Convertible Notes to repurchase 7,487,335 shares of the Company’s common stock at an average price of $ 3.78 per share.

Key terms of the Convertible Notes are as follows:

6 unchanged sentences

Holders may convert at their option at any time prior to the close of business on the business day immediately preceding March 15, 2023 only under the following circumstances:

(i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020, if the last reported sale price of the Company’s common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

(i) if the last reported sale price of the Company’s common stock for at least 20 trading days during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

(ii) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sales price of the Company’s common stock and the conversion rate on each such trading day;

(iii) upon a notice of redemption delivered by the Company in accordance with the terms in the Indenture but only with respect to the Convertible Notes called (or deemed called) for redemption;

(iii) upon a notice of redemption delivered by the Company in accordance with the terms of

the Indenture but only with respect to the Convertible Notes called (or deemed called) for redemption;

or (iv) upon the occurrence of specified corporate events.

2 unchanged sentences

Upon conversion, the Company will pay cash up to the aggregate principal amount of the Convertible Notes to be converted.

At its election, the Company will also settle its conversion obligation in excess of the aggregate principal amount to the Convertible Notes being converted in either cash, shares of its common stock or a combination of cash and shares of its common stock.

At its election, the Company will also settle its conversion obligation in excess of the aggregate principal amount of

the Convertible Notes being converted in either cash, shares of its common stock or a combination of cash and shares of its common stock.

Redemption price of $7

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The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25 % in aggregate principal amount of the Convertible Notes outstanding may declare the entire principal amount of all the Convertible Notes to be repurchased, plus any accrued special interest, if any, to be immediately due and payable.

The following table provides a summary of the carrying value of the Convertible Notes at September 30, 2020:

Additional Notes

Existing Notes

The following table provides a summary of the carrying value of the Convertible Notes at March 31, 2021 and December 31, 2020:

Principal amount

on Additional Notes

premium on Additional Notes

Gross proceeds

Unamortized debt discount and issuance costs (1)

Unamortized discount (1)

Unamortized issuance costs (1)

Carrying amount

Effective interest rate (2)

The debt discount arose from the bifurcation of the conversion option.

The unamortized debt discount and issuance costs is reported net of the unamortized premium on the Additional Notes.

Includes amortization of the discount arising from the bifurcation of the conversion option, amortization of the issuance costs allocated to the Convertible Notes and amortization of the premium associated with the Additional Notes.

Convertible instruments are required to be separated into their liability and equity components by allocating the issuance proceeds to each of those components.

The liability component for convertible instruments that qualify for a derivative scope exception (applicable to the Convertible Notes) is allocated proceeds equal to the estimated fair value of similar debt without the conversion option.

The difference between the gross proceeds received from the issuance of the Convertible Notes and the proceeds allocated to the liability component represents the residual amount that is recorded in additional paid-in

The debt discount arising from the recognition of this residual amount is amortized as interest expense over the life of the Convertible Notes.

The Company estimated the fair value of the liability component of the Convertible Notes to be $ 170,191 , which represents the present value of the future contractual payments, discounted using the Company’s estimated nonconvertible debt borrowing rate of 5.33 % (classified as level 2 in the fair value hierarchy) on the pricing date.

The excess of the gross proceeds received over the estimated fair value of the liability component totaling $ 5,059 ($906 and $4,153 for the Additional Notes and Existing Notes, respectively) was allocated to the conversion option (along with a proportional share of issuance costs totaling $ 157 )

and was recorded in additional paid-in

capital, net of deferred taxes.

Interest expense recognized during the three and nine months ended September 30, 2020 was $ 2,511 and $ 2,888 , respectively.

Interest payable of $ 2,173 at September 30, 2020 is included in accounts payable and other liabilities on the Consolidated Balance Sheets.

The fair value of the Convertible Notes (classified as Level 2 in the fair value hierarchy) was $ 167,153 at September 30, 2020.

Unamortized discount was

reduced by $ 4,207 and unamortized issuance costs increased by $ 119 upon the early adoption of ASU 2020-06

on January 1, 2021.

The discount previously arose from the bifurcation of the conversion option which occurred prior to the adoption of ASU 2020-06.

The unamortized issuance costs are reported net of the unamortized premium on the Additional Notes.

Includes amortization of the issuance costs allocated to the Convertible Notes and amortization of the premium associated with the Additional Notes.

The effective interest rate prior to January 1, 2021 also included amortization of the discount arising from the bifurcation of the conversion option.

