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Subsequent Events | 3 Months Ended
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Mar. 31, 2018
Subsequent Events [Abstract] |
Subsequent Events | 19. Subsequent Events Acquisition of ETFS – Preliminary Purchase Price Allocation As previously disclosed within Note 1, the Company completed its acquisition of ETFS on April 11, 2018 by purchasing the entire issued share capital of a subsidiary of ETF Securities into which ETF Securities transferred ETFS prior to completion of the ETFS acquisition. Pursuant to the Share Sale Agreement, the Company acquired ETFS for a purchase price consisting of (a) $253,000 in cash (including $53,000 paid from proceeds arising from maturities of securities owned, at fair value), subject to customary adjustments for working capital, and (b) a fixed number of shares of the Company’s capital stock, consisting of (i) 15,250,000 Common Shares and (ii) 14,750 Preferred Shares, which are convertible, subject to certain restrictions, into an aggregate of 14,750,000 shares of common stock. The remainder of the cash consideration paid was financed through a $200,000 Term Loan. The ETFS acquisition will be accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, which requires an allocation of the consideration paid by the Company to the identifiable assets and liabilities of ETFS based on the estimated fair values as of the closing date of the acquisition. A preliminary allocation of the consideration transferred is presented below based on information currently available and includes the Company’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed. The following table summarizes the preliminary allocation of the purchase price as of the acquisition date:
Purchase price |
Preferred Shares issued |  |  | 14,750 |
Conversion ratio |  |  | 1,000 |
Common stock equivalents |  |  | 14,750,000 |
Common Shares issued |  |  | 15,250,000 |
Total shares issued |  |  | 30,000,000 |
WisdomTree stock price(1) |  | $ | 9.00 |
Equity portion of purchase price |  | $ | 270,000 |
Cash portion of purchase price |  |  |  |
Term loan |  |  | 200,000 |
Cash on hand |  |  | 53,000 |
Purchase price |  |  | 523,000 |
Deferred consideration(2) |  |  | 172,746 |
Total |  | $ | 695,746 |
Preliminary allocation of consideration |  |  |  |
ETFS net assets acquired(3) |  |  | 8,500 |
Intangible assets(4) |  |  | 602,396 |
Fair value of net assets acquired |  |  | 610,896 |
Preliminary goodwill resulting from the ETFS acquisition (5) |  | $ | 84,850 |
(1) | The closing price of the Company’s common stock on April 10, 2018, the last trading day prior to the closing date of the acquisition.
(2) | ETF Securities first acquired Gold Bullion Securities Ltd. (“GBS Issuer”), one of the issuers that the Company acquired as part of the European ETC Business, paying no upfront consideration. Instead, the consideration was deferred and contracted to be paid by ETF Securities in fixed payments of physical gold bullion equating to 9,500 ounces per year through March 31, 2058 and then subsequently reduced to 6,333 ounces of gold continuing into perpetuity.
ETF Securities’ deferred consideration obligation did not terminate upon the Company’s acquisition of the European ETC Business. Instead, a wholly-owned subsidiary of the Company assumed the obligation by entering into a Gold Royalty Agreement with ETF Securities, which provides for the same fixed payments of physical gold bullion payable to ETF Securities in order for ETF Securities to continue to satisfy its deferred consideration obligation. The fixed payments are paid from advisory fee income generated by the physically backed gold exchange traded product issued by GBS Issuer and any other Company sponsored financial product physically backed by physical gold (“Gold ETCs”). The fixed payment is subject to adjustment and reduction for declines in advisory fee income generated by the Gold ETCs, with any reduction remaining due and payable until paid in full. ETF Securities’ recourse is limited to such advisory fee income and has no recourse back to the Company for any unpaid amounts. ETF Securities ultimately has the right to claw back GBS Issuer if the Company fails to remit any amounts due.
(3) | Pursuant to the Share Sale Agreement, consideration transferred is subject to customary adjustments for working capital. The target working capital amount, as defined within the Share Sale Agreement is estimated to be $8,500. ETF Securities has 45 business days following completion of the acquisition to provide a closing balance sheet. It is anticipated that the carrying value of the net assets acquired, approximates fair value.
