Deferred Consideration

6 Months Ended

Jun. 30, 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

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 $161,273 and $161,540 at June 30, 2019 and December 31, 2018, respectively, using forward-looking gold prices which were extrapolated from the last observable price (beyond 2025), discounted at a rate of 10.0% and a perpetual growth rate of 1.5%. Current amounts payable were $12,857 and $11,765 and long-term amounts payable were $148,416 and $149,775, respectively, at June 30, 2019 and December 31, 2018, respectively.

During the three and six months ended June 30, 2019 and 2018, the Company recognized the following in respect of deferred consideration:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019		2018

Contractual Gold Payments	$	3,110		$	2,715		$	6,208	$	2,715
Contractual Gold Payments – gold ounces paid		2,375			2,085	(1)		4,750		2,085	(1)
(Loss)/gain on revaluation of deferred consideration – gold payments (2)	$	(4,037	)	$	9,898		$	367	$	9,898

(1)	Represents payments during the period April 11, 2018 through June 30, 2018.

(2)	Gains/(losses) arise due to (decreases)/increases in the forward-looking price of gold and the magnitude of any gain or loss is highly correlated to the magnitude of the change in the forward-looking price of gold. See Note 5 for a reconciliation of changes in the deferred consideration balances.