On January 1, 2021, the Company early adopted ASU 2020-06,

which simplified the accounting for convertible instruments by providing for such instruments being reported as a single liability (applicable to the convertible notes) or equity with no separate accounting for the embedded conversion features unless the conversion feature meets the criteria for accounting under the substantial premium model or does not qualify for a derivative scope exception.

Previously, convertible instruments were required to be separated into their liability and equity components by allocating the issuance proceeds to each of those components.

The discount arising from the recognition of the equity component was amortized as interest expense over the life of the Convertible Notes.

Interest expense on the convertible notes during the three months ended March 31, 2021 was $ 2,296 .

Interest expense during the three months ended March 31, 2020 of $ 2,419 was attributable to our former credit facility which was terminated on June 16, 2020.

Interest payable of $ 2,209 and $ 342 at March 31, 2021 and December 31, 2020 is included in accounts payable and other liabilities on the Consolidated Balance Sheets.

The fair value of the Convertible Notes (classified as Level 2 in the fair value hierarchy) was $ 214,972 at March 31, 2021.

The if-converted

value of the Convertible Notes did not exceed the principal amount at September 30, 2020.

value of the Convertible Notes was $ 184,755 at March 31, 2021.

Preferred Shares

8 unchanged sentences

The following is a summary of the Preferred Share balance:

September 30,

Issuance of Preferred Shares

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(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.

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.

2 unchanged sentences

Such redemption payment will be made in one payment no later than 10 business days following the last day of the Company’s first fiscal quarter that begins on a date following the date ETFS Capital exercises such redemption right.

The redemption value of the Preferred Shares was $ 50,690 and $ 71,630 at September 30, 2020 and December 31, 2019, respectively.

The carrying amount of the Preferred Shares was not adjusted

as it was not probable that the Preferred Shares would become redeemable.

The redemption value of the Preferred Shares was $ 88,642 and $ 72,667 at March 31, 2021 and December 31, 2020, respectively.

The carrying amount of the Preferred Shares was not adjusted as it was not probable that the Preferred Shares would become redeemable.

The Company has entered into operating leases for its corporate headquarters and other office facilities, financial data terminals and equipment.

1 unchanged sentence

The following table provides additional information regarding the Company’s leases:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Operating lease cost

7 unchanged sentences

None of the Company’s leases include variable payments, residual value guarantees or any restrictions or covenants relating to the Company’s ability to pay dividends or incur additional financing obligations.

The Company’s lease of its headquarters, which expires on August 20, 2029, includes an option to extend for an additional five years.

Rent payable under the option is equal to the fair market rent of the premises

as determined by the landlord approximately six months prior to the commencement of the extension term.

The Company’s lease of its headquarters, which expires in

August 2029, includes an option to extend for an additional five years.

Rent payable under the option is equal to the fair market rent of the premises as determined by the landlord approximately six months prior to the commencement of the extension term.

The lease also includes a cancellation option which is effective on August 21, 2024 and requires notice to be provided to the landlord at least 12 months prior.

5 unchanged sentences

asset and lease liability.

The following table discloses future minimum lease payments at September 30, 2020 with respect to the Company’s operating lease liabilities:

During the three months ended March 31, 2021, the Company recognized an impairment charge of $ 303 resulting from the derecognition of a right-of-use asset upon exiting its London office in February 2021, as well as costs incurred to restore the office space to its original condition.

The following table discloses future minimum lease payments at March 31, 2021 with respect to the Company’s operating lease liabilities:

Remainder of 2021

1 unchanged sentence

Total future minimum lease payments (undiscounted)

The following table reconciles the future minimum lease payments (disclosed above) at September 30, 2020 to the operating lease liabilities recognized in the Company’s Consolidated Balance Sheet:

The following table reconciles the future minimum lease payments at March 31, 2021 (disclosed above) to the operating lease liabilities recognized in the Company’s Consolidated Balance Sheet:

Amounts recognized in the Company’s Consolidated Balance Sheet

5 unchanged sentences

The Company may be subject to reviews, inspections and investigations by regulatory authorities as well as legal proceedings arising in the ordinary course of business.

The Company is not currently party to any litigation that is expected to have a material adverse impact on its business, financial position, results of operations or cash flows.

Closure of the WisdomTree WTI Crude Oil 3x Daily Leveraged ETP

In December 2020, WMAI, WTMAML, WTUK and WisdomTree Ireland Limited were served with a writ of summons to appear before the Court of Milan, Italy, and in January 2021, WTUK was served with a writ of summons to appear before the Court of Udine, Italy.

