Deferred Consideration

3 Months Ended

Mar. 31, 2019

11. Deferred Consideration

Deferred consideration represents an obligation the Company assumed in connection with the ETFS Acquisition. The obligation is for fixed payments to ETFS Capital of physical gold bullion equating

to 9,500 ounces of gold per year through March 31, 2058 and then subsequently reduced to 6,333 ounces of gold continuing into perpetuity (“Contractual Gold Payments”).

The Contractual Gold Payments are paid from advisory fee income generated by any Company-sponsored financial product backed by physical gold and are subject to adjustment and reduction for declines in advisory fee income generated by such products, with any reduction remaining due and payable until paid in full. ETFS Capital’s recourse is limited to such advisory fee income and it has no recourse back to the Company for any unpaid amounts that exceed advisory fees earned. ETFS Capital ultimately has the right to claw back Gold Bullion Securities Ltd. (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 $157,147 and $161,540 at March 31, 2019 and December 31, 2018, respectively, using forward-looking gold prices which were extrapolated from the last observable price (beyond 2024), discounted at a rate of 10.0%. Current and long-term amounts payable at March 31, 2019 were $11,857 and $145,290, respectively.

During the three months ended March 31, 2019, the Company recognized Contractual Gold Payments expense of $3,098, arising from the fixed payments of physical gold bullion of 2,375 ounces and the unwinding of the discount (representing the increase in the carrying amount of the deferred consideration for the passage of time). A gain on the revaluation of deferred consideration of $4,404 was recognized during the three months ended March 31, 2019 due to flattening of the forward-looking gold curve as compared to the forward-looking gold curve on December 31, 2018, the date on which the deferred consideration was last measured.

See Note 5 for a reconciliation of changes in the deferred consideration balances.