(4) | Represents purchase price allocated to customary advisory agreements. These intangible assets were determined to have an indefinite useful life and are not deductible for tax purposes. A deferred tax liability associated with these intangible assets was not recognized as the intangibles arose in Jersey, where the Company will be subject to a zero percent tax rate.
(5) | Preliminary goodwill arising from the ETFS acquisition represents the value of expected synergies created from combining operations of ETFS and the Company. The goodwill is not deductible for tax purposes as the transaction was structured as a stock acquisition occurring in the United Kingdom.
The finalization of the purchase price allocation may result in changes to the valuation of assets and liabilities assumed, which could be material. The final allocation may include changes in fair values of the deferred consideration, changes in the allocation to the intangible assets and goodwill and other fair value adjustments. Accordingly, the allocation of consideration transferred as presented above is preliminary. The accounting for the business combination is expected to be finalized as soon as practicable within the measurement period in accordance with ASC 805, but in no event later than one year from April 11, 2018. Acquisition of ETFS – Senior Secured Debt Financing On April 11, 2018 and in connection with the ETFS acquisition, the Company and WisdomTree International entered into a Credit Agreement, by and among the Company, WisdomTree International, certain subsidiaries of the Company as guarantors, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent, collateral agent, L/C Issuer and lender. Under the Credit Agreement the lenders extended a $200,000 Term Loan to WisdomTree International, the net cash proceeds of which were used by WisdomTree International, together with other cash on hand, to complete the ETFS acquisition and pay certain fees, costs and expenses, and made a $50,000 Revolver available to the Company and WisdomTree International for revolving borrowings from time to time for working capital, capital expenditures and general corporate purposes. Interest on the Term Loan accrues at a rate per annum equal to LIBOR, plus up to 2.00% (commencing at LIBOR, plus 1.75%), and interest on the Revolver accrues at a rate per annum equal to LIBOR, plus up to 1.50% (commencing at LIBOR, plus 1.25%), in each case, with the exact interest rate margin determined based on the Total Leverage Ratio (as defined below). The Revolver is also subject to a facility fee equal to a rate per annum of up to 0.50% of the actual daily amount the aggregate commitments (whether used or unused) under the Revolver, with the exact facility fee rate determined based on the Total Leverage Ratio. The Credit Facility matures on April 11, 2021 (the “Maturity Date”). The Term Loan does not amortize and the entire principal balance is due in a single payment on the Maturity Date. The Credit Agreement includes a financial covenant that requires that the Company maintain a Total Leverage Ratio, calculated as of the last day of each fiscal quarter commencing with the fiscal quarter ending September 30, 2018, equal to or less than the ratio set forth opposite such fiscal quarter:
Fiscal Quarter Ending |  | Total Leverage Ratio |
September 30, 2018 |  |  | 2.75:1.00 |
December 31, 2018 |  |  | 2.75:1.00 |
March 31, 2019 |  |  | 2.75:1.00 |
June 30, 2019 |  |  | 2.50:1.00 |
September 30, 2019 |  |  | 2.50:1.00 |
December 31, 2019 |  |  | 2.50:1.00 |
March 31, 2020 |  |  | 2.25:1.00 |
June 30, 2020 |  |  | 2.25:1.00 |
September 30, 2020 and each subsequent fiscal quarter ending on or before the Maturity Date |  |  | 2.00:1.00 |
Total Leverage Ratio means, as of the last day of any fiscal quarter, the ratio of Consolidated Total Debt of the Company and its restricted subsidiaries (as defined in the Credit Agreement) as of such date to Consolidated EBITDA of the Company and its restricted subsidiaries (as defined in the Credit Agreement) for the four consecutive fiscal quarters ended on such date. WisdomTree International’s obligations under the Term Loan and Revolver are unconditionally guaranteed by the Company and certain of its subsidiaries and secured by a lien on substantially all of the present and future property and assets of the Company, WisdomTree International and such subsidiaries, in each case, subject to customary exceptions and exclusions. The Company’s obligations under the Revolver are unconditionally guaranteed by certain of the Company’s wholly-owned domestic subsidiaries and secured by substantially all of the present and future property and assets of the Company and such subsidiaries, in each case, subject to customary exceptions and exclusions. The Credit Agreement contains customary affirmative covenants for transactions of this type and other affirmative covenants agreed to by the parties, including, among others, the provision of annual and