Investors had filed actions seeking approximately € 9,000 ($ 10,565 ), in the aggregate, resulting from the closure of the WisdomTree WTI Crude Oil 3x Daily Leveraged ETP (“3OIL”) in March 2020.

The product was dependent on the receipt of payments from a swap provider to satisfy payment obligations to the investors.

Due to an extreme adverse move in oil futures relative to the oil futures’ closing price, the swap contract underlying 3OIL was terminated by the swap provider, which resulted in the compulsory redemption of 3OIL, all in accordance with the prospectus.

The Company is currently assessing these claims and an accrual has not been made with respect to these matters at March 31, 2021 and December 31, 2020.

Variable Interest Entities

6 unchanged sentences

The primary beneficiary is the party who has both (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity.

The Company is not the primary beneficiary of any entities in which it has a variable interest as it does not have the power to direct the activities that most significantly impact the entities’ economic performance.

Such power is conveyed through the entities’ boards of directors and the Company does not have control over the boards.

The Company is not the primary beneficiary of the entity in which it has a variable interest as it does not have the power to direct the activities that most significantly impact the entity’s economic performance.

Such power is conveyed through the entity’s board of directors and the Company does not have control over the board.

The following table presents information about the Company’s variable interests in non-consolidated

September 30,

Carrying Amount – Assets (Securrency)

Preferred stock (Note 9)

Carrying Amount – Assets (AdvisorEngine)

Unsecured convertible notes receivable

Unsecured non-convertible

note receivable

Preferred stock

Total carrying amount (Note 7)

Total carrying amount – Assets

Preferred stock – Series A Shares

Preferred stock – Series B Shares

Total (Note 7)

Maximum exposure to loss

2 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Revenues from contracts with customers:

14 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Revenues from contracts with customers:

3 unchanged sentences

Related Party Transactions

The Company’s revenues are derived primarily from investment advisory agreements with related parties.

The Company’s revenue s

are derived primarily from investment advisory agreements with related parties.

Under these agreements, the Company has licensed to related parties the use of certain of its own indexes for the U.S.

and WisdomTree UCITS ETFs.

WisdomTree ETFs and WisdomTree UCITS ETFs.

The Board of Trustees and Board of Directors (including certain officers of the Company) of the related parties are primarily responsible for overseeing the management and affairs of the entities for the benefit of their stakeholders and have contracted with the Company to provide for general management and administration services.

2 unchanged sentences

In exchange, the Company receives fees based on a percentage of the ETPs’ average daily net assets.

The advisory agreements may be terminated by the related parties upon notice.

A majority of the independent members of the Board of Trustees are required to annually approve the advisory agreements of the U.S.

WisdomTree ETFs and these agreements may be terminated by the Board of Trustees upon notice.

The following table summarizes accounts receivable from related parties which are included as a component of accounts receivable on the Company’s Consolidated Balance Sheets:

September 30,

Receivable from WTT

1 unchanged sentence

Receivable from WMAI and WTI

Receivable from WTAMC (Note 25)

Receivable from WTCS

3 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Advisory services provided to WTT

3 unchanged sentences

Advisory services provided to WTCS

The Company also has investments in certain WisdomTree ETFs of approximately $ 23,906 and $ 16,886 at September 30, 2020 and December 31, 2019, respectively.

Gains related to trading WisdomTree

ETFs during the three months ended September 30, 2020 and 2019 were $ 86 and $ 64 , respectively, and during the nine months ended September 30, 2020 and 2019 were $ 94 and $ 212 , respectively.

The Company also has investments in certain WisdomTree ETFs of approximately $ 23,626 and $ 23,932 at March 31, 2021 and December 31, 2020, respectively.

Losses related to trading WisdomTree ETFs during the three months ended March 31, 2021 and 2020 were $ 384 and $ 290 , respectively, which are recorded in other losses, net on the Consolidated Statements of Operations.

Stock-Based Awards

3 unchanged sentences

Stock options:

Generally issued for terms of ten years and may vest after at least one year of service and have an exercise price equal to the Company’s stock price on the grant date.

The Company estimates the fair value of stock options (when granted) using the Black-Scholes option pricing model.

Generally issued for terms of ten years and may vest after at least one year of service and have an exercise price equal to

Company’s stock price on the grant date.

The Company estimates the fair value of stock options (when granted) using the

Scholes option pricing model.

Awards are valued based on the Company’s stock price on grant date and generally vest ratably over three years.

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The number of PRSUs vesting ranges from 0 % to 200 % of the target number of PRSUs granted, as follows:

If the relative TSR is below the 25 th

percentile, then 0 % of the target number of PRSUs granted will vest;

If the relative TSR is at the 25 th

percentile, then 50 % of the target number of PRSUs granted will vest;

If the relative TSR is above the 25 th

percentile, then linear scaling is applied such that the percent of the target number of PRSUs vesting is 100 % at the 50 th

percentile and capped at 200 % of the target number of PRSUs granted for performance at the 100 th

Stock-based compensation during the three months ended September 30, 2020 and 2019 was $ 2,844 and $ 2,374 , respectively, and during the nine months ended September 30, 2020 and 2019 was $ 9,003 and $ 8,581 , respectively.

• If the relative TSR is below the 25th percentile, then 0 % of the target number of PRSUs granted will vest;

• If the relative TSR is at the 25th percentile, then 50 % of the target number of PRSUs granted will vest;

• If the relative TSR is above the 25th percentile, then linear scaling is applied such that the percent of the target number of PRSUs vesting is 100 % at the 50th percentile and capped at 200 % of the target number of PRSUs granted for performance at the 85th percentile (or 100th percentile for grants made during 2019 and 2020).

Stock-based compensation expense during

the three months ended March 31, 2021 and 2020 was $ 3,143 and $ 3,239 , respectively.

A summary of unrecognized stock-based compensation expense and average remaining vesting period is as follows:

September 30, 2020

March 31, 2021

Unrecognized Stock-

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Employees and directors

A summary of stock-based compensation award activity during the three months ended September 30, 2020

is as follows:

Balance at July 1, 2020

A summary of stock-based compensation award activity during the three months ended March 31, 2021 is as follows:

Balance at January 1, 2021

Exercised/vested

Balance at September 30, 2020

Balance at March 31, 2021

Represents the target number of PRSUs granted and outstanding.

The number of PRSUs that ultimately vest ranges from 0 % to 200 % of this amount.

A Monte-Carlo simulation was used to value these awards using the following assumptions for the Company and the peer group:

(i) beginning 90-day

average stock prices;

(ii) valuation date stock prices;

(iii) historical stock price volatilities ranging from 34 % to 57 % (average 44 %);

(iv) correlation coefficients based upon the price data used to calculate the historical volatilities;

(v) a risk free interest rate of 0.17 %;

and (vi) an expected dividend yield of 0 %.

Earnings Per Share

The following tables set forth reconciliations of the basic and diluted earnings per share computations for the periods presented:

September 30,

Nine Months Ended

September 30,

Basic (Loss)/Earnings per Share

Net (loss)/income

Three Months Ended March 31,

Basic Earnings/(Loss) per Share

Net income/(loss)

Income distributed to participating securities

Undistributed income allocable to participating securities

Net (loss)/income available to common stockholders – Basic EPS

Net income/(loss) available to common stockholders – Basic EPS

Weighted average common shares (in thousands)

Basic (loss)/earnings per share

Three Months Ended

September 30,

Nine Months Ended

September 30,

Diluted (Loss)/Earnings per Share

Net (loss)/income available to common stockholders

Basic earnings/(loss) per share

Three Months Ended March 31,

Diluted Earnings/(Loss) per Share

Net income/(loss) available to common stockholders

Undistributed income allocable to participating securities

Reallocation of undistributed income allocable to participating securities considered potentially dilutive

Net (loss)/income available to common stockholders – Diluted EPS

Net income/(loss) available to common stockholders – Diluted EPS

Weighted Average Diluted Shares (in thousands)

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Weighted average diluted shares, excluding participating securities (in thousands)

Diluted (loss)/earnings per share

Diluted (loss)/earnings per share presented above is calculated using the two-class

Diluted earnings/(loss) per share

Diluted earnings/(loss) per share presented above is calculated using the two-class

method as this method results in the lowest diluted earnings per share amount for common stock.

During the three and nine months ended September 30, 2020, there were no dilutive common stock equivalents as the Company reported a net loss for the period.

During the three months ended March 31, 2020, there were no dilutive common stock equivalents as the Company reported a net loss for the period.

Total antidilutive non-participating

common stock equivalents were 324,383 and 126,824 during the three months ended September 30, 2020 and 2019, respectively, and 441,331 and 64,866 during the nine months ended September 30 ,

2019 , respectively .

Potential common shares associated with the conversion option embedded in the Convertible Notes were excluded from the computation for the three and nine months ended September 30, 2020 as the Company’s average stock price during those respective periods was lower than the conversion price of $ 5.92 per share.