quarterly financial statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters. The Credit Agreement contains customary negative covenants, including among others, restrictions on the incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, repurchasing equity interests of the Company, entering into affiliate transactions and asset sales. The Credit Agreement also provides for a number of customary events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control and judgment defaults. Acquisition of ETFS – Preferred Shares On April 10, 2018, the Company filed a Certificate of Designations of Series A Non-Voting Convertible Preferred Stock with the Secretary of State of the State of Delaware establishing the rights, preferences, privileges, qualifications, restrictions, and limitations relating to the Preferred Shares. The Preferred Shares are intended to provide ETF Securities with economic rights equivalent to the Company’s common stock on an as converted basis. The Preferred Shares have no voting rights, are not transferrable and have the same priority with regard to dividends, distributions and payments as the common stock. In connection with the completion of the ETFS acquisition, the Company issued 14,750 Preferred Shares, which are convertible into an aggregate of 14,750,000 shares of common stock, subject to the following restrictions:
| • |  | Limitation on beneficial ownership. As described in the Certificate of Designations, the Company will not issue, and ETF Securities does not have the right to require the Company to issue, any shares of common stock upon conversion of the Preferred Shares, if, as a result of such conversion, ETF Securities (together with certain attribution parties) would beneficially own more than 9.99% of the Company’s outstanding common stock immediately after giving effect to such conversion.
| • |  | Exchange Cap. As described in the Certificate of Designations, the Company will not issue any shares of common stock upon conversion of the Preferred Shares if the issuance would, together with up to 4,000,000 shares of common stock that the Company may, but is not obligated to, issue prior to December 31, 2018, exceed the aggregate number of shares of common stock that the Company may issue without breaching its obligations under Nasdaq Capital Market Listing Rule 5635(a)(1), unless the Company obtains stockholder approval for the issuance of the Company’s common stock upon conversion of the Preferred Shares in excess of such amount (“Exchange Cap”). 6,633,293 shares of common stock issuable upon conversion of 6,633 Preferred Shares are subject to the Exchange Cap.
ETF Securities has the right to redeem the Preferred Shares under the following circumstances. 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.
| • |  | Redemption right for failure to obtain stockholder approval. If stockholder approval for the issuance of the Company’s common stock upon conversion of the Preferred Shares in excess of the Exchange Cap is not obtained by December 31, 2018, ETF Securities will have the right, at its option, to require the Company to redeem the 6,633 Preferred Shares subject to the Exchange Cap during the period ending on the earlier of (a) December 31, 2020 and (b) the date stockholder approval for the issuance of the Company’s common stock upon conversion of the Preferred Shares in excess of the Exchange Cap is obtained. Any such redemption will be at a price per Preferred Share equal to the dollar volume-weighted average price for a share of common stock for the 30-trading day period ending on December 31, 2018 multiplied by 1,000. Such redemption payments will be made in 12 equal installments no later than 10 business days following the last day of each of the Company’s 12 fiscal quarters beginning on the day following the date ETF Securities exercises such redemption right.
| • |  | Other redemption rights unrelated to stockholder approval. In the event that: (a) the number of shares of the Company’s common stock authorized by its certificate of incorporation is insufficient to permit the Company to convert all of the Preferred Shares requested by ETF Securities to be converted; or (b) ETF Securities 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, ETF Securities will have the right, at its option, to require the Company to redeem all the Preferred Shares specified to be converted during the period of time specified in the Certificate of Designations. Any such redemption will be at a price per Preferred Share equal to the dollar volume-weighted average price for a share of common stock for the 30-trading day period ending on the date of such attempted conversion or change of control, as applicable, multiplied by 1,000. 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 ETF Securities exercises such redemption right.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI http://asc.fasb.org/topic&trid=2122774 + Details
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