The following table reconciles weighted average diluted shares as reported on the Company’s consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 to the weighted average diluted shares used to calculate diluted (loss)/earnings per share as disclosed in the table above:

Three Months Ended

September 30,

Nine Months Ended

September 30,

common stock equivalents were 149 and 430 during the three months ended March 31, 2021 and 2020, respectively (shares herein are reported in thousands).

Potential common shares associated with the conversion option embedded in the Convertible Notes were excluded from the computation for the three months ended March 31, 2021 as the Company’s average stock price during the period was lower than the conversion price of $ 5.92 per share.

The following table reconciles weighted average diluted shares as reported on the Company’s Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020, which are determined pursuant to the treasury stock method, to the weighted average diluted shares used to calculate diluted earnings/(loss) per share as disclosed in the table above:

Three Months Ended March 31,

Reconciliation of Weighted Average Diluted Shares (in thousands)

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Potentially dilutive restricted stock awards

Weighted average diluted shares used to calculate diluted (loss)/earnings per share as disclosed in the table above

Excludes 15,307,153 and 14,997,269 participating securities and 4,669 and 5,437 potentially dilutive non-participating

common stock equivalents for the three and nine months ended September 30, 2020 as the Company reported a net loss for the period.

Effective Income Tax Rate – Three and Nine Months Ended September 30, 2020

The Company’s effective income tax rate during the three months ended September 30, 2020 of 123.7 % resulted in income tax expense of $ 1,408 .

The tax rate differs from the federal statutory tax rate of 21 % primarily due to a non-deductible

Weighted average diluted shares used to calculate diluted earnings/(loss) per share

as disclosed in the table abov e

Excludes 15,025 participating securities and 16 potentially dilutive non-participating

common stock equivalents for the three months ended March 31, 2020 as the Company reported a net loss for the period (shares herein are reported in thousands).

Effective Income Tax Rate – Three Months Ended March 31, 2021 and March 31, 2020

The Company’s effective income tax rate for the three months ended March 31, 2021 of negative 14.9 % resulted in an income tax benefit of $ 1,969 .

The Company’s effective income tax rate differs from the federal statutory tax rate of 21 % primarily due to a $ 5,171 reduction in unrecognized tax benefits, a non-taxable

gain on revaluation of deferred consideration and a lower tax rate on foreign earnings, partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation awards.

The Company’s effective income tax rate for the three months ended March 31, 2020 of 21.5 % resulted in an income tax benefit of $ 2,371 .

The Company’s effective income tax rate differs from the federal statutory tax rate of 21 % primarily due to a $ 5,981 reduction in unrecognized tax benefits, a $ 2,877 non-taxable

gain recognized upon the

sale of the Company’s Canadian ETF business and a lower tax rate on foreign earnings, partly offset by a valuation allowance on capital losses, tax shortfalls associated with the vesting and exercise of stock-based compensation and a non-deductible

loss on revaluation of deferred consideration.

This loss was partly offset by a lower tax rate on foreign earnings.

The Company’s effective income tax rate for the nine months ended September 30, 2020 of 7.4 % resulted in an income tax benefit of $ 1,767 .

The tax rate differs from the federal statutory rate of 21 % primarily due to a valuation allowance on capital losses, a non-deductible

loss on revaluation of deferred consideration and tax shortfalls associated with the vesting and exercise of stock-based compensation awards.

These items were partly offset by a $ 5,981 reduction in unrecognized tax benefits, a $ 2,877 non-taxable

gain recognized upon sale of the Canadian ETF business in the first quarter, a tax benefit of $

2,842 recognized in connection with the release of a deferred tax asset valuation

allowance on interest

carryforwards arising from our debt previously held in the United Kingdom and a lower tax rate on foreign earnings.

Effective Income Tax Rate – Three and Nine Months Ended September 30, 2019

The Company’s effective income tax rate during the three months ended September 30, 2019 of 51.9 % resulted in income tax expense of $ 4,483 .

The tax rate differs from the federal statutory tax rate of 21 % primarily due to a valuation allowance on foreign net operating losses, a non-deductible

loss on revaluation of deferred consideration, non-deductible

executive compensation and state and local income taxes, partly offset by a lower tax rate on foreign earnings.

The Company’s effective income tax rate during the nine months ended September 30, 2019 of 31.2 % resulted in income tax expense of $ 7,021 .

The tax rate differs from the federal statutory tax rate of 21 % primarily due to a valuation allowance on foreign net operating losses, a non-deductible

loss on revaluation of deferred consideration, state and local income taxes and tax shortfalls associated with the vesting and exercise of stock-based compensation awards, partly offset by a $ 4,309 reduction in unrecognized tax benefits and a lower tax rate on foreign earnings.

Deferred Tax Assets

A summary of the components of the Company’s deferred tax assets at September 30, 2020 and December 31, 2019 are as follows:

September 30,

A summary of the components of the Company’s deferred tax assets at March 31, 2021 and December 31, 2020 are as follows:

Deferred tax assets:

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Interest carryforwards

NOLs – International

NOLs – Foreign

Goodwill and intangible assets

Accrued expenses

Stock-based compensation

Goodwill and intangible assets

Outside basis differences

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Fixed assets and prepaid assets

Allocated equity component of convertible note

Unrealized gains

Foreign currency translation adjustment

Unremitted earnings – International subsidiaries

Allocated equity component of convertible notes

Deferred tax liabilities

3 unchanged sentences

Net Operating and Capital Losses – U.S.

The Company’s tax effected net operating losses (“NOLs”) at September 30, 2020 were $ 514 which expire in 2024 .

The Company’s tax effected net operating losses (“NOLs”) at March 31, 2021 were $ 382 which expire in 2024 .

The net operating loss carryforwards have been reduced by the impact of annual limitations described in the Internal Revenue Code Section 382 that arose as a result of an ownership change.

The Company’s tax effected capital losses at September 30, 2020 and December 31, 2019 were $ 16,734 and $ 8,226 , respectively.

The change in capital losses is due to the impairment recognized on the Company’s financial interests in AdvisorEngine (Note 7) and a capital loss recognized upon sale of the Canadian ETF business.

Net Operating Losses and Interest Carryforwards – International

Certain of the Company’s European subsidiaries generated NOLs and interest carryforwards outside the U.S.

These tax effected NOLs and interest carryforwards were $ 4,651 and $ 9,336 at September 30, 2020 and December 31, 2019, respectively.

All of these amounts are carried forward indefinitely.

The reduction in NOLs was due to the sale of the Company’s Canadian ETF business, which occurred on February 19, 2020 (Note 25).

The Company’s tax effected capital losses were $ 16,596 at March 31, 2021 and December 31, 2020.

These capital losses expire between the years 2023 and 2025.

Net Operating Losses – International

One of the Company’s European subsidiary’s generated NOLs outside the U.S.

These tax effected NOLs, all of which are carried forward indefinitely, were

2,167 at March

2021 and December

2020 , respectively.

Valuation Allowance

During the nine months ended September 30, 2020, the Company reduced the valuation allowance on its deferred tax assets by $ 2,842 associated with interest carryforwards in the United Kingdom.

The Company has determined that it is more likely than not that these interest carryforwards will be utilized as the Company extinguished its term loan on June 16, 2020 and is therefore no longer accumulating non-deductible

interest carryforwards in the United Kingdom.

he Company also generates profits in that jurisdiction and unused amounts are carried forward indefinitely.

The Company’s remaining valuation allowance has been established on its capital losses, international net operating losses and outside basis differences as it is more-likely-than-not

The Company’s valuation allowance has been established on its net capital losses, international net operating losses and outside basis differences as it is more-likely-than-not

that these deferred tax assets will not be realized.

Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”)

On March 27, 2020, the CARES Act was enacted in response to the COVID-19

pandemic which included temporary changes to income and non-income

based tax laws including:

(i) the elimination of the 80 % of taxable income limitation by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 and 2020;

(ii) allowing NOLs originating in 2018, 2019 and 2020 to be carried back five years ;

(iii) increasing the net interest expense deduction limit to 50 % of adjusted taxable income from 30 % for tax years beginning January 1, 2019 and 2020;

and (iv) other related provisions.

The CARES Act did not have a material impact on the Company’s consolidated financial statements.

Uncertain Tax Positions

4 unchanged sentences

In connection with the ETFS Acquisition, the Company accrued a liability for uncertain tax positions and interest and penalties at the acquisition date.

The table below sets forth the aggregate changes in the balance of these gross unrecognized tax benefits during the three and nine months ended September 30, 2020:

The table below sets forth the aggregate changes in the balance of these gross unrecognized tax benefits during the three months ended March 31, 2021:

Balance on January 1, 2021

Decrease—Lapse

of statute of limitations (1)

Decrease - Lapse of statute of limitations (1)

Foreign currency translation (2)

Balance at March 31, 2021

Foreign currency translation (2)

Balance at June 30, 2020

Foreign currency translation (2)

Balance at September 30, 2020

Recorded as an income tax benefit of $ 5,981 during the nine months ended September 30, 2020, along with an equal and offsetting amount recorded in other gains and losses, net, to recognize a reduction in the indemnification asset.

During the nine months ended September

30, 2019, an income tax benefit of $ 4,309 was recorded along with an equal and offsetting amount in other gains and losses, net.

Recorded as an income tax benefit of $ 5,171 during the three months ended March 31, 2021, 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, 2020, an income tax benefit of $ 5,981 was recorded along with an equal and offsetting amount in other losses, net.

The gross unrecognized tax benefits were accrued in British pounds.

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ETFS Capital has also agreed to provide additional collateral by maintaining a minimum working capital balance up to a stipulated amount.

The gross unrecognized tax benefits and interest and penalties totaling $ 25,502 and $ 32,101 at September 30, 2020 and December 31, 2019, respectively, are included in other non-current

The gross unrecognized tax benefits and interest and penalties totaling $ 22,222 at March 31, 2021 are included in other non-current

liabilities on the Consolidated Balance Sheets.

It is reasonably possible that the total amount of unrecognized tax benefits will decrease by $ 7,067 (including interest and penalties of $ 2,016 ) in the next 12 months upon lapsing of the statute of limitations.

At September 30, 2020, there were $ 25,502 of unrecognized tax benefits (including interest and penalties) that, if recognized, would impact the effective tax rate.

At March 31, 2021, there were $ 22,222 of unrecognized tax benefits (including interest and penalties) that, if recognized, would impact the effective tax rate.

The recognition of any unrecognized tax benefits would result in an equal and offsetting adjustment to the indemnification asset which would be recorded in income before taxes due to the indemnity for any potential claims.

2 unchanged sentences

federal income tax as well as income tax of multiple state, local and certain foreign jurisdictions.

The Company’s federal tax return and ManJer’s tax return (a Jersey-based subsidiary) for the year ended December 31, 2016 is currently under review by the relevant tax authorities.

The Company’s federal tax return for the year ended December 31, 2016 and ManJer’s tax returns (a Jersey-based subsidiary) for the years ended December 31, 2014 through 2016 are currently under review by the relevant tax authorities.

The Company is indemnified by ETFS Capital for any potential exposure associated with ManJer’s tax return under audit.

The Company is not currently under audit in any other income tax jurisdictions.

As of September 30, 2020, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before 2016.

As of March 31, 2021, with few exceptions, the Company was no longer subject to income tax examinations by any taxing authority for years before 2016.

Undistributed Earnings of Foreign Subsidiaries

Due to the imposition of the Global Intangible Low-Taxed

Income (“GILTI”) provisions, all unremitted earnings are no longer subject to U.S.

federal income tax;

however, there could be U.S.

state and/or foreign withholding taxes upon distribution of such unremitted earnings.

The Company recognizes deferred tax liabilities for withholding taxes that may become payable, where applicable, upon the distribution of earnings and profits from foreign subsidiaries unless considered permanent in duration.

As of September 30, 2020, the Company considers all undistributed foreign earnings and profits to be permanent in duration.

Income Taxes,

provides guidance that US companies do not need to recognize tax effects on foreign earnings that are indefinitely reinvested.

The Company repatriates earnings of its foreign subsidiaries and therefore has recognized a deferred tax liability of

$ 97 and $ 138 at March 31, 2021 and December 31, 2020, respectively.

Shares Repurchased

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Included under this program are purchases to offset future equity grants made under the Company’s equity plans and purchases made in open market or privately negotiated transactions.

This authority may be exercised from time to time, subject to the terms of the credit agreement described below and regulatory considerations.

This authority may be exercised from time to time, subject to regulatory considerations.

The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities.

1 unchanged sentence

Shares repurchased under this program are returned to the status of authorized and unissued on the Company’s books and records.

During the three and nine months ended September 30, 2020, the Company repurchased 1,066,261 shares and 8,189,973 shares of its common stock, respectively, under this program for an aggregate cost of $ 4,535 and $ 30,979 , respectively.

During the three and nine months ended September 30, 2019, the Company repurchased 13,300 shares and 338,578 shares of its common stock, respectively, under this program for an aggregate cost of $ 80 and $ 2,187 , respectively.

During the three months ended March 31, 2021 and March 31, 2020, the Company repurchased 489,763 shares and 385,399 shares of its common stock, respectively, under this program for an aggregate cost of $ 2,630 and $ 1,495 , respectively.

Shares repurchased under this program were returned to the status of authorized and unissued on the Company’s books and records.

As of September 30, 2020, $ 52,410 remained under this program for future purchases.

As of March 31, 2021, $ 49,561 remained under this program for future purchases.

Goodwill and Intangible Assets

1 unchanged sentence

Balance at January 1, 2021

Balance at September 30, 2020

Goodwill arising from the ETFS Acquisition of $ 84,057 is not deductible for tax purposes as the acquisition was structured as a stock acquisition occurring in the United Kingdom.

Balance at March 31, 2021

Goodwill arising from the ETFS Acquisition of $ 84,057 is not deductible for tax purposes as the acquisition was structured as a stock acquisition occurring in the UK.

The remainder of the goodwill is deductible for U.S.

2 unchanged sentences

The table below sets forth the Company’s intangible assets which are tested annually for impairment on November 30 th

(Questrade AUM)

Balance at January 1, 2021

Decreases (1)

Foreign currency translation

Balance at September 30, 2020

Derecognized upon the sale of the Company’s Canadian ETF business (Note 25).

Balance at March 31, 2021

In connection with the ETFS Acquisition, which was completed on April 11, 2018 , the Company identified intangible assets valued at $ 601,247 related to the right to manage AUM through customary advisory agreements.

The intangible assets were determined to have indefinite useful lives and are not deductible for tax purposes.

Exit Activities

The following table summarizes operating losses recognized by the Company’s wholly-owned subsidiaries that have either been sold or liquidated during reporting periods covered by its consolidated financial statements:

Three Months Ended

September 30,

Nine Months Ended

September 30,

WisdomTree Japan Inc.

WTJ also recognized an impairment expense of $ 572 in connection with the termination of its office lease on March 31, 2019.

Contingent Payments

The Company recognizes contingent payments when the contingency is resolved and the gain is realized.

AdvisorEngine – Sale of Financial Interests

On May 4, 2020, the Company closed a transaction to exit its investment in AdvisorEngine.

The fair value of upfront consideration paid to the Company was $ 9,592 .

Consideration also included contingent payments totaling up to $ 10,408 which will be payable only upon AdvisorEngine achieving certain revenue milestones during the first through fourth anniversaries of such exit.

No value has been ascribed to these contingent payments at March 31, 2021 and December 31, 2020.

During the three months ended March 31, 2020, the Company recognized an impairment of $ 19,672 to adjust the carrying value of its previously held financial interests in AdvisorEngine to fair value.

In the following quarter, the Company subsequently recognized a gain of $ 1,093 arising from an adjustment to the estimate fair value of consideration received.

These fair value adjustments were based upon the final sale terms as disclosed above.

Sale of Canadian ETF Business

1 unchanged sentence

The Company received CDN $ 3,720 (USD $ 2,774 ) in cash at closing and will receive additional cash consideration of CDN $ 2,000 to $ 8,000 , depending on the achievement of certain AUM growth targets over the next three years.

During the nine months ended September 30, 2020, the Company recognized a $ 2,877 gain on sale which was recorded in other gains and losses, net on the Consolidated Statements of Operations and represents the difference between the minimum cash consideration payable to the Company and the carrying value of WTAMC’s net assets upon disposition.

Contingent payments, if any, are recognized by the Company when the contingency is resolved and the gain is realized.

Restructuring of Distribution Strategy in Japan

In July 2018, the Company determined to restructure its distribution strategy in Japan .

As a result, WTJ ceased operations and was liquidated in September 2019.

The following table summarizes impairments recognized by the Company:

Three Months Ended

September 30,

Nine Months Ended

September 30,

AdvisorEngine – Financial Interests (Note 7)

Thesys – Series Y Preferred (Note 9)

WTJ (Note 25)

The Company recorded CDN $ 2,000 in other receivables on the Consolidated Statements of Financial Condition at March 31, 2021 and December 31, 2020.

In connection with this sale, the Company recognized a gain of $ 2,877 during the three months ended March 31, 2020 which was recorded in other losses, net on the Consolidated Statements of Operations.

This gain represents the difference between the minimum cash consideration payable to the Company and the carrying value of WTAMC’s net assets upon disposition.

Subsequent Events

The Company evaluated subsequent events through the date of issuance of the accompanying consolidated financial statements.

The Company evaluated subsequent events through the date of issuance of the accompanying financial statements.

There were no events requiring disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements