false Q3 0000880631--12-31 Redemption price: The Company may redeem for cash all or any portion of the notes, at its option, on or after June 20, 2026 and June 20, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, and on or prior to the 55th scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date. No sinking fund is provided for the Convertible Notes.Redemption price: The Company may redeem for cash all or any portion of the notes, at its option, on or after June 20, 2026 and June 20, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, and on or prior to the 55th scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date. No sinking fund is provided for the Convertible Notes.P5D P5D P5D P10D P10D P10D The gross unrecognized tax benefits were accrued in British pounds.Recorded as an income tax benefit of $5,171 during the nine months ended September 30, 2021, 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, 2020, an income tax benefit of $5,981 was recorded along with an equal and offsetting amount in other gains and losses, net.Excludes 15,307 participating securities and 5 potentially dilutive common stock equivalents for the three months ended September 30, 2020 and 14,997 participating securities and 5 potentially dilutive common stock equivalents for the nine months ended September 30, 2020, as the Company reported a net loss for the period (shares herein are reported in thousands).Includes amortization of the issuance costs and premium. The effective interest rate prior to January 1, 2021 also included amortization of the discount arising from the bifurcation of the conversion option. 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. 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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021
or

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to
.
Commission File Number
001-10932
WisdomTree Investments, Inc.
(Exact name of registrant as specified in its charter)

Delaware |  | 13-3487784
(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)

230 Park Avenue 3 rd Floor West New York, New York |  | 10169
(Address of principal executive offices) |  | (Zip Code)

212-801-2080
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $0.01 par value |  | WETF |  | The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Yes
☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.

Large accelerated filer |  | ☐ |  | Accelerated filer |  | ☒
Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☐
|  |  |  | Emerging growth company |  | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act). Yes ☐ No ☒
As of October 26, 2021, there were
145,133,066
shares of the registrant’s Common Stock, $0.01 par value per share, outstanding.

Table of Contents
WISDOMTREE INVESTMENTS, INC.
Form
10-Q
For the Quarterly Period Ended September 30, 2021

|  | Page Number |
PART I: FINANCIAL INFORMATION |  |  | 4 |
Item 1. Financial Statements |  |  | 4 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |  |  | 34 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk |  |  | 54 |
Item 4. Controls and Procedures |  |  | 55 |
PART II: OTHER INFORMATION |  |  | 55 |
Item 1. Legal Proceedings |  |  | 55 |
Item 1A. Risk Factors |  |  | 55 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |  |  | 55 |
Item 3. Defaults Upon Senior Securities |  |  | 56 |
Item 4. Mine Safety Disclosures |  |  | 56 |
Item 5. Other Information |  |  | 56 |
Item 6. Exhibits |  |  | 57 |

Unless otherwise indicated, references to “the Company,” “we,” “us,” “our” and “WisdomTree” mean WisdomTree Investments, Inc. and its subsidiaries.
WisdomTree
®
and Modern Alpha
®
are trademarks of WisdomTree Investments, Inc. in the United States and in other countries. All other trademarks are the property of their respective owners.
2

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect our results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in the section entitled “Risk Factors” included in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020 and Quarterly Report on Form
10-Q
for the quarter ended June 30, 2021. If one or more of these or other risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Report and the documents that we reference in this Report and have filed with the Securities and Exchange Commission, or the SEC, as exhibits to this Report, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.
In particular, forward-looking statements in this Report may include statements about:

| • |  | the ultimate duration of the COVID-19 pandemic and its short-term and long-term impact on our business and the global economy;

| • |  | anticipated trends, conditions and investor sentiment in the global markets and exchange traded products, or ETPs;

| • |  | anticipated levels of inflows into and outflows out of our ETPs;

| • |  | our ability to deliver favorable rates of return to investors;

| • |  | competition in our business;

| • |  | our ability to develop new products and services;

| • |  | our ability to maintain current vendors or find new vendors to provide services to us at favorable costs;

| • |  | our ability to successfully operate and expand our business in non-U.S. markets; and

| • |  | the effect of laws and regulations that apply to our business.

The forward-looking statements in this Report represent our views as of the date of this Report. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. Therefore, these forward-looking statements do not represent our views as of any date other than the date of this Report.
3

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PART I: FINANCIAL INFORMATION

ITEM 1. | FINANCIAL STATEMENTS

WisdomTree Investments, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Per Share Amounts)

|  | September 30, 2021 |  |  | December 31, 2020 |
|  | (unaudited) |  |  |  |
Assets |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 127,924 |  |  | $ | 73,425 |
Securities owned, at fair value (including $21,180 and $23,932 invested in WisdomTree ETFs at September 30, 2021 and December 31, 2020, respectively) |  |  | 119,390 |  |  |  | 34,895 |
Accounts receivable (including $24,055 and $26,884 due from related parties at September 30, 2021 and December 31, 2020, respectively) |  |  | 32,092 |  |  |  | 29,455 |
Income taxes receivable |  |  | 146 |  |  |  | — |
Prepaid expenses |  |  | 5,676 |  |  |  | 3,827 |
Other current assets |  |  | 407 |  |  |  | 259 |
Total current assets |  |  | 285,635 |  |  |  | 141,861 |
Fixed assets, net |  |  | 545 |  |  |  | 7,579 |
Indemnification receivable (Note 20) |  |  | 21,872 |  |  |  | 27,016 |
Securities held-to-maturity |  |  | 331 |  |  |  | 451 |
Deferred tax assets, net |  |  | 7,636 |  |  |  | 8,063 |
Investments (Note 7) |  |  | 14,238 |  |  |  | 8,112 |
Right of use assets – operating leases (Note 13) |  |  | 631 |  |  |  | 16,327 |
Goodwill (Note 22) |  |  | 85,856 |  |  |  | 85,856 |
Intangible assets (Note 22) |  |  | 601,247 |  |  |  | 601,247 |
Other noncurrent assets |  |  | 359 |  |  |  | 180 |
Total assets |  | $ | 1,018,350 |  |  | $ | 896,692 |
Liabilities and stockholders’ equity |  |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Fund management and administration payable |  | $ | 22,273 |  |  | $ | 19,564 |
Compensation and benefits payable |  |  | 24,411 |  |  |  | 22,803 |
Deferred consideration – gold payments (Note 9) |  |  | 15,961 |  |  |  | 17,374 |
Operating lease liabilities (Note 13) |  |  | 361 |  |  |  | 3,135 |
Income taxes payable |  |  | — |  |  |  | 916 |
Accounts payable and other liabilities |  |  | 12,737 |  |  |  | 10,207 |
Total current liabilities |  |  | 75,743 |  |  |  | 73,999 |
Convertible notes (Note 11) |  |  | 317,979 |  |  |  | 166,646 |
Deferred consideration – gold payments (Note 9) |  |  | 208,992 |  |  |  | 212,763 |
Operating lease liabilities (Note 13) |  |  | 327 |  |  |  | 17,434 |
Other noncurrent liabilities (Note 20) |  |  | 21,872 |  |  |  | 27,016 |
Total liabilities |  |  | 624,913 |  |  |  | 497,858 |
Preferred stock – Series A Non-Voting Convertible, par value $0.01; 14.750 shares authorized, issued and outstanding; redemption value of $88,456 and $72,667 at September 30, 2021 and December 31, 2020, respectively) (Note 12) |  |  | 132,569 |  |  |  | 132,569 |
Contingencies (Note 14 ) |  |  |  |  |  |  |  |
Stockholders’ equity |  |  |  |  |  |  |  |
Preferred stock, par value $0.01; 2,000 shares authorized: |  |  | — |  |  |  | — |
Common stock, par value $0.01; 250,000 shares authorized; issued and outstanding: 145,150 and 148,716 at September 30, 2021 and December 31, 2020, respectively |  |  | 1,451 |  |  |  | 1,487 |
Additional paid-in capital |  |  | 287,399 |  |  |  | 317,075 |
Accumulated other comprehensive income |  |  | 853 |  |  |  | 1,102 |
Accumulated deficit |  |  | (28,835 | ) |  |  | (53,399 | )
Total stockholders’ equity |  |  | 260,868 |  |  |  | 266,265 |
Total liabilities and stockholders’ equity |  | $ | 1,018,350 |  |  | $ | 896,692 |

The accompanying notes are an integral part of these consolidated financial statements
4

Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Operating Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Advisory fees |  | $ | 76,400 |  |  | $ | 63,028 |  |  | $ | 220,611 |  |  | $ | 181,697 |
Other income |  |  | 1,712 |  |  |  | 721 |  |  |  | 4,532 |  |  |  | 2,563 |
Total revenues |  |  | 78,112 |  |  |  | 63,749 |  |  |  | 225,143 |  |  |  | 184,260 |
Operating Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Compensation and benefits |  |  | 22,027 |  |  |  | 19,098 |  |  |  | 64,985 |  |  |  | 53,848 |
Fund management and administration |  |  | 15,181 |  |  |  | 14,328 |  |  |  | 43,495 |  |  |  | 41,785 |
Marketing and advertising |  |  | 2,925 |  |  |  | 2,996 |  |  |  | 9,525 |  |  |  | 7,413 |
Sales and business development |  |  | 2,935 |  |  |  | 2,386 |  |  |  | 7,239 |  |  |  | 7,984 |
Contractual gold payments (Note 9) |  |  | 4,250 |  |  |  | 4,539 |  |  |  | 12,834 |  |  |  | 12,362 |
Professional fees |  |  | 1,583 |  |  |  | 950 |  |  |  | 5,517 |  |  |  | 3,580 |
Occupancy, communications and equipment |  |  | 1,163 |  |  |  | 1,611 |  |  |  | 3,904 |  |  |  | 4,805 |
Depreciation and amortization |  |  | 185 |  |  |  | 253 |  |  |  | 693 |  |  |  | 760 |
Third-party distribution fees |  |  | 1,873 |  |  |  | 1,233 |  |  |  | 5,346 |  |  |  | 3,928 |
Acquisition and disposition-related costs |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 416 |
Other |  |  | 1,787 |  |  |  | 1,611 |  |  |  | 5,110 |  |  |  | 5,204 |
Total operating expenses |  |  | 53,909 |  |  |  | 49,005 |  |  |  | 158,648 |  |  |  | 142,085 |
Operating income |  |  | 24,203 |  |  |  | 14,744 |  |  |  | 66,495 |  |  |  | 42,175 |
Other Income/(Expenses): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | (3,729 | ) |  |  | (2,511 | ) |  |  | (8,592 | ) |  |  | (6,974 | )
Gain/(loss) on revaluation of deferred consideration – gold payments (Note 9) |  |  | 1,737 |  |  |  | (8,870 | ) |  |  | 5,066 |  |  |  | (34,436 | )
Interest income |  |  | 689 |  |  |  | 111 |  |  |  | 1,145 |  |  |  | 393 |
Impairments (Note 13 and 24) |  |  | (15,853 | ) |  |  | (3,080 | ) |  |  | (16,156 | ) |  |  | (22,752 | )
Loss on extinguishment of debt (Note 10) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,387 | )
Other losses and gains, net |  |  | (714 | ) |  |  | 744 |  |  |  | (6,558 | ) |  |  | 56 |
Income/(loss) before income taxes |  |  | 6,333 |  |  |  | 1,138 |  |  |  | 41,400 |  |  |  | (23,925 | )
Income tax expense/(benefit) |  |  | 500 |  |  |  | 1,408 |  |  |  | 2,790 |  |  |  | (1,767 | )
Net income/(loss) |  | $ | 5,833 |  |  | $ | (270 | ) |  | $ | 38,610 |  |  | $ | (22,158 | )
Earnings/(loss) per share—basic |  | $ | 0.04 |  |  | $ | (0.01 | ) |  | $ | 0.24 |  |  | $ | (0.16 | )
Earnings/(loss) per share—diluted |  | $ | 0.04 |  |  | $ | (0.01 | ) |  | $ | 0.24 |  |  | $ | (0.16 | )
Weighted-average common shares—basic |  |  | 142,070 |  |  |  | 145,564 |  |  |  | 144,445 |  |  |  | 149,886 |
Weighted-average common shares—diluted |  |  | 159,213 |  |  |  | 145,564 |  |  |  | 161,706 |  |  |  | 149,886 |
Cash dividends declared per common share |  | $ | 0.03 |  |  | $ | 0.03 |  |  | $ | 0.09 |  |  | $ | 0.09 |

The accompanying notes are an integral part of these consolidated financial statements
(See Note 2 for revisions made to certain amounts previously reported)
5

Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income/(Loss)
(In Thousands)
(Unaudited)

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Net income/(loss) |  | $ | 5,833 |  |  | $ | (270 | ) |  | $ | 38,610 |  |  | $ | (22,158 | )
Other comprehensive (loss)/income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Reclassification of foreign currency translation adjustment to other losses and gains, net, upon the sale of WisdomTree Asset Management Canada, Inc. (“WTAMC” or “Canadian ETF business”) (Note 23) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (167 | )
Foreign currency translation adjustment, net of income taxes |  |  | (302 | ) |  |  | 380 |  |  |  | (249 | ) |  |  | (138 | )
Other comprehensive (loss)/income |  |  | (302 | ) |  |  | 380 |  |  |  | (249 | ) |  |  | (305 | )
Comprehensive income/(loss) |  | $ | 5,531 |  |  | $ | 110 |  |  | $ | 38,361 |  |  | $ | (22,463 | )

The accompanying notes are an integral part of these consolidated financial statements
6

Table of Contents
WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(In Thousands)
(Unaudited)

|  | For the Three Months Ended September 30, 2021 |
|  | Common Stock |  |  | Additional Paid-In Capital |  |  | Accumulated Other |  |  | Accumulated Deficit |  |  | Total |
|  | Shares Issued |  |  | Par Value |  |  | Comprehensive Income |
Balance—July 1, 2021 |  |  | 145,114 |  |  | $ | 1,451 |  |  | $ | 285,002 |  |  | $ | 1,155 |  |  | $ | (29,871 | ) |  | $ | 257,737 |
Restricted stock issued and vesting of restricted stock units, net |  |  | 36 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 2,397 |  |  |  | — |  |  |  | — |  |  |  | 2,397 |
Other comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (302 | ) |  |  | — |  |  |  | (302 | )
Dividends |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4,797 | ) |  |  | (4,797 | )
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,833 |  |  |  | 5,833 |
Balance—September 30, 2021 |  |  | 145,150 |  |  | $ | 1,451 |  |  | $ | 287,399 |  |  | $ | 853 |  |  | $ | (28,835 | ) |  | $ | 260,868 |

|  | For the Three Months Ended September 30, 2020 |
|  | Common Stock |  |  | Additional Paid-In Capital |  |  | Accumulated Other |  |  | Accumulated Deficit |  |  | Total |
|  | Shares Issued |  |  | Par Value |  |  | Comprehensive Income |
Balance—July 1, 2020 |  |  | 149,796 |  |  | $ | 1,498 |  |  | $ | 325,406 |  |  | $ | 260 |  |  | $ | (39,632 | ) |  | $ | 287,532 |
Restricted stock issued and vesting of restricted stock units, net |  |  | 52 |  |  |  | 1 |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |
Shares repurchased |  |  | (1,066 | ) |  |  | (11 | ) |  |  | (4,524 | ) |  |  | — |  |  |  | — |  |  |  | (4,535 | )
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 2,844 |  |  |  | — |  |  |  | — |  |  |  | 2,844 |
Allocation of equity component related to convertible notes, net of issuance costs of $29 and deferred taxes of $222 |  |  | — |  |  |  | — |  |  |  | 655 |  |  |  | — |  |  |  | — |  |  |  | 655 |
Other comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 380 |  |  |  | — |  |  |  | 380 |
Dividends |  |  | — |  |  |  | — |  |  |  | (4,937 | ) |  |  | — |  |  |  | — |  |  |  | (4,937 | )
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (270 | ) |  |  | (270 | )
Balance—September 30, 2020 |  |  | 148,782 |  |  | $ | 1,488 |  |  | $ | 319,443 |  |  | $ | 640 |  |  | $ | (39,902 | ) |  | $ | 281,669 |

The accompanying notes are an integral part of these consolidated financial statements
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WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Continued)
(In Thousands)
(Unaudited)

|  | For the Nine Months Ended September 30, 2021 |
|  | Common Stock |  |  | Additional Paid-In Capital |  |  | Accumulated Other |  |  | Accumulated Deficit |  |  | Total |
|  | Shares Issued |  |  | Par Value |  |  | Comprehensive Income |
Balance—January 1, 2021 |  |  | 148,716 |  |  | $ | 1,487 |  |  | $ | 317,075 |  |  | $ | 1,102 |  |  | $ | (53,399 | ) |  | $ | 266,265 |
Reclassification of equity component related to convertible notes, net deferred taxes of $1,022, upon the implementation of Accounting Standards Update 2020-06 (Note 11) |  |  | — |  |  |  | — |  |  |  | (3,682 | ) |  |  | — |  |  |  | 616 |  |  |  | (3,066 | )
Balance—January 1, 2021 (as adjusted) |  |  | 148,716 |  |  | $ | 1,487 |  |  | $ | 313,393 |  |  | $ | 1,102 |  |  | $ | (52,783 | ) |  | $ | 263,199 |
Restricted stock issued and vesting of restricted stock units, net |  |  | 1,412 |  |  |  | 13 |  |  |  | (13 | ) |  |  | — |  |  |  | — |  |  |  | — |
Shares repurchased |  |  | (5,121 | ) |  |  | (51 | ) |  |  | (34,455 | ) |  |  | — |  |  |  | — |  |  |  | (34,506 | )
Exercise of stock options, net |  |  | 143 |  |  |  | 2 |  |  |  | 813 |  |  |  | — |  |  |  | — |  |  |  | 815 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 7,661 |  |  |  | — |  |  |  | — |  |  |  | 7,661 |
Other comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (249 | ) |  |  | — |  |  |  | (249 | )
Dividends |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (14,662 | ) |  |  | (14,662 | )
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 38,610 |  |  |  | 38,610 |
Balance—September 30, 2021 |  |  | 145,150 |  |  | $ | 1,451 |  |  | $ | 287,399 |  |  | $ | 853 |  |  | $ | (28,835 | ) |  | $ | 260,868 |

|  | For the Nine Months Ended September 30, 2020 |
|  | Common Stock |  |  | Additional Paid-In Capital |  |  | Accumulated Other |  |  | Accumulated Deficit |  |  | Total |
|  | Shares Issued |  |  | Par Value |  |  | Comprehensive Income |
Balance—January 1, 2020 |  |  | 155,264 |  |  | $ | 1,553 |  |  | $ | 352,658 |  |  | $ | 945 |  |  | $ | (17,744 | ) |  | $ | 337,412 |
Restricted stock issued and vesting of restricted stock units, net |  |  | 1,601 |  |  |  | 16 |  |  |  | (16 | ) |  |  | — |  |  |  | — |  |  |  | — |
Shares repurchased |  |  | (8,190 | ) |  |  | (81 | ) |  |  | (30,898 | ) |  |  | — |  |  |  | — |  |  |  | (30,979 | )
Exercise of stock options, net |  |  | 107 |  |  |  | — |  |  |  | 240 |  |  |  | — |  |  |  | — |  |  |  | 240 |
Stock-based compensation |  |  | — |  |  |  | — |  |  |  | 9,003 |  |  |  | — |  |  |  | — |  |  |  | 9,003 |
Allocation of equity component related to convertible notes, net of issuance costs of $157 and deferred taxes of $1,239 |  |  | — |  |  |  | — |  |  |  | 3,663 |  |  |  | — |  |  |  | — |  |  |  | 3,663 |
Other comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (305 | ) |  |  | — |  |  |  | (305 | )
Dividends |  |  | — |  |  |  | — |  |  |  | (15,207 | ) |  |  | — |  |  |  | — |  |  |  | (15,207 | )
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (22,158 | ) |  |  | (22,158 | )
Balance—September 30, 2020 |  |  | 148,782 |  |  | $ | 1,488 |  |  | $ | 319,443 |  |  | $ | 640 |  |  | $ | (39,902 | ) |  | $ | 281,669 |

The accompanying notes are an integral part of these consolidated financial statements
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WisdomTree Investments, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)

|  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net income/(loss) |  | $ | 38,610 |  |  | $ | (22,158 | )
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: |  |  |  |  |  |  |  |
Advisory fees received in gold, other precious metals and cryptocurrencies |  |  | (57,617 | ) |  |  | (46,077 | )
Impairments |  |  | 16,156 |  |  |  | 22,752 |
Contractual gold payments |  |  | 12,834 |  |  |  | 12,362 |
Stock-based compensation |  |  | 7,661 |  |  |  | 9,003 |
(Gain/)/loss on revaluation of deferred consideration – gold payments |  |  | (5,066 | ) |  |  | 34,436 |
Unrealized losses |  |  | 2,183 |  |  |  | 1,212 |
Amortization of right of use asset |  |  | 1,860 |  |  |  | 2,384 |
Amortization of issuance costs – convertible notes |  |  | 1,542 |  |  |  | 882 |
Deferred income taxes |  |  | 1,515 |  |  |  | (961 | )
Gain on sale – Canadian ETF business, including remeasurement of contingent consideration |  |  | (787 | ) |  |  | (2,877 | )
Depreciation and amortization |  |  | 693 |  |  |  | 760 |
Loss on extinguishment of debt |  |  | — |  |  |  | 2,387 |
Amortization of issuance costs – former credit facility |  |  | — |  |  |  | 1,328 |
Other |  |  | (369 | ) |  |  | (1,173 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Securities owned, at fair value |  |  | (84 | ) |  |  | 94 |
Accounts receivable |  |  | (1,273 | ) |  |  | 3,166 |
Prepaid expenses |  |  | (1,888 | ) |  |  | (1,325 | )
Gold, other precious metals and cryptocurrencies |  |  | 44,006 |  |  |  | 32,969 |
Other assets |  |  | (315 | ) |  |  | (341 | )
Fund management and administration payable |  |  | 2,868 |  |  |  | 735 |
Compensation and benefits payable |  |  | 1,756 |  |  |  | (12,349 | )
Income taxes receivable/payable |  |  | (1,050 | ) |  |  | (3,399 | )
Securities sold, but not yet purchased, at fair value |  |  | — |  |  |  | (582 | )
Operating lease liabilities (including lease termination payment of $12,725) |  |  | (15,462 | ) |  |  | (2,778 | )
Accounts payable and other liabilities |  |  | 2,336 |  |  |  | 1,679 |
Net cash provided by operating activities |  |  | 50,109 |  |  |  | 32,129 |
Cash flows from investing activities: |  |  |  |  |  |  |  |
Purchase of securities owned, a fair value |  |  | (97,570 | ) |  |  | (34,683 | )
Purchase of investments |  |  | (5,750 | ) |  |  | — |
Purchase of fixed assets |  |  | (237 | ) |  |  | (292 | )
Proceeds from the sale of securities owned, at fair value |  |  | 10,976 |  |  |  | 18,122 |
Proceeds from held-to-maturity securities maturing or called prior to maturity |  |  | 114 |  |  |  | 16,441 |
Proceeds from the sale of the Company’s financial interests in AdvisorEngine Inc. |  |  | — |  |  |  | 9,592 |
Proceeds from the sale of Canadian ETF business, net, including receipt of contingent consideration |  |  | — |  |  |  | 2,774 |
Net cash (used in)/provided by investing activities |  |  | (92,467 | ) |  |  | 11,954 |
Cash flows from financing activities: |  |  |  |  |  |  |  |
Shares repurchased |  |  | (34,506 | ) |  |  | (30,979 | )
Dividends paid |  |  | (14,662 | ) |  |  | (15,207 | )
Convertible notes issuance costs |  |  | (4,297 | ) |  |  | (5,411 | )
Repayment of debt |  |  | — |  |  |  | (179,000 | )
Proceeds from the issuance of convertible notes |  |  | 150,000 |  |  |  | 175,250 |
Proceeds from exercise of stock options |  |  | 815 |  |  |  | 240 |
Net cash provided by/(used in) financing activities |  |  | 97,350 |  |  |  | (55,107 | )
Decrease in cash flow due to changes in foreign exchange rate |  |  | (493 | ) |  |  | (387 | )
Increase/(decrease) in cash and cash equivalents |  |  | 54,499 |  |  |  | (11,411 | )
Cash and cash equivalents—beginning of year |  |  | 73,425 |  |  |  | 74,972 |
Cash and cash equivalents—end of period |  | $ | 127,924 |  |  | $ | 63,561 |
Supplemental disclosure of cash flow information: |  |  |  |  |  |  |  |
Cash paid for taxes |  | $ | 7,332 |  |  | $ | 7,650 |
Cash paid for interest |  | $ | 3,719 |  |  | $ | 3,390 |

NON-CASH
ACTIVITIES
On January
1
, 2021, the Company reclassified the equity component related to the convertible notes, net of deferred taxes, reducing accumulated deficit 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
(Note 11).
The accompanying notes are an integral part of these consolidated financial statements (See Note 2 for reclassifications made to certain amounts previously reported)
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WisdomTree Investments, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(In Thousands, Except Share and Per Share Amounts)
1. Organization and Description of Business
WisdomTree Investments, Inc., through its global subsidiaries (collectively, “WisdomTree” or the “Company”), is an exchange traded product (“ETP”) sponsor and asset manager headquartered in New York. WisdomTree offers ETPs covering equity, commodity, fixed income, leveraged and inverse, currency, cryptocurrency and alternative strategies. The Company has the following wholly-owned operating subsidiaries:

| • | WisdomTree Asset Management, Inc. is a New York based investment adviser registered with the SEC, providing investment advisory and other management services to the WisdomTree Trust (“WTT”) and WisdomTree exchange-traded funds (“ETFs”). The WisdomTree ETFs are issued in the U.S. by WTT. WTT, a non-consolidated third party, is a Delaware statutory trust registered with the SEC as an open-end management investment company. The Company has licensed to WTT the use of certain of its own indexes on an exclusive basis for the WisdomTree ETFs in the U.S.

| • | WisdomTree Management Jersey Limited (“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 strategies.

| • | WisdomTree Multi Asset Management Limited (“WTMAML”) is a Jersey based management company providing management services to WisdomTree Multi Asset Issuer PLC (“WMAI”) in respect of the ETPs issued by WMAI. WMAI, a non-consolidated third party, is a public limited company domiciled in Ireland.

| • | WisdomTree Management Limited (“WML”) is an Ireland based management company providing management services to WisdomTree Issuer ICAV (“WTI”) in respect of the WisdomTree UCITS ETFs issued by WTI. WTI, a non-consolidated third party, is a public limited company domiciled in Ireland.

| • | WisdomTree UK Limited (“WTUK”) is a United Kingdom based company registered with the Financial Conduct Authority currently providing distribution and support services to ManJer, WTMAML and WML.

| • | WisdomTree Europe Limited is a United Kingdom based company which is the legacy distributor of the WMAI ETPs and WisdomTree UCITS ETFs. These services are now provided directly by WTUK. WisdomTree Europe Limited is no longer regulated and does not provide any regulated services.

| • | WisdomTree Ireland Limited is an Ireland based company authorized by the Central Bank of Ireland providing distribution services to ManJer, WTMAML and WML.

| • | WisdomTree Commodity Services, LLC (“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.

2. Significant Accounting Policies
Basis of Presentation
These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and in the opinion of management reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of financial condition, results of operations, and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Immaterial Correction of an Error – Consolidated Statements of Operations
The presentation of amounts
collected on behalf of third parties of
$891 and $2,380
for the three and nine months ended September 30, 2020, respectively, has been revised due to an immaterial error correction. These amounts were originally recorded as advisory fee revenue and fund management and administration expense while no such amounts should have been recorded in the Company’s Consolidated Statements of Operations.
The following table summarizes these revisions, which had no effect on previously reported net income:
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|  | Three Months Ended September 30, 2020 |  |  | Nine Months Ended September 30, 2020 |
Operating Revenues: |  |  |  |  |  |  |  |
Advisory fees (previously reported) |  | $ | 63,919 |  |  | $ | 184,077 |
Amounts collected on behalf of third parties |  |  | (891 | ) |  |  | (2,380 | )
Advisory fees (as corrected) |  | $ | 63,028 |  |  | $ | 181,697 |
Total revenues (previously reported) |  | $ | 64,640 |  |  | $ | 186,640 |
Amounts collected on behalf of third parties |  |  | (891 | ) |  |  | (2,380 | )
Total revenues (as corrected) |  | $ | 63,749 |  |  | $ | 184,260 |
Operating Expenses: |  |  |  |  |  |  |  |
Fund management and administration (previously reported) |  | $ | 15,219 |  |  | $ | 44,165 |
Amounts collected on behalf of third parties |  |  | (891 | ) |  |  | (2,380 | )
Fund management and administration (as corrected) |  | $ | 14,328 |  |  | $ | 41,785 |
Total operating expenses (previously reported) |  | $ | 49,896 |  |  | $ | 144,465 |
Amounts collected on behalf of third parties |  |  | (891 | ) |  |  | (2,380 | )
Total operating expenses (as corrected) |  | $ | 49,005 |  |  | $ | 142,085 |

Reclassifications - Consolidated Statements of Cash Flows
Cash flows from purchasing securities owned, at fair value of $34,683 and selling securities owned, at fair value of $18,122
during the nine months ended September 30, 2020 that were not acquired specifically for resale or associated with the Company’s business activities have been reclassified from operating activities to investing activities to conform to the current year’s presentation in the Company’s Consolidated Statements of Cash Flows.
The following table summarizes these reclassifications for the nine months ended September 30, 2020:

|  | Nine Months Ended September 30, 2020 |
Consolidated Statements of Cash Flows: |  |  |  |
Cash Flows from Operating Activities |  |  |  |
Net cash provided by operating activities (previously reported) |  | $ | 15,568 |
Reclassification of net cash flows from securities purchases and sales |  |  | 16,561 |
Net cash provided by operating activities (currently reported) |  | $ | 32,129 |
Cash Flows from Investing Activities |  |  |  |
Net cash provided by investing activities (previously reported) |  | $ | 28,515 |
Purchases of securities owned, at fair value |  |  | (34,683 | )
Proceeds from the sale of securities owned, at fair value |  |  | 18,122 |
Net cash provided by investing activities (currently reported) |  | $ | 11,954 |

Consolidation
The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). The usual condition for a controlling financial interest in a VOE is ownership of a majority voting interest. If the Company has a majority voting interest in a VOE, the entity is consolidated. The Company has a controlling financial interest in a VIE when the Company has a variable interest that provides it with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
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The Company reassesses its evaluation of whether an entity is a VOE or VIE when certain reconsideration events occur.
Segment and Geographic Information
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.
Foreign Currency Translation
Assets and liabilities of subsidiaries whose functional currency is not the U.S. dollar are translated based on the end of period exchange rates from local currency to U.S. dollars. Results of operations are translated at the average exchange rates in effect during the period. The impact of the foreign currency translation adjustment is included in the Consolidated Statements of Comprehensive Income/(Loss) as a component of other comprehensive income/(loss).
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet dates and the reported amounts of revenues and expenses for the periods presented. Actual results could differ materially from those estimates.
Revenue Recognition
The Company earns substantially all of its revenue in the form of advisory fees from its ETPs and recognizes this revenue over time, as the performance obligation is satisfied. Advisory fees are based on a percentage of the ETPs’ average daily net assets. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice.
Contractual Gold Payments
Contractual gold payments are measured and paid monthly based upon the average daily spot price of gold (Note 9).
Marketing and Advertising
Marketing and advertising costs, including media advertising and production costs, are expensed when incurred.
Depreciation and Amortization
Depreciation is provided for using the straight-line method over the estimated useful lives of the related assets as follows:

Equipment |  |  | 5 years |
Furniture and fixtures |  |  | 15 years |

Leasehold improvements are amortized over the term of their respective leases or service lives of the improvements, whichever is shorter. Fixed assets are recorded at cost less accumulated depreciation and amortization.
Stock-Based Awards
Accounting for stock-based compensation requires the measurement and recognition of compensation expense for all equity awards based on estimated fair values. Stock-based compensation is measured based on the grant-date fair value of the award and is amortized over the relevant service period. Forfeitures are recognized when they occur.
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 and recognizes these expenses as incurred.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be classified as cash equivalents. The Company maintains deposits with financial institutions in an amount that is in excess of federally insured limits.
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Accounts Receivable
Accounts receivable are customer and other obligations due under normal trade terms. 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.
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
(“AFS”). These securities are recorded on their trade date and are measured at fair value. All equity securities are classified by the Company as trading. Debt securities are classified based primarily on the Company’s intent to hold or sell the security. Changes in the fair value of debt securities classified as trading and AFS are reported in other income and other comprehensive income, respectively, in the period the change occurs. 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 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.
Securities
Held-to-Maturity
The Company accounts for certain of its securities as
held-to-maturity
on a trade date basis, which are recorded at amortized cost. For
held-to-maturity
securities, the Company has the intent and ability to hold these securities to maturity and it is not
more-likely-than-not
that the Company will be required to sell these securities before recovery of their amortized cost bases, which may be maturity.
Held-to-maturity
securities are placed on
non-accrual
status when the Company is in receipt of information indicating collection of interest is doubtful. Cash received on
held-to-maturity
securities placed on
non-accrual
status is recognized on a cash basis as interest income if and when received.
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. government guarantee.
Investments
The Company accounts for equity investments that do not have a readily determinable fair value under the measurement alternative prescribed in Accounting Standards Update (“ASU”)
2016-01,
Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities
, 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. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment.
Goodwill
Goodwill is the excess of the purchase price over the fair values of the identifiable net assets at the acquisition date. The Company tests goodwill for impairment at least annually and at the time of a triggering event requiring
re-evaluation,
if one were to occur. Goodwill is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value. If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying amount of goodwill. A reporting unit is an operating segment or a component of an operating segment provided that the component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that component.
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Goodwill is allocated to the Company’s U.S. Business and European Business components. 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 unit.
Intangible Assets
Indefinite-lived intangible assets are tested for impairment at least annually and are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are impaired if their estimated fair values are less than their carrying values.
Finite-lived intangible assets, if any, are amortized over their estimated useful life, which is the period over which the assets are expected to contribute directly or indirectly to the future cash flows of the Company. These intangible assets are tested for impairment at the time of a triggering event, if one were to occur. Finite-lived intangible assets may be impaired when the estimated undiscounted future cash flows generated from the assets are less than their carrying amounts.
The Company may rely on a qualitative assessment when performing its intangible asset impairment test. Otherwise, the impairment evaluation is performed at the lowest level of reasonably identifiable cash flows independent of other assets. The annual impairment testing date for all of the Company’s intangible assets is November 30
th
.
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
asset. The remaining lease payments are discounted using the rate implicit in the lease, if known, or otherwise the Company’s incremental borrowing rate. After lease commencement,
right-of-use
assets are assessed for impairment and otherwise are amortized over the remaining lease term on a straight-line basis. These recognition requirements are not applied to short-term leases which are those with a lease term of 12 months or less. Instead, lease payments associated with short-term leases are recognized as an expense on a straight-line basis over the lease term.
ASC 842 also provides a practical expedient which allows for consideration in a contract to be accounted for as a single lease component rather than allocated between lease and
non-lease
components. The Company has elected to apply this practical expedient to all lease contracts, where applicable.
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 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. ASU
2020-06
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
capital. 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.
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Contingent Payments
The Company recognizes contingent payments when the contingency is resolved and the gain is realized.
Earnings per Share
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding for the period. Net income available to common stockholders represents net income of the Company reduced by an allocation of earnings to participating securities. The Series A
non-voting
convertible preferred stock (Note 12) and unvested share-based payment awards that contain
non-forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of EPS pursuant to the
two-class
method. Share-based payment awards that do not contain such rights are not deemed participating securities and are included in diluted shares outstanding (if dilutive).
Diluted EPS is calculated under the treasury stock method and the
two-class
method. The calculation that results in the lowest diluted EPS amount for the common stock is reported in the Company’s consolidated financial statements. The treasury stock method includes the dilutive effect of potential common shares including unvested stock-based awards, the Series A
non-voting
convertible preferred stock and the convertible notes, if any. Potential common shares associated with the Series A
non-voting
convertible preferred stock and the convertible notes are computed under the
if-converted
method. 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.
Income Taxes
The Company accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is
more-likely-than-not
that some portion or all the deferred tax assets will not be realized.
Tax positions are evaluated utilizing a
two-step
process. The Company first determines whether any of its tax positions are
more-likely-than-not
to be sustained upon examination, based solely on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. 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.
Non-income
based taxes are recorded as part of other liabilities and other expenses.
Recently Adopted Accounting Pronouncements
On January 1, 2021, the Company early adopted ASU
2020-06,
Debt – Debt with Conversion and Other Options
(ASU
2020-06)
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. Upon the adoption of this ASU, the Company reclassified the equity component related to the convertible notes, net of deferred taxes, reducing accumulated deficit 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 11).
On January 1, 2021, the Company adopted ASU
2019-12,
Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes
(ASU
2019-12).
The main objective of the standard is to reduce complexity in the accounting for income taxes by removing the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income); (2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (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 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
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income as an income-based tax and account for any incremental amount as a
non-income-based
tax; (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; (c) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; 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. The Company has determined that the adoption of this standard did not have a material impact on its financial statements.
3. Cash and Cash Equivalents
Of the total cash and cash equivalents of $127,924 and $73,425 at September 30, 2021 and December 31, 2020, respectively, $105,885 and $70,911 were held at two financial institutions. At September 30, 2021 and December 3
1
, 2020, cash equivalents were approximately $20,143 and $660, respectively.
Certain of the Company’s international subsidiaries are required to maintain a minimum level of regulatory capital, which was $12,384 and $10,745 at September 30, 2021 and December 31, 2020, respectively. These requirements are generally satisfied by cash on hand.
4. Fair Value Measurements
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 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. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs reflect assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. 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.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 – Instruments whose significant drivers are unobservable.
The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
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, 2021 and 2020 there were no transfers between Levels 2 and 3.

|  | September 30, 2021 |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 20,143 |  |  | $ | 20,143 |  |  | $ | — |  |  | $ | — |
Securities owned, at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ETFs |  |  | 21,454 |  |  |  | 21,454 |  |  |  | — |  |  |  | — |
Pass-through GSEs |  |  | 95,785 |  |  |  | 24,969 |  |  |  | 70,816 |  |  |  | — |
Corporate bonds |  |  | 2,151 |  |  |  | — |  |  |  | 2,151 |  |  |  | — |
Total |  | $ | 139,533 |  |  | $ | 66,566 |  |  | $ | 72,967 |  |  | $ | — |
Non-recurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securrency, Inc. – Series A convertible preferred stock (1) |  | $ | 8,488 |  |  | $ | — |  |  | $ | — |  |  | $ | 8,488 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred consideration (Note 9) |  | $ | 224,953 |  |  | $ | — |  |  | $ | — |  |  | $ | 224,953 |

(1) | Fair value of $8,488 and $8,349 determined on June 9, 2021 and March 8, 2021, respectively (Note 7).

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|  | December 31, 2020 |
|  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | 660 |  |  | $ | 660 |  |  | $ | — |  |  | $ | — |
Securities owned, at fair value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ETFs |  |  | 24,165 |  |  |  | 24,165 |  |  |  | — |  |  |  | — |
Pass-through GSEs |  |  | 8,613 |  |  |  | — |  |  |  | 8,613 |  |  |  | — |
Corporate bonds |  |  | 2,117 |  |  |  | — |  |  |  | 2,117 |  |  |  | — |
Total |  | $ | 35,555 |  |  | $ | 24,825 |  |  | $ | 10,730 |  |  | $ | — |
Non-recurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
AdvisorEngine Inc. (“AdvisorEngine”) – Financial interests (1) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Thesys Group, Inc. (“Thesys”) – Series Y Preferred Stock (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Recurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred consideration (Note 9) |  | $ | 230,137 |  |  | $ | — |  |  | $ | — |  |  | $ | 230,137 |
Non-recurring fair value measurements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Convertible notes (2) |  | $ | 170,191 |  |  | $ | — |  |  | $ | 170,191 |  |  | $ | — |

(1) | The fair value of the AdvisorEngine financial interests of $9,592 was determined on May 4, 2020, the date on which these financial interests were sold (Note 23). Thesys was written down to zero on September 30, 2020.

(2) | Fair value of $145,847 and $24,344 determined for convertible notes raised on June 16, 2020 and August 13, 2020, respectively (Note 11).

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 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 timing of prepayments and are therefore generally classified as Level 2. Pass-through GSE positions invested in through a fund structure with a quoted market price on an exchange are generally classified as Level 1.
Deferred Consideration (Note 9)
– Deferred consideration represents the present value of an obligation to pay gold into perpetuity.
The following table presents a reconciliation of beginning and ending balances of recurring fair value measurements classified as Level 3:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Deferred consideration (Note 9) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 226,706 |  |  | $ | 198,784 |  |  | $ | 230,137 |  |  | $ | 173,024 |
Net realized losses/(gains) (1) |  |  | 4,250 |  |  |  | 4,539 |  |  |  | 12,834 |  |  |  | 12,362 |
Net unrealized (gains)/losses (2) |  |  | (1,737 | ) |  |  | 8,870 |  |  |  | (5,066 | ) |  |  | 34,436 |
Settlements |  |  | (4,266 | ) |  |  | (4,445 | ) |  |  | (12,952 | ) |  |  | (12,074 | )
Ending balance |  | $ | 224,953 |  |  | $ | 207,748 |  |  | $ | 224,953 |  |  | $ | 207,748 |

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

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

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5. Securities Owned
These securities consist of the following:

|  | September 30, 2021 |  |  | December 31, 2020 |
Securities Owned |  |  |  |  |  |  |  |
Trading securities |  | $ | 119,390 |  |  | $ | 34,895 |

The Company recognized net trading losses on securities owned that were still held at the reporting dates of $1,323 and $180 during the three months ended September 30, 2021 and 2020, respectively, and $2,156 and $25 during the nine months ended September 30, 2021 and 2020, respectively.
The Company had no AFS debt securities at September 30, 2021 and December 31, 2020.
6. Securities
Held-to-Maturity
The following table is a summary of the Company’s securities
held-to-maturity:

|  | September 30, 2021 |  |  | December 31, 2020 |
Debt instruments: Pass-through GSEs (amortized cost) |  | $ | 331 |  |  | $ | 451 |

During the nine months ended September 30, 2021 and 2020, the Company received proceeds of $114 and $16,441, 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, 2021 |  |  | December 31, 2020 |
Cost/amortized cost |  | $ | 331 |  |  | $ | 451 |
Gross unrealized gains |  |  | 25 |  |  |  | 30 |
Gross unrealized losses |  |  | (9 | ) |  |  | (12 | )
Fair value |  | $ | 347 |  |  | $ | 469 |

An allowance for credit losses was not provided on the Company’s
held-to-maturity
securities as all securities are investments in pass-through GSEs which are determined to have an estimated loss rate of zero due to an implicit U.S. government guarantee.
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, 2021 |  |  | December 31, 2020 |
Due within one year |  | $ | — |  |  | $ | — |
Due one year through five years |  |  | — |  |  |  | — |
Due five years through ten years |  |  | — |  |  |  | — |
Due over ten years |  |  | 331 |  |  |  | 451 |
Total |  | $ | 331 |  |  | $ | 451 |

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7. Investments
The following table sets forth the Company’s investments:

|  | September 30, 2021 |  |  | December 31, 2020 |
|  | Carrying Value |  |  | Cost |  |  | Carrying Value |  |  | Cost |
Securrency, Inc. – Series A convertible preferred stock |  | $ | 8,488 |  |  | $ | 8,112 |  |  | $ | 8,112 |  |  | $ | 8,112 |
Securrency, Inc. – Series B convertible preferred stock |  |  | 5,500 |  |  |  | 5,500 |  |  |  | — |  |  |  | — |
Subtotal – Securrency, Inc. |  | $ | 13,988 |  |  | $ | 13,612 |  |  | $ | 8,112 |  |  | $ | 8,112 |
Onramp Invest, LLC – Simple Agreement for Future Equity |  |  | 250 |  |  |  | 250 |  |  |  | — |  |  |  | — |
|  | $ | 14,238 |  |  | $ | 13,862 |  |  | $ | 8,112 |  |  | $ | 8,112 |

Securrency, Inc. – Preferred Stock
The Company owns approximately 22% (or 18% 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 are substantially the same as the Series B Shares except that they have limited voting rights) and senior to that of the holders of the Series A Shares, which are 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 90% of the Series B Shares (at any time on or
after March 31, 2031).
The investment is accounted for under the measurement alternative prescribed in ASU
2016-01,
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. There was no impairment recognized during the three months ended September 30, 2021 based upon a qualitative assessment. During the nine months ended September 30, 2021, the Company recognized a gain of $376 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 |
|  | June 9, 2021 |  |  | March 8, 2021 |
Expected volatility |  |  | 50 | % |  |  | 55 | %
Time to exit (in years) |  |  | 4.75 |  |  |  | 5.00 |

There was no impairment recognized during the three and nine months ended September 30, 2020 based upon a qualitative assessment.
Onramp Invest, LLC
In June 2021, the Company invested $250 in Onramp Invest, LLC (“Onramp”), a technology company that provides access to cryptoassets for registered investment advisers. In consideration for its investment, the Company holds a Simple Agreement for Future Equity (“SAFE”), which provides the Company with the right to be issued certain shares of Onramp’s preferred stock in connection with Onramp’s future equity financing for preferred stock, at a 20% discount to the price per share issued in connection with such equity financing, subject to a
pre-determined
valuation cap. The preferred stock is issuable upon the occurrence of such preferred equity financing, which would occur after Onramp’s conversion to a corporation.
The investment is accounted for under the measurement alternative prescribed in ASU
2016-01,
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. There was no impairment recognized during the three and nine months ended September 30, 2021 based upon a qualitative assessment.
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8. Fixed Assets, net
The following table summarizes fixed assets:

|  | September 30, 2021 |  |  | December 31, 2020 |
Equipment |  | $ | 997 |  |  | $ | 2,836 |
Furniture and fixtures |  |  | — |  |  |  | 2,225 |
Leasehold improvements |  |  | — |  |  |  | 11,012 |
Less: accumulated depreciation and amortization |  |  | (452 | ) |  |  | (8,494 | )
Total |  | $ | 545 |  |  | $ | 7,579 |

During the three months ended September 30, 2021, the Company recognized an impairment charge of $6,576,
representing the write-off of leasehold improvements and fixed assets in connection with the termination of the lease for its principal executive office at 245 Park Avenue, New York, New York. See Notes 13 and 24 for additional information.
9. Deferred Consideration
Deferred consideration represents an obligation the Company assumed in connection with its acquisition of the European exchange-traded commodity, currency and leveraged and inverse business of ETFS Capital Limited (“ETFS Capital”) which occurred on April 11, 2018 (“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 $224,953 and $230,137 at September 30, 2021 and December 31, 2020 using the following assumptions:

|  | September 30, 2021 |  |  | December 31, 2020 |
Forward-looking gold price (low) – per ounce |  | $ | 1,756 |  |  | $ | 1,903 |
Forward-looking gold price (high) – per ounce |  | $ | 2,906 |  |  | $ | 2,662 |
Forward-looking gold price (weighted average) – per ounce |  | $ | 2,093 |  |  | $ | 2,117 |
Discount rate |  |  | 9.0 | % |  |  | 9.0 | %
Perpetual growth rate |  |  | 1.4 | % |  |  | 0.9 | %

The forward-looking gold prices at September 30, 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 2027. 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 $15,961 and $17,374 and long-term amounts payable were $208,992 and $212,763, respectively, at September 30, 2021 and December 31, 2020, respectively.
During the three and nine months ended September 30, 2021 and 2020, the Company recognized the following in respect of deferred consideration:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Contractual gold payments |  | $ | 4,250 |  |  | $ | 4,539 |  |  | $ | 12,834 |  |  | $ | 12,362 |
Contractual gold payments – gold ounces paid |  |  | 2,375 |  |  |  | 2,375 |  |  |  | 7,125 |  |  |  | 7,125 |
Gain/(loss) on revaluation of deferred consideration – gold payments (1) |  | $ | 1,737 |  |  | $ | (8,870 | ) |  | $ | 5,066 |  |  | $ | (34,436 | )

(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 present value of the annual payment obligations.

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10. Former Credit Facility
On June 16, 2020, the Company terminated its former 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 former credit facility during the nine months ended September 30, 2020 was $
4,086
.
11. Convertible Notes
On June 14, 2021, the Company issued and sold $150,000 in aggregate principal amount of 3.25% Convertible Senior Notes due 2026 (the “2021 Notes”) pursuant to an indenture dated June 14, 2021, 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 (“Rule 144A”).
On June 16, 2020, the Company issued and sold $150,000 in aggregate principal amount of 4.25% Convertible Senior Notes due 2023 (the “June 2020 Notes”) pursuant to an indenture dated June 16, 2020, between the Company and the Trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A. On August 13, 2020, the Company issued and sold $25,000 in aggregate principal amount of 4.25% Convertible Senior Notes due 2023 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 June 2020 Notes (the “August 2020 Notes” and together with the June 2020 Notes, the “2020 Notes”).
After the issuance of the 2021 Notes (and together with the 2020 Notes, the “Convertible Notes”), the Company had $325,000 aggregate principal amount of Convertible Notes outstanding.
Key terms of the Convertible Notes are as follows:

|  | 2021 Notes |  |  | 2020 Notes |
Maturity date (unless earlier converted, repurchased or redeemed) |  |  | June 15, 2026 |  |  |  | June 15, 2023 |
Interest rate |  |  | 3.25 | % |  |  | 4.25 | %
Conversion price |  | $ | 11.04 |  |  | $ | 5.92 |
Conversion rate |  |  | 90.5797 |  |  |  | 168.9189 |
Redemption price |  | $ | 14.35 |  |  | $ | 7.70 |

| • | Interest rate : Payable semiannually in arrears on June 15 and December 15 of each year.

| • | Conversion price : Convertible at an initial conversion rate of the Company’s common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price as disclosed in the table above).

| • | Conversion : Holders may convert at their option at any time prior to the close of business on the business day immediately preceding March 15, 2026 and March 15, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, only under the following circumstances: (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 of the indentures but only with respect to the Convertible Notes called (or deemed called) for redemption; or (iv) upon the occurrence of specified corporate events. On or after March 15, 2026 and March 15, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances.

| • | Cash settlement of principal amount : 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 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: The Company may redeem for cash all or any portion of the notes, at its option, on or after June 20, 2026 and June 20, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, and on or prior to the 55 th scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has

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|  | been at least 130% of the conversion price then in effect for at least 20 trading days, including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date. No sinking fund is provided for the Convertible Notes.

| • | Limited investor put rights : Holders of the Convertible Notes have the right to require the Company to repurchase for cash all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of certain change of control transactions or liquidation, dissolution or common stock delisting events.

| • | Conversion rate increase in certain customary circumstances : In certain circumstances, conversions in connection with a “make-whole fundamental change” (as defined in the indentures) or conversions of Convertible Notes called (or deemed called) for redemption may result in an increase to the conversion rate, provided that the conversion rate will not exceed 144.9275 shares and 270.2702 shares of the Company’s common stock per $1,000 principal amount of the 2021 Notes and 2020 Notes, respectively (the equivalent of 69,036,410 shares of the Company’s common stock), subject to adjustment.

| • | Seniority and Security : The 2021 Notes and 2020 Notes rank equal in right of payment, and are the Company’s senior unsecured obligations, but are subordinated in right of payment to the Company’s obligations to make certain redemption payments (if and when due) in respect of its Series A Non-Voting Convertible Preferred Stock (Note 12).

The indentures contain 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, 2021 and December 31, 2020:

|  | September 30, 2021 |  |  | December 31, |
|  | 2021 Notes |  |  | 2020 Notes |  |  | Total |  |  | 2020 |
Principal amount |  | $ | 150,000 |  |  | $ | 175,000 |  |  | $ | 325,000 |  |  | $ | 175,000 |
Plus: Premium |  |  | — |  |  |  | 250 |  |  |  | 250 |  |  |  | 250 |
Gross proceeds |  |  | 150,000 |  |  |  | 175,250 |  |  |  | 325,250 |  |  |  | 175,250 |
Less: Unamortized discount (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4,207 | )
Less: Unamortized issuance costs (1) |  |  | (4,045 | ) |  |  | (3,226 | ) |  |  | (7,271 | ) |  |  | (4,397 | )
Carrying amount |  | $ | 145,955 |  |  | $ | 172,024 |  |  | $ | 317,979 |  |  | $ | 166,646 |
Effective interest rate (2) |  |  | 3.83% |  |  |  | 5.26% |  |  |  | 4.60% |  |  |  | 6.29% |

(1) | 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.

(2) | Includes amortization of the issuance costs and premium. 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 2020 Notes.
Interest expense on the Convertible Notes during the three and nine months ended September 30, 2021 was $3,729 and $8,592, respectively. Interest expense on the 2020 Notes during the three and nine months ended September 30, 2020 was $2,511 and $2,888, respectively. Interest payable of $3,674 and $2,173
at September 30, 2021 and December 31, 2020 is included in accounts payable and other liabilities on the Company’s Consolidated Balance Sheets.
The fair value of the Convertible Notes (classified as Level 2 in the fair value hierarchy) was $350,331 at September 30, 2021. The
if-converted
value of the 2020 Notes and the 2021 Notes did not exceed the principal amount at September 30, 2021.
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12. 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 (defined below). The Preferred Shares are intended to provide ETFS Capital with economic rights equivalent to the Company’s common stock on an
as-converted
basis. The Preferred Shares have no voting rights, are not transferable and have the same priority with regard to dividends, distributions and payments as the common stock.
As described in the Certificate of Designations, the Company will not issue, and ETFS Capital 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, ETFS Capital (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.
In connection with the completion of the ETFS Acquisition, the Company issued 14,750 shares of Series A
Non-Voting
Convertible Preferred Stock (the “Preferred Shares”), which are convertible into an aggregate of 14,750,000 shares of common stock. The fair value of this consideration was $132,750, based on the closing price of the Company’s common stock on April 10, 2018 of $9.00 per share, the trading day prior to the closing of the acquisition.
The following is a summary of the Preferred Share balance:

|  | September 30, 2021 |  |  | December 31, 2020 |
Issuance of Preferred Shares |  | $ | 132,750 |  |  | $ | 132,750 |
Less: Issuance costs |  |  | (181 | ) |  |  | (181 | )
Preferred Shares – carrying value |  | $ | 132,569 |  |  | $ | 132,569 |

Temporary equity classification is required for redeemable instruments for which redemption triggers are outside of the issuer’s control. ETFS Capital has the right to redeem all the Preferred Shares specified to be converted during the period of time specified in the Certificate of Designations 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 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. 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.
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 ETFS Capital exercises such redemption right. The redemption value of the Preferred Shares was $88,456 and $72,667 at September 30, 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.
13. Leases
The Company has entered into operating leases for office facilities, financial data terminals and equipment. The Company has no finance leases.
The following table provides
additional
information regarding the Company’s leases:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Lease cost: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating lease cost |  | $ | 520 |  |  | $ | 796 |  |  | $ | 1,860 |  |  | $ | 2,384 |
Short-term lease cost |  |  | 242 |  |  |  | 299 |  |  |  | 797 |  |  |  | 941 |
Total lease cost |  | $ | 762 |  |  | $ | 1,095 |  |  | $ | 2,657 |  |  | $ | 3,325 |
Other information: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash paid for amounts included in the measurement of operating lease liabilities |  | $ | 13,804 |  |  | $ | 933 |  |  | $ | 15,462 |  |  | $ | 2,778 |
Right-of-use assets obtained in exchange for new operating lease liabilities |  |  | n/a |  |  |  | n/a |  |  |  | n/a |  |  |  | n/a |
Weighted-average remaining lease term (in years) – operating leases |  |  | 1.8 |  |  |  | 8.9 |  |  |  | 1.8 |  |  |  | 8.9 |
Weighted-average discount rate – operating leases |  |  | 4.4 | % |  |  | 6.3 | % |  |  | 4.4 | % |  |  | 6.3 | %

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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.
On September 9, 2021, the Company entered into a Surrender Agreement to terminate the lease for its principal executive office at 245 Park Avenue, New York, New York effective immediately. In consideration for the landlord’s agreement to enter into the Surrender Agreement and accelerate the expiration date of the term of the lease from August 31, 2029, the Company paid a termination fee of
$12,725.
As a result, the Company recognized a loss on the termination of a lease of
$9,277
during the three months ended September 30, 2021, which was inclusive of the write-off of the right-of-use asset, broker fees and a reduction in operating lease liabilities. This loss is included in impairments in the Company’s Consolidated Statements of Operations (Note 24).
The following table provides additional information regarding lease impairment charges recognized by the Company:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Impairment charges – Leases: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
New York office |  | $ | 9,277 |  |  | $ | — |  |  | $ | 9,277 |  |  | $ | — |
London office |  |  | — |  |  |  | — |  |  |  | 303 |  |  |  | — |
Total impairment charges – Leases: |  | $ | 9,277 |  |  | $ | — |  |  | $ | 9,580 |  |  | $ | — |

The Company’s leases also included extension, automatic renewal and termination provisions. These provisions were also not reasonably certain of being exercised and were therefore not recognized as part of the
right-of-use
asset and lease liability.
The following table discloses future minimum lease payments at September 30, 2021 with respect to the Company’s operating lease liabilities:

Remainder of 2021 |  | $ | 98 |
2022 |  |  | 358 |
2023 |  |  | 195 |
2024 |  |  | — |
2025 |  |  | — |
2026 and thereafter |  |  | — |
Total future minimum lease payments (undiscounted) |  | $ | 651 |

The following table reconciles the future minimum lease payments (disclosed above) at September 30, 2021 to the operating lease liabilities recognized in the Company’s Consolidated Balance Sheets:

Amounts recognized in the Company’s Consolidated Balance Sheets |  |  |  |
Lease liability – short term |  | $ | 361 |
Lease liability – long term |  |  | 327 |
Subtotal |  |  | 688 |
Difference between undiscounted and discounted cash flows |  |  | (37 | )
Total future minimum lease payments (undiscounted) |  | $ | 651 |

14. 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.
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 ($10,479), 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.
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The Company is currently assessing these claims and an accrual has not been made with respect to these matters at September 30, 2021 and December 31, 2020.
15. Variable Interest Entities
VIEs are entities with any of the following characteristics: (i) the entity does not have enough equity to finance its activities without additional financial support; (ii) the equity holders, as a group, lack the characteristics of a controlling financial interest; or (iii) the entity is structured with
non-substantive
voting rights.
Consolidation of a VIE is required for the party deemed to be the primary beneficiary, if any. 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 the entities 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 entities’ boards of directors and the Company does not have control over the boards.
The following table presents information about the Company’s variable interests in
non-consolidated
VIEs:

|  | September 30, 2021 |  |  | December 31, 2020 |
Carrying Amount – Assets (Securrency) |  |  |  |  |  |  |  |
Preferred stock – Series A Shares |  | $ | 8,488 |  |  | $ | 8,112 |
Preferred stock – Series B Shares |  |  | 5,500 |  |  |  | — |
Subtotal – Securrency |  | $ | 13,988 |  |  | $ | 8,112 |
Carrying Amount – Assets (Onramp) |  |  |  |  |  |  |  |
SAFE |  |  | 250 |  |  |  | — |
Total (Note 7) |  | $ | 14,238 |  |  | $ | 8,112 |
Maximum exposure to loss |  | $ | 14,238 |  |  | $ | 8,112 |

16. Revenues
from Contracts with Customers
The following table presents the Company’s total revenues from contracts with customers:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Revenues from contracts with customers: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Advisory fees (1) |  | $ | 76,400 |  |  | $ | 63,028 |  |  | $ | 220,611 |  |  | $ | 181,697 |
Other |  |  | 1,712 |  |  |  | 721 |  |  |  | 4,532 |  |  |  | 2,563 |
Total operating revenues |  | $ | 78,112 |  |  | $ | 63,749 |  |  | $ | 225,143 |  |  | $ | 184,260 |

(1) | Advisory fees previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 for additional information.

The Company recognizes revenues from contracts with customers when the performance obligation is satisfied, which is when the promised services are transferred to the customer. A service is considered to be transferred when the customer obtains control, which is represented by the transfer of rights with regard to the service. Transfer of control happens either over time or at a point in time. When a performance obligation is satisfied over time, an entity is required to select a single method of measuring progress for each performance obligation that depicts the entity’s performance in transferring control of services to the customer.
Substantially all the Company’s revenues from contracts with customers are derived primarily from investment advisory agreements with related parties (Note 17). These advisory fees are recognized over time, are earned from the Company’s ETPs and are calculated based on a percentage of the ETPs’ average daily net assets. There is
no
significant judgment in calculating amounts due which are invoiced monthly in arrears and are not subject to any potential reversal. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice.
There are no contract assets or liabilities that arise in connection with the recognition of advisory fee revenue. In addition, there are no costs incurred to obtain or fulfill the contracts with customers, all of which are investment advisory agreements with related parties.
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Geographic Distribution of Revenue
The following table presents the Company’s total revenues geographically as determined by where the respective management companies reside:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Revenues from contracts with customers: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 46,523 |  |  | $ | 34,018 |  |  | $ | 131,744 |  |  | $ | 105,517 |
Jersey (1) |  |  | 28,724 |  |  |  | 28,636 |  |  |  | 85,953 |  |  |  | 75,313 |
Ireland |  |  | 2,865 |  |  |  | 1,095 |  |  |  | 7,446 |  |  |  | 3,065 |
Canada (Note 23) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 365 |
Total operating revenues |  | $ | 78,112 |  |  | $ | 63,749 |  |  | $ | 225,143 |  |  | $ | 184,260 |

(1) | Advisory fees previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 for additional information.

17. Related Party Transactions
The Company’s revenues 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. 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. The Company is also responsible for certain expenses of the related parties, including the cost of transfer agency, custody, fund administration and accounting, legal, audit, and other
non-distribution
services, excluding extraordinary expenses, taxes and certain other expenses, which are included in fund management and administration on the Company’s Consolidated Statements of Operations. In exchange, the Company receives fees based on a percentage of the ETPs’ average daily net assets. 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, 2021 |  |  | December 31, 2020 |
Receivable from WTT |  | $ | 15,264 |  |  | $ | 13,030 |
Receivable from ManJer Issuers |  |  | 6,053 |  |  |  | 11,693 |
Receivable from WMAI and WTI |  |  | 2,738 |  |  |  | 2,125 |
Receivable from WTCS |  |  | — |  |  |  | 36 |
Total |  | $ | 24,055 |  |  | $ | 26,884 |

The allowance for credit losses on accounts receivable from related parties is insignificant when applying historical loss rates, adjusted for current conditions and supportable forecasts, to the amounts outstanding in the table above. Amounts outstanding are all invoiced in arrears, are less than 30 days aged and are collected shortly after the applicable reporting period.
The following table summarizes revenues from advisory services provided to related parties:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Advisory services provided to WTT |  | $ | 46,386 |  |  | $ | 33,767 |  |  | $ | 131,364 |  |  | $ | 104,757 |
Advisory services provided to ManJer Issuers (1) |  |  | 24,759 |  |  |  | 26,506 |  |  |  | 75,296 |  |  |  | 68,945 |
Advisory services provided to WMAI and WTI |  |  | 5,255 |  |  |  | 2,603 |  |  |  | 13,951 |  |  |  | 7,145 |
Advisory services provided to WTAMC |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 365 |
Advisory services provided to WTCS |  |  | — |  |  |  | 152 |  |  |  | — |  |  |  | 485 |
Total |  | $ | 76,400 |  |  | $ | 63,028 |  |  | $ | 220,611 |  |  | $ | 181,697 |

(1) | Advisory fees previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 for additional information.

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The Company also has investments in certain WisdomTree ETFs of approximately $21,180 and $23,932 at September 30, 2021 and December 31, 2020, respectively. Net losses and gains related to trading WisdomTree ETFs during the three months ended September 30, 2021 and 2020 were ($92) and $86, respectively, and during the nine months ended September 30, 2021 and 2020 were $75 and $94, respectively, which are recorded in other losses and gains, net.
18. Stock-Based Awards
On June 20, 2016, the Company’s stockholders approved a new equity award plan under which the Company can issue up to 10,000,000 shares of common stock (less one share for every share granted under prior plans since March 31, 2016 and inclusive of shares available under the prior plans as of March 31, 2016) in the form of stock options and other stock-based awards.
The Company grants equity awards to employees and directors which include restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”) and stock options. Certain awards described below are subject to acceleration under certain conditions.

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.
RSAs/RSUs: |  | Awards are valued based on the Company’s stock price on grant date and generally vest ratably over three years.
PRSUs: |  | These awards cliff vest three years from the grant date and contain a market condition whereby the number of PRSUs ultimately vesting is tied to how the Company’s total shareholder return (“TSR”) compares to a peer group of other publicly traded asset managers over the three-year period. A Monte Carlo simulation is used to value these awards.
|  | 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; and
|  | •   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 85 th percentile (or 100 th percentile for grants made during 2019 and 2020).
|  | •   If the Company’s TSR is negative, the target number of PRSUs vesting is capped at 100% regardless of the relative TSR percentile.

Stock-based
compensation
expense during the three months ended September 30, 2021 and 2020 was $2,397 and $2,844, respectively, and during the nine months ended September 30, 2021 and 2020 was $7,661 and $9,003, respectively.
A summary of unrecognized stock-based compensation expense and average remaining vesting period is as follows:

|  | September 30, 2021 |
|  | Unrecognized Stock- Based Compensation |  |  | Average Remaining Vesting Period (Years) |
Employees and directors |  | $ | 11,362 |  |  |  | 1.48 |

A summary of stock-based compensation award activity during the three months ended September 30, 2021 is as follows:

|  | Stock Options |  |  | RSAs |  |  | RSUs |  |  | PRSUs |
Balance at July 1, 2021 |  |  | 47,500 |  |  |  | 3,043,948 |  |  |  | 53,209 |  |  |  | 550,686 |
Granted |  |  | — |  |  |  | 47,393 |  |  |  | — |  |  |  | — |
Exercised/vested |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Forfeitures |  |  | — |  |  |  | (11,396 | ) |  |  | — |  |  |  | — |
Balance at September 30, 2021 |  |  | 47,500 |  |  |  | 3,079,945 |  |  |  | 53,209 |  |  |  | 550,686 |

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19. Earnings Per Share
The following tables set forth reconciliations of the basic and diluted earnings/(loss) per share computations for the periods presented:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Basic Earnings/(Loss) per Share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income/(loss) |  | $ | 5,833 |  |  | $ | (270 | ) |  | $ | 38,610 |  |  | $ | (22,158 | )
Less: Income distributed to participating securities |  |  | (538 | ) |  |  | (556 | ) |  |  | (1,634 | ) |  |  | (1,663 | )
Less: Undistributed income allocable to participating securities |  |  | (115 | ) |  |  | — |  |  |  | (2,666 | ) |  |  | — |
Net income/(loss) available to common stockholders – Basic EPS |  | $ | 5,180 |  |  | $ | (826 | ) |  | $ | 34,310 |  |  | $ | (23,821 | )
Weighted average common shares (in thousands) |  |  | 142,070 |  |  |  | 145,564 |  |  |  | 144,445 |  |  |  | 149,886 |
Basic earnings/(loss) per share |  | $ | 0.04 |  |  | $ | (0.01 | ) |  | $ | 0.24 |  |  | $ | (0.16 | )

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Diluted Earnings/(Loss) per Share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income/(loss) available to common stockholders |  | $ | 5,180 |  |  | $ | (826 | ) |  | $ | 34,310 |  |  | $ | (23,821 | )
Add back: Undistributed income allocable to participating securities |  |  | 115 |  |  |  | — |  |  |  | 2,666 |  |  |  | — |
Less: Reallocation of undistributed income allocable to participating securities considered potentially dilutive |  |  | (115 | ) |  |  | — |  |  |  | (2,647 | ) |  |  | — |
Net income/(loss) available to common stockholders – Diluted EPS |  | $ | 5,180 |  |  | $ | (826 | ) |  | $ | 34,329 |  |  | $ | (23,821 | )
Weighted Average Diluted Shares (in thousands): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average common shares |  |  | 142,070 |  |  |  | 145,564 |  |  |  | 144,445 |  |  |  | 149,886 |
Dilutive effect of common stock equivalents, excluding participating securities |  |  | 1,072 |  |  |  | — |  |  |  | 1,159 |  |  |  | — |
Weighted average diluted shares, excluding participating securities (in thousands) |  |  | 143,142 |  |  |  | 145,564 |  |  |  | 145,604 |  |  |  | 149,886 |
Diluted earnings/(loss) per share |  | $ | 0.04 |  |  | $ | (0.01 | ) |  | $ | 0.24 |  |  | $ | (0.16 | )

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. Total antidilutive
non-participating
common stock equivalents were 48 and 324 during the three months ended September 30, 2021 and 2020, respectively, and 130 and 441 during the nine months ended September 30, 2021 and 2020, respectively (shares herein are reported in thousands).
Potential common shares associated with the conversion option embedded in the Convertible Notes for the three and nine months ended September 30, 2021 were 1,042 and 1,140, respectively (shares herein are reported in thousands). There were no potential common shares included in weighted average diluted shares 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.
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, 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:
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|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Reconciliation of Weighted Average Diluted Shares (in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average diluted shares as disclosed on the Consolidated Statements of Operations |  |  | 159,213 |  |  |  | 145,564 | (1) |  |  | 161,706 |  |  |  | 149,886 | (1)
Less: Participating securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares of common stock issuable upon conversion of the Preferred Shares (Note 12) |  |  | (14,750 | ) |  |  | — |  |  |  | (14,750 | ) |  |  | — |
Potentially dilutive restricted stock awards |  |  | (1,321 | ) |  |  | — |  |  |  | (1,352 | ) |  |  | — |
Weighted average diluted shares used to calculate diluted earnings/(loss) per share as disclosed in the table above |  |  | 143,142 |  |  |  | 145,564 |  |  |  | 145,604 |  |  |  | 149,886 |

(1) | Excludes 15,307 participating securities and 5 potentially dilutive common stock equivalents for the three months ended September 30, 2020 and 14,997 participating securities and 5 potentially dilutive common stock equivalents for the nine months ended September 30, 2020, as the Company reported a net loss for the period (shares herein are reported in thousands).

20. Income Taxes
Effective Income Tax Rate – Three and Nine Months Ended September 30, 2021
The Company’s effective income tax rate during the three months ended September 30, 2021 of 7.9% resulted in income tax expense of $500. The effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a lower tax rate on foreign earnings and a
non-taxable
gain on revaluation of deferred consideration, partly offset by higher
non-deductible
compensation.
The Company’s effective income tax rate for the nine months ended September 30, 2021 of 6.7% resulted in income tax expense of $2,790. The effective income tax rate differs from the federal statutory rate of 21% primarily due to a $5,171 reduction in unrecognized tax benefits, a lower tax rate on foreign earnings and a
non-taxable
gain on revaluation of deferred consideration. These items were partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation and
non-deductible
executive compensation.
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 an income tax expense of $1,408. The effective income tax rate differs from the federal statutory tax rate of 21% primarily due to 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 effective income 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 of 2020, a tax benefit of $2,842 recognized in connection with the release of a deferred tax asset valuation allowance on interest carryforwards arising from the Company’s debt previously held in the United Kingdom 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, 2021 and December 31, 2020 are as follows:

|  | September 30, 2021 |  |  | December 31, 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Capital losses |  | $ | 16,368 |  |  | $ | 16,596 |
Accrued expenses |  |  | 3,560 |  |  |  | 3,507 |
NOLs – Foreign |  |  | 2,016 |  |  |  | 2,167 |
Goodwill and intangible assets |  |  | 1,323 |  |  |  | 1,466 |
Interest carryforwards |  |  | 1,223 |  |  |  | 2,235 |
Stock-based compensation |  |  | 1,045 |  |  |  | 1,922 |
Unrealized losses |  |  | 467 |  |  |  | 15 |
NOLs – U.S. |  |  | 382 |  |  |  | 510 |
Outside basis differences |  |  | 122 |  |  |  | 122 |
Operating lease liabilitie s |  |  | — |  |  |  | 4,953 |
Othe r |  |  | 315 |  |  |  | 96 |
Deferred tax assets |  |  | 26,821 |  |  |  | 33,589 |

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Deferred tax liabilities: |  |  |  |  |
Fixed assets and prepaid assets |  |  | 267 |  |  |  | 1,261 |
Foreign currency translation adjustment |  |  | 226 |  |  |  | 293 |
Unremitted earnings – International subsidiaries |  |  | 185 |  |  |  | 138 |
Right of use assets – operating leases |  |  | — |  |  |  | 3,927 |
Allocated equity component of convertible notes |  |  | — |  |  |  | 1,022 |
Deferred tax liabilitie s |  |  | 678 |  |  |  | 6,641 |
Total deferred tax assets less deferred tax liabilities |  |  | 26,143 |  |  |  | 26,948 |
Less: valuation allowance |  |  | (18,507 | ) |  |  | (18,885 | )
Deferred tax assets, net |  | $ | 7,636 |  |  | $ | 8,063 |

Net Operating and Capital Losses – U.S
.
The Company’s tax effected net operating losses (“NOLs”) at September 30, 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 were $16,368 at September 30, 2021. These capital losses expire between the years 2023 and 2025.
Net Operating Losses – International
One of the Company’s European subsidiar
ie
s generated NOLs outside the U.S. These tax effected NOLs, all of which are carried forward indefinitely, were $2,016 at September 30, 2021.
Valuation Allowance
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.
Uncertain Tax Positions
Tax positions are evaluated utilizing a
two-step
process. The Company first determines whether any of its tax positions are
more-likely-than-not
to be sustained upon examination, based solely on the technical merits of the position. Once it is determined that a position meets this recognition threshold, the position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
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, 2021:

|  | Total |  |  | Unrecognized Tax Benefits |  |  | Interest and Penalties |
Balance on January 1, 2021 |  | $ | 27,016 |  |  | $ | 21,850 |  |  | $ | 5,166 |
Decrease - Lapse of statute of limitations (1) |  |  | (5,171 | ) |  |  | (3,559 | ) |  |  | (1,612 | )
Increases |  |  | 39 |  |  |  | — |  |  |  | 39 |
Foreign currency translation (2) |  |  | 338 |  |  |  | 273 |  |  |  | 65 |
Balance at March 31, 2021 |  | $ | 22,222 |  |  | $ | 18,564 |  |  | $ | 3,658 |
Increases |  |  | 40 |  |  |  | — |  |  |  | 40 |
Foreign currency translation (2) |  |  | 165 |  |  |  | 138 |  |  |  | 27 |
Balance at June 30, 2021 |  | $ | 22,427 |  |  | $ | 18,702 |  |  | $ | 3,725 |
Increases |  |  | 39 |  |  |  | — |  |  |  | 39 |
Foreign currency translation (2) |  |  | (594 | ) |  |  | (496 | ) |  |  | (98 | )
Balance at September 30, 2021 |  | $ | 21,872 |  |  | $ | 18,206 |  |  | $ | 3,666 |

(1) | Recorded as an income tax benefit of $5,171 during the nine months ended September 30, 2021, 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, 2020, an income tax benefit of $5,981 was recorded along with an equal and offsetting amount in other gains and losses, net.

(2) | The gross unrecognized tax benefits were accrued in British pounds.

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The Company also recorded an offsetting indemnification asset provided by ETFS Capital as part of its agreement to indemnify the Company for any potential claims, for which an amount is being held in escrow. 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 $21,872 at September 30, 2021 are included in other
non-current
liabilities on the Company’s Consolidated Balance Sheets. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by $6,995 (including interest and penalties of $2,041) in the next 12 months upon lapsing of the statute of limitations.
At September 30, 2021, there were $21,872 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.
Income Tax Examinations
The Company is subject to U.S. federal income tax as well as income tax of multiple state, local and certain foreign jurisdictions. 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, 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
ASC
740-30
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 $185 and $138 at September 30, 2021 and December 31, 2020, respectively.
21. Shares Repurchased
On April 24, 2019, the Company’s Board of Directors extended the term of the Company’s share repurchase program for three years through April 27, 2022. 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 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. The repurchase program may be suspended or terminated at any time without prior notice. Shares repurchased under this program are returned to the status of authorized and unissued on the Company’s books and records.
There were no shares repurchased during the three months ended September 30, 2021. During the nine months ended September 30, 2021, the Company repurchased 5,120,496 shares of its common stock under this program for an aggregate cost of $34,506.
During the three and nine months ended September 30, 2020, the Company repurchased 1,066,261 and 8,189,973 shares of its common stock, respectively, under this program for an aggregate cost of $4,535 and $30,979, 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, 2021, $17,685 remained under this program for future
repurchases
.
22. Goodwill and Intangible Assets
Goodwill
The table below sets forth goodwill which is tested annually for impairment on November 30
th
:

|  | Total |
Balance at January 1, 2021 |  | $ | 85,856 |
Changes |  |  | — |
Balance at September 30, 2021 |  | $ | 85,856 |

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. The remainder of the goodwill is deductible for U.S. tax purposes.
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Intangible Assets (Indefinite-Lived)
The table below sets forth the Company’s intangible assets which are tested annually for impairment on November 30
th
:

|  | Total |
Balance at January 1, 2021 |  | $ | 601,247 |
Changes |  |  | — |
Balance at September 30, 2021 |  | $ | 601,247 |

ETFS
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.
23. 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 September 30, 2021 and December 31, 2020.
During the nine months ended September 30, 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. During the three and nine months ended September 30, 2020, the Company subsequently recognized a gain of $225 and $1,093, respectively, 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
On February 19, 2020, the Company completed the sale of all the outstanding shares of WTAMC to CI Financial Corp. The Company received CDN $3,720 (USD $2,774)
in cash at closing and is entitled to additional cash consideration depending on the achievement of certain AUM growth targets as determined on the
18-
and
36-month
anniversaries of the closing date. In connection with this sale, the Company recognized a gain of
$2,877
during the nine months ended September 30, 2020 which was recorded in other losses and gains, net. This gain represented the difference between the minimum cash consideration payable to the Company and the carrying value of WTAMC’s net assets upon disposition.
During the three months ended September 30, 2021, it was determined that the Company is entitled to CDN
$3,000 (USD $2,360)
of additional cash consideration as determined on the
18-month
anniversary of the closing date, which was paid to the Company on October 4, 2021. A gain of
$787
from remeasuring the contingent payment to its realizable value was recorded in other losses and gains, net.
The Company may receive additional cash consideration of CDN $0 to $4,000
depending on the achievement of certain AUM growth targets as determined on the
36-month
anniversary of the closing date.
24. Impairments
The following table summarizes impairments recognized by the Company:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Lease termination – New York office (Note 13) |  | $ | 9,277 |  |  | $ | — |  |  | $ | 9,277 |  |  | $ | — |
Fixed assets – New York office (Note 8) |  |  | 6,576 |  |  |  | — |  |  |  | 6,576 |  |  |  | — |
Lease termination – London office (Note 13) |  |  | — |  |  |  | — |  |  |  | 303 |  |  |  | — |
AdvisorEngine – Financial Interests (Note 23) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 19,672 |
Thesys – Series Y Preferred (Note 4) |  |  | — |  |  |  | 3,080 |  |  |  | — |  |  |  | 3,080 |
Total |  | $ | 15,853 |  |  | $ | 3,080 |  |  | $ | 16,156 |  |  | $ | 22,752 |

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25. Subsequent Events
The Company evaluated subsequent events through the date of issuance of the accompanying consolidated financial statements. There were no events requiring disclosure.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and the other financial information included elsewhere in this Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below. For a more complete description of the risks noted above and other risks that could cause our actual results to materially differ from our current expectations, please see Item 1A “Risk Factors” in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020 and our Quarterly Report on Form
10-Q
for the quarter ended June 30, 2021. We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.
Executive Summary
Introduction
We are the only publicly-traded asset management company that focuses exclusively on exchange-traded products, or ETPs, and are a leading global ETP sponsor based on assets under management, or AUM, with AUM of $72.8 billion globally as of September 30, 2021. An ETP is a pooled investment vehicle that holds a basket of securities, financial instruments or other assets and generally seeks to track (index-based) or outperform (actively managed) the performance of a broad or specific equity, fixed income or alternatives market segment, commodity or currency (or an inverse or multiple thereof). ETPs are listed on an exchange with their shares traded in the secondary market at market prices, generally at approximately the same price as the net asset value of their underlying components. ETP is an umbrella term that includes exchange-traded funds, or ETFs, exchange-traded notes and exchange-traded commodities.
Our family of ETPs includes products that track our own indexes, third-party indexes and market prices of commodities. We also offer actively managed products. Most of our equity-based funds employ a fundamentally weighted investment methodology, which weights securities based on factors such as dividends, earnings or investment factors, whereas most other industry indexes use a capitalization weighted methodology. We distribute our products through all major channels in the asset management industry, including banks, brokerage firms, registered investment advisers, institutional investors, private wealth managers and online brokers primarily through our sales force. Our sales efforts are not primarily directed towards the retail segment but rather are directed towards financial advisers that act as intermediaries between the
end-client
and us or institutional investors.
We focus on creating products for investors that offer thoughtful innovation, smart engineering and redefined investing. We have launched many
first-to-market
products and pioneered alternative weighting we call “Modern Alpha,” which combines the outperformance potential of active management with the benefits of passive management to offer investors cost-effective funds that are built to perform.
Through our operating subsidiaries, we provide investment advisory and other management services to our ETPs collectively offering products covering equity, commodity, fixed income, leveraged and inverse, currency, cryptocurrency and alternative strategies. In exchange for providing these services, we receive advisory fee revenues based on a percentage of the ETPs’ average daily AUM. Our expenses are predominantly related to selling, operating and marketing our products. We have contracted with third parties to provide certain operational services for the ETPs.
We strive to deliver a better investing experience through innovative solutions. Continued investments in technology-enabled and research-driven solutions and our Advisor Solutions program, which includes portfolio construction, asset allocation, practice management services and digital tools for financial advisors, are meant to differentiate us in the market, expand our distribution and further enhance our relationships with financial advisors.
We were incorporated under the laws of the state of Delaware on September 19, 1985 as Financial Data Systems, Inc. and ultimately renamed WisdomTree Investments, Inc. on September 6, 2005.
Digital Assets – Developments
We are executing on our digital assets initiative and have made meaningful advancements. We filed registration statements for the WisdomTree Bitcoin Trust, the WisdomTree Ethereum Trust and the WisdomTree Digital Short-Term Treasury Fund with the SEC, among other regulatory and product related digital asset advancements which we expect to communicate in the future. The WisdomTree Enhanced Commodity Strategy Fund (GCC) became the first ETF to add bitcoin futures exposure. We cross-listed our European-domiciled WisdomTree Bitcoin ETP, or BTCW, in Germany, appointed Coinbase Custody as a custodian and received approval to passport BTCW in the European Union, or EU, allowing for a wider audience to access and invest in the product. We launched a physically backed Ethereum ETP in Europe, which is also passported across the EU. We also invested in Securrency, Inc.’s Series B funding round, as we believe their team is uniquely suited to lead in blockchain-based financial and regulatory technology going forward. We also recently invested in Onramp Invest, a technology firm that provides access to digital assets for registered investment advisers. Collaborations with Onramp Invest and Federal Life Insurance Company were also announced with respect to making available WisdomTree model portfolios that include digital assets in different channels. These initiatives were undertaken in our pursuit to establish ourselves as a leader in this space.
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Industry Developments
In September 2021, Senator Ron Wyden, Senate Finance Committee Chair, released draft tax legislation that would directly impact the tax treatment of ETFs. The proposed legislation would eliminate ETFs’ chief tax advantage by repealing Section 852(b)(6) of the Internal Revenue Code, which allows ETFs to redeem shares
in-kind
without exposing long-term investors to capital gains on any individual security in the underlying ETF structure. We believe that ETFs are an important tool used by retail investors striving to build financial security, as well as younger investors who are participating in the financial markets for the first time. The ETF creation and redemption process ensures accurate index tracking for the benefit of all shareholders and it is the most cost-effective and
tax-efficient
way to achieve this, directly benefiting the end investor. We believe that ETFs have proven to be a successful investment structure that should be protected. If eliminated, ETFs would lose a valuable benefit associated with the structure; however, overall industry growth should not be materially affected due to the other inherent benefits of ETFs – transparency and liquidity.
Termination of New York Office Lease
On September 9, 2021, we entered into a Surrender Agreement to terminate the lease for our principal executive office at 245 Park Avenue, New York, effective immediately. In consideration for the landlord’s agreement to enter into the Surrender Agreement and accelerate the expiration date of the term of the lease from August 31, 2029, we paid a termination fee of $12.7 million. As a result, we recognized a loss on the termination of a lease of $15.9 million during the three months ended September 30, 2021 which is included in impairments and was inclusive of the
right-of-use
asset, leasehold improvements and fixed assets broker fees and a reduction in operating lease liabilities.
Cost savings were $0.2 million during the third quarter of 2021 and are estimated to be approximately $0.6 million during the fourth quarter of 2021 when compared to actual occupancy and depreciation expense recognized during the second quarter of 2021. Cost savings for the year ending December 31, 2022 resulting from the reduction in the New York and London office footprints are estimated to be approximately $3.5 million when compared to actual occupancy and depreciation expense recognized during the year ended December 31, 2020. Anticipated rent for new office space in New York and London with a smaller footprint is included in these estimates.
Assets Under Management
WisdomTree ETPs
We offer ETPs covering equity, commodity, fixed income, leveraged and inverse, currency, cryptocurrency and alternative strategies. The chart below sets forth the asset mix of our ETPs at September 30, 2020, June 30, 2021 and September 30, 2021:
Market Environment
During the third quarter of 2021, the U.S and Eurozone markets were flat as growth and inflation concerns arising in September erased prior gains. Emerging markets underperformed amid a
sell-off
in China and concerns over continued supply chain disruptions. Gold prices also decreased modestly during the quarter.
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The S&P 500 and MSCI EAFE (local currency) rose 0.6% and 1.4%, respectively, while MSCI Emerging Markets Index (U.S. dollar) weakened 8.0%, and gold prices declined 1.1% during the third quarter of 2021. In addition, the European and Japanese equities markets both appreciated with the MSCI EMU Index and MSCI Japan Index increasing 0.5% and 5.3%, respectively, in local currency terms for the quarter. Also, the U.S. dollar rose 2.3% and 2.7% versus the euro and British pound, respectively, and weakened 1.0% versus the Japanese yen during the quarter.
U.S. listed ETF Industry Flows
U.S. listed ETF industry net flows for the three months ended September 30, 2021 were $170.4 billion. U.S. equity and fixed income gathered the majority of those flows.
Source: Morningstar
European ETP Industry Flows
European ETP industry net flows were $38.0 billion for the three months ended September 30, 2021. Equities and fixed income gathered the majority of those flows.
Source: Morningstar
Our Operating and Financial Results
We operate as an ETP sponsor and asset manager providing investment advisory services globally through our subsidiaries in the United States and Europe.
U.S. Listed ETFs
Our U.S. listed ETFs’ AUM decreased from $45.1 billion at June 30, 2021 to $44.7 billion at September 30, 2021 due to market depreciation, partly offset by net inflows.
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European Listed ETPs
Our European listed ETPs’ AUM decreased from $28.8 billion at June 30, 2021 to $28.0 billion at September 30, 2021 primarily due to market depreciation.
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Consolidated Operating Results
The following table sets forth our revenues and net income/(loss) for the most recent five quarters. Prior period amounts previously disclosed have been revised to conform with our current presentation. These revisions had no effect on previously reported net income. See Note 2 to our Consolidated Financial Statements for additional information.

| • |  | Revenues – We recorded operating revenues of $78.1 million during the three months ended September 30, 2021, up 22.5% from the three months ended September 30, 2020 due to higher average global AUM.

| • |  | Operating Expenses – Total operating expenses increased 10.0% from the three months ended September 30, 2020 to $53.9 million primarily due to higher incentive compensation and headcount, fund management and administration costs, third-party distribution fees, professional fees and sales and business development expenses, partly offset by lower occupancy expense and contractual gold payments.

| • |  | Other Income/(Expenses) – Other income/(expenses) includes interest income and interest expense, gains/(losses) on revaluation of deferred consideration – gold payments, impairments and other gains and losses. We recognized a loss of $15.9 million upon the termination of our New York office lease during the three months ended September 30, 2021, which is included in impairments. For the three months ended September 30, 2021 and 2020, the gains/(losses) on revaluation of deferred consideration – gold payments were $1.7 million and ($8.9) million, respectively.

| • |  | Net income – We reported net income of $5.8 million during the three months ended September 30, 2021, compared to a net loss of $0.3 million during the three months ended September 30, 2020. The change was impacted by the $15.9 million impairment charge, the change in revenue and expenses described above and a favorable change related to the revaluation of deferred consideration – gold payments of $10.6 million.

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Key Operating Statistics
The following table presents key operating statistics that serve as indicators for the performance of our business:

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, 2021 |  |  | June 30, 2021 |  |  | September 30, 2020 |  |  | September 30, 2021 |  |  | September 30, 2020 |
GLOBAL ETPs (in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 73,944 |  |  | $ | 69,534 |  |  | $ | 57,618 |  |  | $ | 67,385 |  |  | $ | 63,532 |
Assets sold |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (778 | )
Inflows/(outflows) |  |  | 548 |  |  |  | 931 |  |  |  | (485 | ) |  |  | 2,758 |  |  |  | (900 | )
Market appreciation/(depreciation) |  |  | (1,709 | ) |  |  | 3,483 |  |  |  | 3,622 |  |  |  | 2,644 |  |  |  | (783 | )
Fund closures |  |  | — |  |  |  | (4 | ) |  |  | (46 | ) |  |  | (4 | ) |  |  | (362 | )
End of period assets |  | $ | 72,783 |  |  | $ | 73,944 |  |  | $ | 60,709 |  |  | $ | 72,783 |  |  | $ | 60,709 |
Average assets during the period |  | $ | 74,563 |  |  | $ | 73,652 |  |  | $ | 61,200 |  |  | $ | 72,599 |  |  | $ | 59,020 |
Average ETP advisory fee during the period |  |  | 0.41 | % |  |  | 0.40 | % |  |  | 0.41 | % |  |  | 0.41 | % |  |  | 0.41 | %
Revenue days |  |  | 92 |  |  |  | 91 |  |  |  | 92 |  |  |  | 273 |  |  |  | 274 |
Number of ETPs—end of period |  |  | 322 |  |  |  | 318 |  |  |  | 305 |  |  |  | 322 |  |  |  | 305 |
U.S. LISTED ETFs (in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 45,129 |  |  | $ | 42,163 |  |  | $ | 31,362 |  |  | $ | 38,517 |  |  | $ | 40,600 |
Inflows/(outflows) |  |  | 612 |  |  |  | 1,130 |  |  |  | 575 |  |  |  | 3,085 |  |  |  | (2,172 | )
Market appreciation/(depreciation) |  |  | (999 | ) |  |  | 1,836 |  |  |  | 1,373 |  |  |  | 3,140 |  |  |  | (4,994 | )
Fund closures |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (124 | )
End of period assets |  | $ | 44,742 |  |  | $ | 45,129 |  |  | $ | 33,310 |  |  | $ | 44,742 |  |  | $ | 33,310 |
Average assets during the period |  | $ | 44,508 |  |  | $ | 44,184 |  |  | $ | 33,003 |  |  | $ | 43,466 |  |  | $ | 33,534 |
Number of ETFs – end of the period |  |  | 73 |  |  |  | 73 |  |  |  | 67 |  |  |  | 73 |  |  |  | 67 |
EUROPEAN LISTED ETPs (in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 28,815 |  |  | $ | 27,371 |  |  | $ | 26,256 |  |  | $ | 28,868 |  |  | $ | 22,932 |
Assets sold |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (778 | )
Inflows/(outflows) |  |  | (64 | ) |  |  | (199 | ) |  |  | (1,060 | ) |  |  | (327 | ) |  |  | 1,272 |
Market appreciation/(depreciation) |  |  | (710 | ) |  |  | 1,647 |  |  |  | 2,249 |  |  |  | (496 | ) |  |  | 4,211 |
Fund closures |  |  | — |  |  |  | (4 | ) |  |  | (46 | ) |  |  | (4 | ) |  |  | (238 | )
End of period assets |  | $ | 28,041 |  |  | $ | 28,815 |  |  | $ | 27,399 |  |  | $ | 28,041 |  |  | $ | 27,399 |
Average assets during the period |  | $ | 29,055 |  |  | $ | 29,468 |  |  | $ | 28,197 |  |  | $ | 29,134 |  |  | $ | 25,486 |
Number of ETPs—end of period |  |  | 249 |  |  |  | 245 |  |  |  | 238 |  |  |  | 249 |  |  |  | 238 |
PRODUCT CATEGORIES (in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity & Currency |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 24,772 |  |  | $ | 23,657 |  |  | $ | 24,246 |  |  | $ | 25,880 |  |  | $ | 20,073 |
Inflows/(outflows) |  |  | (249 | ) |  |  | (318 | ) |  |  | (1,112 | ) |  |  | (1,227 | ) |  |  | 767 |
Market appreciation/(depreciation) |  |  | (697 | ) |  |  | 1,433 |  |  |  | 2,042 |  |  |  | (827 | ) |  |  | 4,336 |
End of period assets |  | $ | 23,826 |  |  | $ | 24,772 |  |  | $ | 25,176 |  |  | $ | 23,826 |  |  | $ | 25,176 |
Average assets during the period |  | $ | 24,859 |  |  | $ | 25,577 |  |  | $ | 25,949 |  |  | $ | 25,244 |  |  | $ | 23,132 |
U.S. Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 21,285 |  |  | $ | 20,018 |  |  | $ | 13,997 |  |  | $ | 18,367 |  |  | $ | 17,732 |
Inflows/(outflows) |  |  | 351 |  |  |  | 190 |  |  |  | 897 |  |  |  | 759 |  |  |  | 370 |
Market appreciation/(depreciation) |  |  | (253 | ) |  |  | 1,077 |  |  |  | 718 |  |  |  | 2,257 |  |  |  | (2,490 | )
End of period assets |  | $ | 21,383 |  |  | $ | 21,285 |  |  | $ | 15,612 |  |  | $ | 21,383 |  |  | $ | 15,612 |
Average assets during the period |  | $ | 21,793 |  |  | $ | 20,983 |  |  | $ | 15,160 |  |  | $ | 20,699 |  |  | $ | 14,833 |
International Developed Market Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 10,792 |  |  | $ | 9,989 |  |  | $ | 8,843 |  |  | $ | 9,408 |  |  | $ | 13,018 |
Inflows/(outflows) |  |  | 404 |  |  |  | 399 |  |  |  | (586 | ) |  |  | 820 |  |  |  | (2,649 | )
Market appreciation/(depreciation) |  |  | (16 | ) |  |  | 404 |  |  |  | 363 |  |  |  | 952 |  |  |  | (1,749 | )
End of period assets |  | $ | 11,180 |  |  | $ | 10,792 |  |  | $ | 8,620 |  |  | $ | 11,180 |  |  | $ | 8,620 |
Average assets during the period |  | $ | 11,146 |  |  | $ | 10,526 |  |  | $ | 8,834 |  |  | $ | 10,488 |  |  | $ | 9,693 |
Emerging Market Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 11,519 |  |  | $ | 10,477 |  |  | $ | 5,413 |  |  | $ | 8,539 |  |  | $ | 6,400 |
Inflows/(outflows) |  |  | (149 | ) |  |  | 531 |  |  |  | 257 |  |  |  | 2,044 |  |  |  | 301 |
Market appreciation/(depreciation) |  |  | (704 | ) |  |  | 511 |  |  |  | 309 |  |  |  | 83 |  |  |  | (722 | )
End of period assets |  | $ | 10,666 |  |  | $ | 11,519 |  |  | $ | 5,979 |  |  | $ | 10,666 |  |  | $ | 5,979 |
Average assets during the period |  | $ | 11,038 |  |  | $ | 11,012 |  |  | $ | 5,917 |  |  | $ | 10,642 |  |  | $ | 5,656 |

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|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, 2021 |  |  | June 30, 2021 |  |  | September 30, 2020 |  |  | September 30, 2021 |  |  | September 30, 2020 |
Fixed Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 3,441 |  |  | $ | 3,246 |  |  | $ | 3,507 |  |  | $ | 3,308 |  |  | $ | 3,565 |
Inflows/(outflows) |  |  | 115 |  |  |  | 168 |  |  |  | 76 |  |  |  | 293 |  |  |  | 39 |
Market appreciation/(depreciation) |  |  | (26 | ) |  |  | 27 |  |  |  | 23 |  |  |  | (71 | ) |  |  | 2 |
End of period assets |  | $ | 3,530 |  |  | $ | 3,441 |  |  | $ | 3,606 |  |  | $ | 3,530 |  |  | $ | 3,606 |
Average assets during the period |  | $ | 3,502 |  |  | $ | 3,337 |  |  | $ | 3,581 |  |  | $ | 3,358 |  |  | $ | 3,571 |
Leveraged & Inverse |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 1,693 |  |  | $ | 1,521 |  |  | $ | 1,344 |  |  | $ | 1,477 |  |  | $ | 1,133 |
Inflows/(outflows) |  |  | 42 |  |  |  | (2 | ) |  |  | (10 | ) |  |  | 35 |  |  |  | 374 |
Market appreciation/(depreciation) |  |  | (69 | ) |  |  | 174 |  |  |  | 89 |  |  |  | 154 |  |  |  | (84 | )
End of period assets |  | $ | 1,666 |  |  | $ | 1,693 |  |  | $ | 1,423 |  |  | $ | 1,666 |  |  | $ | 1,423 |
Average assets during the period |  | $ | 1,717 |  |  | $ | 1,666 |  |  | $ | 1,476 |  |  | $ | 1,646 |  |  | $ | 1,260 |
Cryptocurrency |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 229 |  |  | $ | 377 |  |  | $ | 15 |  |  | $ | 167 |  |  | $ | 1 |
Inflows/(outflows) |  |  | 12 |  |  |  | 8 |  |  |  | 15 |  |  |  | 56 |  |  |  | 28 |
Market appreciation/(depreciation) |  |  | 54 |  |  |  | (156 | ) |  |  | 3 |  |  |  | 72 |  |  |  | 4 |
End of period assets |  | $ | 295 |  |  | $ | 229 |  |  | $ | 33 |  |  | $ | 295 |  |  | $ | 33 |
Average assets during the period |  | $ | 277 |  |  | $ | 300 |  |  | $ | 27 |  |  | $ | 280 |  |  | $ | 13 |
Alternatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 198 |  |  | $ | 227 |  |  | $ | 225 |  |  | $ | 215 |  |  | $ | 358 |
Inflows/(outflows) |  |  | 22 |  |  |  | (39 | ) |  |  | (4 | ) |  |  | (17 | ) |  |  | (99 | )
Market appreciation/(depreciation) |  |  | 2 |  |  |  | 10 |  |  |  | 8 |  |  |  | 24 |  |  |  | (30 | )
End of period assets |  | $ | 222 |  |  | $ | 198 |  |  | $ | 229 |  |  | $ | 222 |  |  | $ | 229 |
Average assets during the period |  | $ | 214 |  |  | $ | 231 |  |  | $ | 226 |  |  | $ | 223 |  |  | $ | 260 |
Closed ETPs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning of period assets |  | $ | 15 |  |  | $ | 22 |  |  | $ | 28 |  |  | $ | 24 |  |  | $ | 1,252 |
Assets sold |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (778 | )
Inflows/(outflows) |  |  | — |  |  |  | (6 | ) |  |  | (18 | ) |  |  | (5 | ) |  |  | (31 | )
Market appreciation/(depreciation) |  |  | — |  |  |  | 3 |  |  |  | 67 |  |  |  | — |  |  |  | (50 | )
Fund closures |  |  | — |  |  |  | (4 | ) |  |  | (46 | ) |  |  | (4 | ) |  |  | (362 | )
End of period assets |  | $ | 15 |  |  | $ | 15 |  |  | $ | 31 |  |  | $ | 15 |  |  | $ | 31 |
Average assets during the period |  | $ | 17 |  |  | $ | 20 |  |  | $ | 30 |  |  | $ | 20 |  |  | $ | 602 |
Headcount: |  |  | 235 |  |  |  | 227 |  |  |  | 211 |  |  |  | 235 |  |  |  | 211 |

Note: Previously issued statistics may be restated due to fund closures and trade adjustments
Source: WisdomTree
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Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020
Selected Operating and Financial Information

|  | Three Months Ended September 30, |  |  | Change |  |  | Percent Change |
Global AUM (in millions) |  | 2021 |  |  | 2020 |
Average global AUM |  | $ | 74,563 |  |  | $ | 61,200 |  |  | $ | 13,363 |  |  |  | 21.8 | %
Operating Revenues (in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Advisory fees (1) |  | $ | 76,400 |  |  | $ | 63,028 |  |  | $ | 13,372 |  |  |  | 21.2 | %
Other income |  |  | 1,712 |  |  |  | 721 |  |  |  | 991 |  |  |  | 137.4 | %
Total revenues |  | $ | 78,112 |  |  | $ | 63,749 |  |  | $ | 14,363 |  |  |  | 22.5 | %

(1) | Advisory fees previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 to our Consolidated Financial Statements for additional information.

Average Global AUM
Our average global AUM increased 21.8% from $61.2 billion at September 30, 2020 to $74.6 billion at September 30, 2021 due to market appreciation and net inflows.
Operating Revenues
Advisory fees
Advisory fee revenues increased 21.2% from $63.0 million during the three months ended September 30, 2020 to $76.4 million in the comparable period in 2021 due to higher average global AUM. Our average global advisory fee was 0.41% during both the three months ended September 30, 2020 and September 30, 2021.
Other income
Other income increased 137.4% from $0.7 million during the three months ended September 30, 2020 to $1.7 million in the comparable period in 2021 primarily due to higher fees associated with our European listed products.
Operating Expenses

|  | Three Months Ended September 30, |  |  | Change |  |  | Percent Change |
(in thousands) |  | 2021 |  |  | 2020 |
Compensation and benefits |  | $ | 22,027 |  |  | $ | 19,098 |  |  | $ | 2,929 |  |  |  | 15.3 | %
Fund management and administration (1) |  |  | 15,181 |  |  |  | 14,328 |  |  |  | 853 |  |  |  | 6.0 | %
Marketing and advertising |  |  | 2,925 |  |  |  | 2,996 |  |  |  | (71 | ) |  |  | (2.4 | %)
Sales and business development |  |  | 2,935 |  |  |  | 2,386 |  |  |  | 549 |  |  |  | 23.0 | %
Contractual gold payments |  |  | 4,250 |  |  |  | 4,539 |  |  |  | (289 | ) |  |  | (6.4 | %)
Professional fees |  |  | 1,583 |  |  |  | 950 |  |  |  | 633 |  |  |  | 66.6 | %
Occupancy, communications and equipment |  |  | 1,163 |  |  |  | 1,611 |  |  |  | (448 | ) |  |  | (27.8 | %)
Depreciation and amortization |  |  | 185 |  |  |  | 253 |  |  |  | (68 | ) |  |  | (26.9 | %)
Third-party distribution fees |  |  | 1,873 |  |  |  | 1,233 |  |  |  | 640 |  |  |  | 51.9 | %
Other |  |  | 1,787 |  |  |  | 1,611 |  |  |  | 176 |  |  |  | 10.9 | %
Total operating expenses |  | $ | 53,909 |  |  | $ | 49,005 |  |  | $ | 4,904 |  |  |  | 10.0 | %

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|  | Three Months Ended September 30, |
As a Percent of Revenues: |  | 2021 |  |  | 2020 |
Compensation and benefits |  |  | 28.3 | % |  |  | 30.0 | %
Fund management and administration (1) |  |  | 19.4 | % |  |  | 22.5 | %
Marketing and advertising |  |  | 3.7 | % |  |  | 4.7 | %
Sales and business development |  |  | 3.8 | % |  |  | 3.8 | %
Contractual gold payments |  |  | 5.4 | % |  |  | 7.1 | %
Professional fees |  |  | 2.0 | % |  |  | 1.5 | %
Occupancy, communications and equipment |  |  | 1.5 | % |  |  | 2.5 | %
Depreciation and amortization |  |  | 0.2 | % |  |  | 0.4 | %
Third-party distribution fees |  |  | 2.4 | % |  |  | 1.9 | %
Other |  |  | 2.3 | % |  |  | 2.5 | %
Total operating expenses |  |  | 69.0 | % |  |  | 76.9 | %

(1) | Fund management and administration expenses previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 to our Consolidated Financial Statements for additional information.

Compensation and benefits
Compensation and benefits expense increased 15.3% from $19.1 million during the three months ended September 30, 2020 to $22.0 million in the comparable period in 2021 due to higher incentive compensation and headcount. Headcount was 211 and 235 at September 30, 2020 and September 30, 2021, respectively.
Fund management and administration
Fund management and administration expense increased 6.0% from $14.3 million during the three months ended September 30, 2020 to $15.2 million in the comparable period in 2021 due to higher average global AUM.
Marketing and advertising
Marketing and advertising expense was essentially unchanged from the three months ended September 30, 2020.
Sales and business development
Sales and business development expense increased 23% from $2.4 million during the three months ended September 30, 2020 to $2.9 million in the comparable period in 2021 primarily due to higher spending on conferences and sales tools.
Contractual gold payments
Contractual gold payments expense decreased 6.4% from $4.5 million during the three months ended September 30, 2020 to $4.3 million in the comparable period in 2021. This expense was associated with the payment of 2,375 ounces of gold and was calculated using the average daily spot price of $1,911 and $1,789 per ounce during the three months ended September 30, 2020 and 2021, respectively.
Professional fees
Professional fees increased 66.6% from $1.0 million during the three months ended September 30, 2020 to $1.6 million in the comparable period in 2021 due to spending related to our digital assets initiative.
Occupancy, communications and equipment
Occupancy, communications and equipment expense decreased 27.8% from $1.6 million during the three months ended September 30, 2020 to $1.2 million in the comparable period in 2021 as we exited our New York office and reduced our office footprint in Europe.
Depreciation and amortization
Depreciation and amortization expense decreased 26.9% from 0.3 million during the three months ended September 30, 2020 to 0.2 million in the comparable period in 2021 due to
write-off
of fixed assets related to the exit of our New York office.
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Third-party distribution fees
Third-party distribution fees increased 51.9% from $1.2 million during the three months ended September 30, 2020 to $1.9 million in the comparable period in 2021 primarily due to higher AUM in Latin America resulting in higher fees paid to our third-party marketing agent.
Other
Other expenses were essentially unchanged from the three months ended September 30, 2020.
Other Income/(Expenses)

|  | Three Months Ended September 30, |  |  | Change |  |  | Percent Change |
(in thousands) |  | 2021 |  |  | 2020 |
Interest expense |  |  | $ (3,729) |  |  |  | $ (2,511) |  |  |  | $ (1,218) |  |  |  | 48.5 | %
Gain/(loss) on revaluation of deferred consideration – gold payments |  |  | 1,737 |  |  |  | (8,870 | ) |  |  | 10,607 |  |  |  | n/a |
Interest income |  |  | 689 |  |  |  | 111 |  |  |  | 578 |  |  |  | 520.7 | %
Impairments |  |  | (15,853 | ) |  |  | (3,080 | ) |  |  | (12,773 | ) |  |  | 414.7 | %
Other losses and gains, net |  |  | (714 | ) |  |  | 744 |  |  |  | (1,458 | ) |  |  | n/a |
Total other expenses, net |  |  | $ (17,870) |  |  |  | $ (13,606) |  |  |  | $ (4,264) |  |  |  | 31.3 | %

|  | Three Months Ended September 30, |
As a Percent of Revenues: |  | 2021 |  |  | 2020 |
Interest expense |  |  | (4.8 | %) |  |  | (4.0 | %)
Gain/(loss) on revaluation of deferred consideration – gold payments |  |  | 2.2 | % |  |  | (13.9 | %)
Interest income |  |  | 0.9 | % |  |  | 0.2 | %
Impairments |  |  | (20.3 | %) |  |  | (4.8 | %)
Other losses and gains, net |  |  | (0.9 | %) |  |  | 1.2 | %
Total other expenses, net |  |  | 22.9 | % |  |  | (21.3 | %)

Interest expense
Interest expense increased 48.5% from $2.5 million during the three months ended September 30, 2020 to $3.7 million in the comparable period in 2021 due to a higher level of debt outstanding, partly offset by a lower effective interest rate. Our effective interest rate during the three months ended September 30, 2020 and 2021 was 6.3% and 4.6%, respectively.
Gain/(loss) on revaluation of deferred consideration
We recognized a loss on revaluation of deferred consideration of ($8.9) million during the three months ended September 30, 2020 as compared to a gain of $1.7 million gain during the three months ended September 30, 2021. The gain in the current quarter was due to lower forward-looking gold prices. The magnitude of any gain or loss is highly correlated to the magnitude of the change in the forward-looking price of gold.
Interest income
Interest income increased 520.7% from $0.1 million during the three months ended September 30, 2020 to $0.7 million in the comparable period in 2021 due to an increase in our securities owned.
Impairment
During the three months ended September 30, 2021, we recognized a loss of $15.9 million upon the termination of our New York office lease, which is included in impairments. The impairment was inclusive of the
write-off
of the
right-of-use
asset, leasehold improvements and fixed assets, broker fees and a reduction in operating lease liabilities.
During the three months ended September 30, 2020, we recognized a
non-cash
impairment charge of $3.1 million related to our investment in Thesys Group, Inc.
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Other losses and gains, net
Other losses and gains, net were $0.7 million and ($0.7) million during the three months ended September 30, 2020 and 2021, respectively. The three months ended September 30, 2021 includes losses on our securities owned of $1.3 million and a gain of $0.8 million related to the remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business. Included in the three months ended September 30, 2020, is a gain of $0.2 million arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine. Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.
Income taxes
Our effective income tax rate for the three months ended September 30, 2021 of 7.9% resulted in income tax expense of $0.5 million. Our effective income tax rate differs from the federal statutory tax rate of 21% primarily due to a lower tax rate on foreign earnings and a
non-taxable
gain on revaluation of deferred consideration, partly offset by higher
non-deductible
compensation.
Our effective income tax rate for the three months ended September 30, 2020 of 123.7% resulted in an income tax expense of $1.4 million. Our effective income tax rate differs from the federal statutory tax rate of 21% due to a
non-deductible
loss on revaluation of deferred consideration. This loss was partly offset by a lower tax rate on foreign earnings.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Selected Operating and Financial Information

|  | Nine Months Ended September 30, |  |  | Change |  |  | Percent Change |
Global AUM (in millions) |  | 2021 |  |  | 2020 |
Average global AUM |  | $ | 72,599 |  |  | $ | 59,020 |  |  | $ | 13,579 |  |  |  | 23.0 | %
Operating Revenues (in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Advisory fees (1) |  | $ | 220,611 |  |  | $ | 181,697 |  |  | $ | 38,914 |  |  |  | 21.4 | %
Other income |  |  | 4,532 |  |  |  | 2,563 |  |  |  | 1,969 |  |  |  | 76.8 | %
Total revenues |  | $ | 225,143 |  |  | $ | 184,260 |  |  | $ | 40,833 |  |  |  | 22.2 | %

(1) | Advisory fees previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 to our Consolidated Financial Statements for additional information.

Average Global AUM
Our average global AUM increased 23.0% from $59.0 billion at September 30, 2020 to $72.6 billion at September 30, 2021 arising from market appreciation and net inflows.
Operating Revenues
Advisory fees
Advisory fee revenues increased 21.4% from $181.7 million during the nine months ended September 30, 2020 to $220.6 million in the comparable period in 2021 due to higher average global AUM. Our average global advisory fee was 0.41% during both the nine months ended September 30, 2020 and September 30, 2021.
Other income
Other income increased 76.8% from $2.6 million during the nine months ended September 30, 2020 to $4.5 million in the comparable period in 2021 primarily due to higher fees associated with our European listed products.
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Operating Expenses

|  | Nine Months Ended September 30, |  |  | Change |  |  | Percent Change |
(in thousands) |  | 2021 |  |  | 2020 |
Compensation and benefits |  | $ | 64,985 |  |  | $ | 53,848 |  |  | $ | 11,137 |  |  |  | 20.7 | %
Fund management and administration (1) |  |  | 43,495 |  |  |  | 41,785 |  |  |  | 1,710 |  |  |  | 4.1 | %
Marketing and advertising |  |  | 9,525 |  |  |  | 7,413 |  |  |  | 2,112 |  |  |  | 28.5 | %
Sales and business development |  |  | 7,239 |  |  |  | 7,984 |  |  |  | (745 | ) |  |  | (9.3 | %)
Contractual gold payments |  |  | 12,834 |  |  |  | 12,362 |  |  |  | 472 |  |  |  | 3.8 | %
Professional fees |  |  | 5,517 |  |  |  | 3,580 |  |  |  | 1,937 |  |  |  | 54.1 | %
Occupancy, communications and equipment |  |  | 3,904 |  |  |  | 4,805 |  |  |  | (901 | ) |  |  | (18.8 | %)
Depreciation and amortization |  |  | 693 |  |  |  | 760 |  |  |  | (67 | ) |  |  | (8.8 | %)
Third-party distribution fees |  |  | 5,346 |  |  |  | 3,928 |  |  |  | 1,418 |  |  |  | 36.1 | %
Acquisition and disposition-related costs |  |  | — |  |  |  | 416 |  |  |  | (416 | ) |  |  | (100.0 | %)
Other |  |  | 5,110 |  |  |  | 5,204 |  |  |  | (94 | ) |  |  | (1.8 | %)
Total operating expenses |  | $ | 158,648 |  |  | $ | 142,085 |  |  | $ | 16,563 |  |  |  | 11.7 | %

|  | Nine Months Ended September 30, |
As a Percent of Revenues: |  | 2021 |  |  | 2020 |
Compensation and benefits |  |  | 28.9 | % |  |  | 29.2 | %
Fund management and administration (1) |  |  | 19.3 | % |  |  | 22.7 | %
Marketing and advertising |  |  | 4.2 | % |  |  | 4.0 | %
Sales and business development |  |  | 3.2 | % |  |  | 4.4 | %
Contractual gold payments |  |  | 5.7 | % |  |  | 6.7 | %
Professional fees |  |  | 2.5 | % |  |  | 2.0 | %
Occupancy, communications and equipment |  |  | 1.7 | % |  |  | 2.6 | %
Depreciation and amortization |  |  | 0.3 | % |  |  | 0.4 | %
Third-party distribution fees |  |  | 2.4 | % |  |  | 2.1 | %
Acquisition and disposition-related costs |  |  | 0.0 | % |  |  | 0.2 | %
Other |  |  | 2.3 | % |  |  | 2.8 | %
Total operating expenses |  |  | 70.5 | % |  |  | 77.1 | %

(1) | Fund management and administration expenses previously reported have been revised due to an immaterial error correction. These revisions had no effect on previously reported net income. See Note 2 to our Consolidated Financial Statements for additional information.

Compensation and benefits
Compensation and benefits expense increased 20.7% from $53.8 million during the nine months ended September 30, 2020 to $65.0 million in the comparable period in 2021 due to higher incentive compensation and headcount.
Fund management and administration
Fund management and administration expense increased 4.1% from $41.8 million during the nine months ended September 30, 2020 to $43.5 million in the comparable period in 2021 primarily due to higher average global AUM.
Marketing and advertising
Marketing and advertising expense increased 28.5% from $7.4 million during the nine months ended September 30, 2020 to $9.5 million in the comparable period in 2021 as our spending in the prior year was reduced at the onset of the
COVID-19
pandemic.
Sales and business development
Sales and business development expense decreased 9.3% from $8.0 million during the nine months ended September 30, 2020 to $7.2 million in the comparable period in 2021 primarily due to lower travel and discretionary spending resulting from the persistence of the
COVID-19
pandemic.
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Contractual gold payments
Contractual gold payments expense increased 3.8% from $12.4 million during the nine months ended September 30, 2020 to $12.8 million in the comparable period in 2021. This expense was associated with the payment of 7,125 ounces of gold and was calculated using the average daily spot price of $1,735 and $1,801 per ounce during the nine months ended September 30, 2020 and 2021, respectively.
Professional fees
Professional fees increased 54.1% from $3.6 million during the nine months ended September 30, 2020 to $5.5 million in the comparable period in 2021 due to spending related to our digital assets initiative.
Occupancy, communications and equipment
Occupancy, communications and equipment expense decreased 18.8% from $4.8 million during the nine months ended September 30, 2020 to $3.9 million in the comparable period in 2021 as we exited our New York office and reduced our office footprint in Europe.
Depreciation and amortization
Depreciation and amortization expense decreased 8.8% from $0.8 million during the nine months ended September 30, 2020 to $0.7 million in the comparable period in 2021 due to the
write-off
of fixed assets related to the exit of our New York office.
Third-party distribution fees
Third-party distribution fees increased 36.1% from $3.9 million during the nine months ended September 30, 2020 to $5.3 million in the comparable period in 2021 due to higher AUM in Latin America resulting in higher fees paid to our third-party marketing agent, as well as additional platform relationships.
Acquisition and disposition-related costs
Acquisition and disposition-related costs of $0.4 million during the nine months ended September 30, 2020 arose due to the sale of our Canadian ETF business which was completed in February 2020.
Other
Other expenses were essentially unchanged from the nine months ended September 30, 2020.
Other Income/(Expenses)

|  | Nine Months Ended September 30, |  |  | Change |  |  | Percent Change |
(in thousands) |  | 2021 |  |  | 2020 |
Interest expense |  |  | $ (8,592) |  |  |  | $ (6,974) |  |  |  | $ (1,618) |  |  |  | 23.2 | %
Gain/(loss) on revaluation of deferred consideration – gold payments |  |  | 5,066 |  |  |  | (34,436 | ) |  |  | 39,502 |  |  |  | n/a |
Interest income |  |  | 1,145 |  |  |  | 393 |  |  |  | 752 |  |  |  | 191.3 | %
Impairments |  |  | (16,156 | ) |  |  | (22,752 | ) |  |  | 6,596 |  |  |  | (29.0 | %)
Loss on extinguishment of debt |  |  | — |  |  |  | (2,387 | ) |  |  | 2,387 |  |  |  | (100.0 | %)
Other losses and gains, net |  |  | (6,558 | ) |  |  | 56 |  |  |  | (6,614 | ) |  |  | n/a |
Total other expenses, net |  |  | $ (25,095) |  |  |  | $ (66,100) |  |  | $ | 41,005 |  |  |  | (62.0 | %)

|  | Nine Months Ended September 30, |
As a Percent of Revenues: |  | 2021 |  |  | 2020 |
Interest expense |  |  | (3.8 | %) |  |  | (3.8 | %)
Gain/(loss) on revaluation of deferred consideration – gold payments |  |  | 2.3 | % |  |  | (18.7 | %)
Interest income |  |  | 0.5 | % |  |  | 0.2 | %
Impairments |  |  | (7.2 | %) |  |  | (12.3 | %)
Loss on extinguishment of debt |  |  | — |  |  |  | (1.3 | %)
Other losses and gains, net |  |  | (2.9 | %) |  |  | 0.0 | %
Total other expenses, net |  |  | (11.1 | %) |  |  | (35.9 | %)

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Interest expense
Interest expense increased 23.2% from $7.0 million during the nine months ended September 30, 2020 to $8.6 million in the comparable period in 2021 due to a higher level of debt outstanding in the current period. Our effective interest rate during the nine months ended September 30, 2020 and 2021 was 5.3% and 5.0%, respectively.
Gain/(loss) on revaluation of deferred consideration
We recognized a loss on revaluation of deferred consideration of ($34.4) million during the nine months ended September 30, 2020 as compared to a gain of $5.1 million during the nine months ended September 30, 2021. The gain in the current period was due to a decline in spot gold prices, partly offset by a steepening of the forward-looking gold curve. The magnitude of any gain or loss is highly correlated to the magnitude of the change in the forward-looking price of gold.
Interest income
Interest income increased 191.3% from $0.4 million during the nine months ended September 30, 2020 to $1.1 million in the comparable period in 2021 due to an increase in our securities owned.
Impairments
During the nine months ended September 30, 2021, we recognized a loss of approximately $16.2 million upon exiting our New York and London offices, which is included in impairments. During the nine months ended September 30, 2020, we recognized a
non-cash
impairment charge of $22.8 million, including $3.1 million related to our investment in Thesys and $19.7 million related to our investment in AdvisorEngine.
Loss on extinguishment of debt
During the nine months ended September 30, 2020, we recognized a
non-cash
loss on extinguishment of debt of $2.4 million arising from the acceleration of debt issuance cost amortization in connection with the termination of our former credit facility on June 16, 2020.
Other losses and gains, net
Other losses and gains, net were $0.1 million and ($6.6) million during the nine months ended September 30, 2020 and 2021, respectively. This includes a charge of $6.0 million and $5.2 million during the nine months ended September 30, 2020 and 2021, respectively, arising from the release of a
tax-related
indemnification asset upon the expiration of the statute of limitations. An equal and offsetting benefit has been recognized in income tax expense. During the nine months ended September 30, 2021, we also recognized losses on our securities owned of $2.2 million, a gain of $0.8 million related to the remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business and an unrealized gain of $0.4 million on our investment in Securrency. In addition, during the nine months ended September 30, 2020, we recognized a gain of $2.9 million associated with the sale of our Canadian ETF business and a gain of $1.1 million arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine. Gains and losses also generally arise from the sale of gold earned from management fees paid by our physically-backed gold ETPs, foreign exchange fluctuations and other miscellaneous items.
Income taxes
Our effective income tax rate for the nine months ended September 30, 2021 of 6.7% resulted in income tax expense of $2.8 million. Our effective income tax rate differs from the federal statutory rate of 21% primarily due to a $5.2 million reduction in unrecognized tax benefits, a lower tax rate on foreign earnings and a
non-taxable
gain on revaluation of deferred consideration. These items were partly offset by tax shortfalls associated with the vesting and exercise of stock-based compensation and
non-deductible
executive compensation.
Our effective income tax rate for the nine months ended September 30, 2020 of 7.4% resulted in an income tax benefit of $1.8 million. Our effective income 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 $6.0 million reduction in unrecognized tax benefits, a $2.9 million
non-taxable
gain recognized upon sale of our Canadian ETF business in the first quarter of 2020, a tax benefit of $2.8 million 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.
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Non-GAAP
Financial Measurements
In an effort to provide additional information regarding our results as determined by GAAP, we also disclose certain
non-GAAP
information which we believe provides useful and meaningful information. Our management reviews these
non-GAAP
financial measurements when evaluating our financial performance and results of operations; therefore, we believe it is useful to provide information with respect to these
non-GAAP
measurements so as to share this perspective of management.
Non-GAAP
measurements do not have any standardized meaning, do not replace nor are superior to GAAP financial measurements and are unlikely to be comparable to similar measures presented by other companies. These
non-GAAP
financial measurements should be considered in the context with our GAAP results. The
non-GAAP
financial measurements contained in this Report include:

| • |  | Adjusted net income and adjusted diluted earnings per share. We disclose adjusted net income and adjusted diluted earnings per share as non-GAAP financial measurements in order to report our results exclusive of items that are non-recurring or not core to our operating business. We believe presenting these non-GAAP financial measures provides investors with a consistent way to analyze our performance. These non-GAAP financial measures exclude the following:

| • |  | Unrealized gains or losses on the revaluation of deferred consideration : Deferred consideration is an obligation we assumed in connection with the ETFS acquisition that is carried at fair value. This item represents the present value of an obligation to pay fixed ounces of gold into perpetuity and is measured using forward-looking gold prices. Changes in the forward-looking price of gold and changes in the discount rate used to compute the present value of the annual payment obligations may have a material impact on the carrying value of the deferred consideration and our reported financial results. We exclude this item when arriving at adjusted net income and adjusted diluted earnings per share as it is not core to our operating business. The item is not adjusted for income taxes as the obligation was assumed by a wholly-owned subsidiary of ours that is based in Jersey, a jurisdiction where we are subject to a zero percent tax rate.

| • |  | Gains or losses on securities owned : We account for our securities owned as trading securities, which requires these instruments to be measured at fair value with gains and losses reported in net income. In the third quarter of 2021, we began excluding these items when calculating our non-GAAP financial measurements as these securities have become a more meaningful percentage of total assets and the gains and losses introduce volatility in earnings and are not core to our operating business.

| • |  | Tax shortfalls and windfalls upon vesting and exercise of stock-based compensation awards : GAAP requires the recognition of tax windfalls and shortfalls within income tax expense. These items arise upon the vesting and exercise of stock-based compensation awards and the magnitude is directly correlated to the number of awards vesting/exercised as well as the difference between the price of our stock on the date the award was granted and the date the award vested or was exercised. We exclude these items when determining adjusted net income and adjusted diluted earnings per share as they introduce volatility in earnings and are not core to our operating business.

| • |  | Other items : Remeasurement of contingent consideration payable to us from the sale of our former Canadian ETF business, unrealized gains recognized on our investment in Securrency, impairment charges, interest expense from the amortization of discount arising from the bifurcation of the conversion option embedded in the Convertible Notes (prior to January 1, 2021, the effective date of Accounting Standards Update 2020-06, Debt – Debt with Conversion and Other Options, Cash Conversion) , a loss on extinguishment of debt, the release of a deferred tax asset valuation allowance recognized on interest carryforwards arising from our debt previously outstanding in the United Kingdom, a gain arising from an adjustment to the estimated fair value of consideration received from the exit of our investment in AdvisorEngine, a gain recognized upon the sale of our Canadian ETF business and acquisition and disposition-related costs are excluded when calculating our non-GAAP financial measurements.

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|  | Three Months Ended |  |  | Nine Months Ended |
Adjusted Net Income and Diluted Earnings per Share: |  | September 30, 2021 |  |  | September 30, 2020 |  |  | September 30, 2021 |  |  | September 30, 2020 |
Net income/(loss), as reported |  |  | $ 5,833 |  |  |  | $ (270) |  |  |  | $38,610 |  |  |  | $(22,158) |
Add back: Impairments, net of income taxes (where applicable) |  |  | 12,002 |  |  |  | 2,326 |  |  |  | 12,247 |  |  |  | 21,998 |
Deduct/Add back: (Gain)/loss on revaluation of deferred consideration |  |  | (1,737) |  |  |  | 8,870 |  |  |  | (5,066) |  |  |  | 34,436 |
Deduct: Gain recognized upon sale of Canadian ETF business |  |  | (787) |  |  |  | — |  |  |  | (787) |  |  |  | (2,877) |
Add back: Unrealized loss on securities owned, a fair value, net of income taxes |  |  | 1,006 |  |  |  | — |  |  |  | 1,006 |  |  |  | — |
Deduct: Unrealized gain recognized on our investment in Securrency, net of income taxes |  |  | — |  |  |  | — |  |  |  | (284) |  |  |  | — |
Deduct/Add back: Tax (windfalls)/shortfalls upon vesting and exercise of stock-based compensation awards |  |  | — |  |  |  | 50 |  |  |  | (110) |  |  |  | 670 |
Add back: Loss on extinguishment of debt, net of income taxes |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,910 |
Deduct: Release of a deferred tax asset valuation allowance recognized on interest carryforwards arising from debt previously outstanding in the United Kingdom |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,842) |
Add back: Interest expense from the amortization of discount arising from the bifurcation of the conversion option embedded in the convertible notes, net of income taxes |  |  | — |  |  |  | 286 |  |  |  | — |  |  |  | 328 |
Deduct: Gain arising from an adjustment to the estimated fair value of consideration received from the exit of investment in AdvisorEngine |  |  | — |  |  |  | (225) |  |  |  | — |  |  |  | (1,093) |
Add back: Acquisition and disposition-related costs, net of income taxes |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 383 |
Adjusted net income |  |  | $16,317 |  |  |  | $11,037 |  |  |  | $45,616 |  |  |  | $ 30,755 |
Deduct: Income distributed to participating securities |  |  | (538) |  |  |  | (556) |  |  |  | (1,634) |  |  |  | (1,663) |
Deduct: Undistributed income allocable to participating securities |  |  | (1,275) |  |  |  | (687) |  |  |  | (3,422) |  |  |  | (1,701) |
Adjusted net income available to common stockholders |  |  | $14,504 |  |  |  | $ 9,794 |  |  |  | $40,560 |  |  |  | $ 27,391 |
Weighted average diluted shares, excluding participating securities (in thousands) (See Note 19 to our Consolidated Financial Statements) |  |  | 143,142 |  |  |  | 145,569 |  |  |  | 145,604 |  |  |  | 149,891 |
Adjusted earnings per share - diluted |  |  | $ 0.10 |  |  |  | $ 0.07 |  |  |  | $ 0.28 |  |  |  | $ 0.18 |

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Liquidity and Capital Resources
The following table summarizes key data regarding our liquidity, capital resources and use of capital to fund our operations:

|  | September 30, 2021 |  |  | December 31, 2020 |
Balance Sheet Data (in thousands) : |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 127,924 |  |  | $ | 73,425 |
Securities owned, at fair value |  |  | 119,390 |  |  |  | 34,895 |
Accounts receivable |  |  | 32,092 |  |  |  | 29,455 |
Securities held-to-maturity |  |  | 331 |  |  |  | 451 |
Total: Liquid assets |  |  | 279,737 |  |  |  | 138,226 |
Less: Total current liabilities |  |  | (75,743 | ) |  |  | (73,999 | )
Less: Regulatory capital requirement – certain international subsidiaries |  |  | (12,384 | ) |  |  | (10,745 | )
Total: Available liquidity |  | $ | 191,610 |  |  | $ | 53,482 |

|  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |
Cash Flow Data (in thousands) : |  |  |  |  |  |  |  |
Operating cash flows (1) |  | $ | 50,109 |  |  | $ | 32,129 |
Investing cash flows (1) |  |  | (92,467) |  |  |  | 11,954 |
Financing cash flows |  |  | 97,350 |  |  |  | (55,107) |
Foreign exchange rate effect |  |  | (493) |  |  |  | (387) |
Increase/(decrease) in cash and cash equivalents |  | $ | 54,499 |  |  | $ | (11,411) |

(1) | Cash flows from purchasing securities owned, at fair value of $34,683 and selling securities owned, at fair value of $18,122 during the nine months ended September 30, 2020 that were not acquired specifically for resale or associated with the Company’s business activities have been reclassified from operating activities to investing activities to conform to the current year’s presentation in the Consolidated Statements of Cash Flows. See Note 2 for additional information.

Liquidity
We consider our available liquidity to be our liquid assets, less our current liabilities and regulatory capital requirements of certain international subsidiaries. Liquid assets consist of cash and cash equivalents, securities owned, at fair value, accounts receivable and securities
held-to-maturity.
Our securities owned, at fair value are highly liquid investments. Accounts receivable are current assets and primarily represent receivables from advisory fees we earn from our ETPs. Our current liabilities consist primarily of payments owed to vendors and third parties in the normal course of business, deferred consideration and accrued incentive compensation for employees.
Cash and cash equivalents increased $54.5 million during the nine months ended September 30, 2021 due to $150.0 million of proceeds received from the issuance of the 2021 Notes, $50.1 million of net cash provided by operating activities, $11.0 million of proceeds from the sale of securities owned and $0.3 million provided by other activities. These increases were partly offset by $97.6 million used to purchase securities owned, $34.5 million used to repurchase our common stock, $14.7 million used to pay dividends on our common stock, $5.8 million used to purchase investments and $4.3 million used to pay the 2021 Note issuance costs.
Cash and cash equivalents decreased $11.4 million during the nine months ended September 30, 2020 due to $179.0 million used to repay our debt, $34.7 million used to purchase securities owned, $31.0 million used to repurchase our common stock, $15.2 million used to pay dividends on our common stock, $5.4 million used to pay the June 2020 Notes issuance costs and $0.4 million used in other activities. These decreases were partly offset by $175.3 million of proceeds from the issuance of the June 2020 Notes, $32.1 million of net cash provided by operating activities, $18.1 million of proceeds from the sale of securities owned, $16.4 million of proceeds from
held-to-maturity
securities maturing or called prior to maturity, $9.6 million of proceeds from the sale of our financial interests in AdvisorEngine and $2.8 million of net proceeds from the sale of our Canadian ETF business.
Issuance of Convertible Notes
On June 14, 2021, we issued and sold $150.0 million in aggregate principal amount of 3.25% Convertible Senior Notes due 2026 (the “2021 Notes”) pursuant to an indenture dated June 14, 2021, between us and U.S. Bank National Association, as trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (“Rule 144A”).
On June 16, 2020, we issued and sold $150.0 million in aggregate principal amount of 4.25% Convertible Senior Notes due
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2023 (the “June 2020 Notes”) pursuant to an indenture dated June 16, 2020, between us and the trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A. On August 13, 2020, we issued and sold $25.0 million in aggregate principal amount of 4.25% Convertible Senior Notes due 2023 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, our June 2020 Notes (the “August 2020 Notes” and together with the June 2020 Notes, the “2020 Notes”).
After the issuance of the 2021 Notes (and together with the 2020 Notes, the “Convertible Notes”), we had $325.0 million aggregate principal amount of Convertible Notes outstanding.
Key terms of the Convertible Notes are as follows:

|  | 2021 Notes |  |  | 2020 Notes |
Maturity date (unless earlier converted, repurchased or redeemed) |  |  | June 15, 2026 |  |  |  | June 15, 2023 |
Interest rate |  |  | 3.25 | % |  |  | 4.25 | %
Conversion price |  | $ | 11.04 |  |  | $ | 5.92 |
Conversion rate |  |  | 90.5797 |  |  |  | 168.9189 |
Redemption price |  | $ | 14.35 |  |  | $ | 7.70 |

| • | Interest rate : Payable semiannually in arrears on June 15 and December 15 of each year.

| • | Conversion price : Convertible at an initial conversion rate of our common stock, per $1,000 principal amount of notes (equivalent to an initial conversion price as disclosed in the table above).

| • | Conversion : Holders may convert at their option at any time prior to the close of business on the business day immediately preceding March 15, 2026 and March 15, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, only under the following circumstances: (i) if the last reported sale price of our 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 our common stock and the conversion rate on each such trading day; (iii) upon a notice of redemption delivered by us in accordance with the terms of the indentures but only with respect to the Convertible Notes called (or deemed called) for redemption; or (iv) upon the occurrence of specified corporate events. On or after March 15, 2026 and March 15, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at any time, regardless of the foregoing circumstances.

| • | Cash settlement of principal amount : Upon conversion, we will pay cash up to the aggregate principal amount of the Convertible Notes to be converted. At our election, we will also settle our conversion obligation in excess of the aggregate principal amount of the Convertible Notes being converted in either cash, shares of our common stock or a combination of cash and shares of its common stock.

| • | Redemption price : We may redeem for cash all or any portion of the notes, at our option, on or after June 20, 2026 and June 20, 2023 in respect of the 2021 Notes and 2020 Notes, respectively, and on or prior to the 55 th scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding the redemption date. No sinking fund is provided for the Convertible Notes.

| • | Limited investor put rights : Holders of the Convertible Notes have the right to require us to repurchase for cash all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of certain change of control transactions or liquidation, dissolution or common stock delisting events.

| • | Conversion rate increase in certain customary circumstances : In certain circumstances, conversions in connection with a “make-whole fundamental change” (as defined in the indentures) or conversions of Convertible Notes called (or deemed called) for redemption may result in an increase to the conversion rate, provided that the conversion rate will not exceed 144.9275 shares and 270.2702 shares of our common stock per $1,000 principal amount of the 2021 Notes and 2020 Notes, respectively (the equivalent of 69,036,410 shares of our common stock), subject to adjustment.

| • | Seniority and Security : The 2021 Notes and 2020 Notes rank equal in right of payment, and are our senior unsecured obligations, but are subordinated in right of payment to our obligations to make certain redemption payments (if and when due) in respect of its Series A Non-Voting Convertible Preferred Stock (See Note 12 to our Consolidated Financial Statements).

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The indentures contain 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.
Capital Resources
Our principal source of financing is our operating cash flow. We believe that cash flows generated by our operating activities and existing cash balances should be sufficient for us to fund our operations for the foreseeable future.
Our ability to satisfy our contractual obligations as they arise are discussed in the section titled “Contractual Obligations” below.
Use of Capital
Our business does not require us to maintain a significant cash position. However, certain of our international subsidiaries are required to maintain a minimum level of regulatory capital, which at September 30, 2021 was approximately $12.4 million in the aggregate. Notwithstanding these regulatory capital requirements, we expect that our main uses of cash will be to fund the ongoing operations of our business. We also maintain a capital return program which includes a $0.03 per share quarterly cash dividend and authority to purchase our common stock through April 27, 2022, including purchases to offset future equity grants made under our equity plans.
There were no shares repurchased during the three months ended September 30, 2021. At September 30, 2021, $17.7 million remained under this program for future purchases.
Contractual Obligations
Convertible Notes
At September 30, 2021, we had $325.0 million aggregate principal amount of Convertible Notes outstanding, of which $175.0 million are scheduled to mature on June 15, 2023 and $150.0 million are scheduled to mature on June 15, 2026, unless earlier converted, repurchased or redeemed. Conditional conversions or a requirement to repurchase the Convertible Notes upon the occurrence of a fundamental change may accelerate payment.
The Convertible Notes require cash settlement of the principal amount, while settlement of the conversion obligation in excess of the aggregate principal amount may be satisfied in either cash, shares of our common stock or a combination of cash and shares of its common stock. We currently anticipate refinancing these obligations when due.
See the section titled “Issuance of Convertible Notes” above for additional information.
Deferred Consideration – Gold Payments
Deferred consideration represents an obligation we assumed in April 2018 in connection with our acquisition of the European exchange-traded commodity, currency and leveraged and inverse business of ETFS Capital Limited. The obligation is for fixed payments to ETFS Capital Limited 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 present value of the deferred consideration was $225.0 million at September 30, 2021.
The Contractual Gold Payments are paid from advisory fee income generated by any of our sponsored financial products backed by physical gold with no recourse back to us for any unpaid amounts that exceed advisory fees earned.
See Note 9 to our Consolidated Financial Statements for additional information.
Operating Leases
Total future minimum lease payments with respect to our office space was $0.7 million at September 30, 2021.
Cash flows generated by our operating activities and existing cash balances should be sufficient to satisfy the future minimum lease payments.
See Note 13 to our Consolidated Financial Statements for additional information.
Off-Balance
Sheet Arrangements
We do not have any
off-balance
sheet financing or other arrangements and have neither created nor are party to any special-purpose or
off-balance
sheet entities for the purpose of raising capital, incurring debt or operating our business.
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Critical Accounting Policies
Goodwill and Intangible Assets
Goodwill is the excess of the purchase price over the fair values of the identifiable net assets at the acquisition date. We test goodwill for impairment at least annually and at the time of a triggering event requiring
re-evaluation,
if one were to occur. Goodwill is considered impaired when the estimated fair value of the reporting unit that was allocated the goodwill is less than its carrying value. If the estimated fair value of such reporting unit is less than its carrying value, goodwill impairment is recognized based on that difference, not to exceed the carrying amount of goodwill. A reporting unit is an operating segment or a component of an operating segment provided that the component constitutes a business for which discrete financial information is available and management regularly reviews the operating results of that component.
Goodwill is allocated to our U.S. Business and European Business components. 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 our goodwill impairment test, we consider a qualitative assessment, when appropriate, and a quantitative assessment using the market approach and our market capitalization when determining the fair value of the reporting unit.
Indefinite-lived intangible assets are tested for impairment at least annually and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are impaired if their estimated fair value is less than their carrying value. We may rely on a qualitative assessment when performing our intangible asset impairment test. Otherwise, the impairment evaluation is performed at the lowest level of reasonably identifiable cash flows independent of other assets. The annual impairment testing date for our intangible assets is November 30
th
.
Investments
We account for equity investments that do not have a readily determinable fair value under the measurement alternative prescribed in ASU
2016-01,
Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities
, 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. In addition, income is recognized when dividends are received only to the extent they are distributed from net accumulated earnings of the investee. Otherwise, such distributions are considered returns of investment and are recorded as a reduction of the cost of the investment. See Note 7 to our Consolidated Financial Statements for information regarding a gain of $0.4 million recognized on our investment in Securrency during the nine months ended September 30, 2021.
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 observed on the CMX exchange, a selected discount rate and perpetual growth rate. The weighted average forward-looking gold price per ounce, discount rate and perpetual growth rate were $2,093, 9.0% and 1.4%, respectively, at September 30, 2021. Changes in the fair value of this obligation are reported as gain/(loss) on revaluation of deferred consideration – gold payments on our Consolidated Statements of Operations.
During the three months ended September 30, 2021, we reported a gain on deferred consideration – gold payments of $1.7 million. A 1.0% increase in the weighted average forward-looking gold price per ounce would have reduced this reported gain by $1.6 million, a 1 percentage point increase in the discount rate would have increased this reported gain by $23.7 million and a 1 percentage point increase in the perpetual growth rate would have reduced this reported gain by $20.7 million. See Note 9 to our Consolidated Financial Statements for additional information.
Revenue Recognition
We earn substantially all of our revenue in the form of advisory fees from our ETPs and recognize this revenue over time, as the performance obligation is satisfied. Advisory fees are based on a percentage of the ETPs’ average daily net assets. Progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which we have a right to invoice.
Recently Adopted Accounting Pronouncements
On January 1, 2021, we early adopted ASU
2020-06,
Debt – Debt with Conversion and Other Options
(ASU
2020-06)
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
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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. Upon the adoption of this ASU, we reclassified the equity component related to the convertible notes, net of deferred taxes, reducing accumulated deficit by $0.6 million, increasing the carrying value of the convertible notes by $4.1 million, reducing additional
paid-in
capital by $3.7 million and reducing deferred tax liabilities by $1.0 million. These updates also reduced interest expense recognized on our convertible notes by approximately $0.4 million per quarter. See Note 11 to our Consolidated Financial Statements for additional information.
On January 1, 2021, we adopted ASU
2019-12,
Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes
(ASU
2019-12).
The main objective of the standard is to reduce complexity in the accounting for income taxes by removing the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income); (2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (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 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
tax; (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; (c) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; 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. We have determined that the adoption of this standard did not have a material impact on our financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following information, together with information included in other parts of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, describes key aspects of our market risk.
Market Risk
Market risk to us generally represents the risk of changes in the value of our ETPs that results from fluctuations in securities or commodity prices, foreign currency exchange rates against the U.S. dollar, and interest rates. Nearly all our revenues are derived from advisory agreements for the WisdomTree ETPs. Under these agreements, the advisory fee we receive is based on the average market value of the assets in the WisdomTree ETP portfolios we manage.
Fluctuations in the value of the ETPs are common and are generated by numerous factors such as market volatility, the global economy, inflation, changes in investor strategies and sentiment, availability of alternative investment vehicles, domestic and foreign government regulations, emerging markets developments and others. Accordingly, changes in any one or a combination of these factors may reduce the value of investment securities and, in turn, the underlying AUM on which our revenues are earned. These declines may cause investors to withdraw funds from our ETPs in favor of investments that they perceive as offering greater opportunity or lower risk, thereby compounding the impact on our revenues. We believe challenging and volatile market conditions will continue to be present in the foreseeable future.
Interest Rate Risk
We invest our corporate cash in short-term interest earning assets, primarily in WisdomTree fixed income ETFs, federal agency debt instruments, corporate bonds, money market instruments at a commercial bank and other securities which totaled $36.0 million and $139.9 million as of December 31, 2020 and September 30, 2021, respectively. We do not anticipate that changes in interest rates will have a material impact on our financial condition, operating results or cash flows.
In addition, our Convertible Notes bear interest at a fixed rate of 3.25% to 4.25%. Therefore, we have no direct financial statement risk associated with changes in interest rates. However, the fair value of the Convertible Notes changes primarily when the market price of our common stock fluctuates or interest rates change.
Exchange Rate Risk
We are subject to currency translation exposure on the results of our
non-U.S.
operations, primarily in the United Kingdom and Europe. Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to our reporting currency (the U.S. dollar) for consolidation purposes. The advisory fees earned on our international listed ETPs are predominantly in U.S. dollars (and also paid in gold ounces, as described below); however, expenses for corporate overhead are generally incurred in British pounds. Currently, we do not enter into derivative financial instruments aimed at offsetting certain exposures in the statement of operations or the balance sheet but may seek to do so in the future.
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Exchange rate risk associated with the euro is not considered to be significant.
Commodity and Cryptocurrency Price Risk
Fluctuations in the prices of commodities and cryptocurrencies that are linked to certain of our ETPs could have a material adverse effect on our AUM and revenues. In addition, a portion of the advisory fee revenues we receive on our ETPs backed by gold, other precious metals and cryptocurrencies are paid in the underlying metal or cryptocurrency. In addition, we pay gold ounces to satisfy our deferred consideration obligation (See Note 9 to our Consolidated Financial Statements). While we readily sell the gold, precious metals and cryptocurrencies that we earn under these advisory contracts, we still may maintain a position. We currently do not enter into arrangements to hedge against fluctuations in the price of these commodities and cryptocurrencies and any hedging we may undertake in the future may not be cost-effective or sufficient to hedge against this exposure.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of September 30, 2021, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule
13a-15(b)
promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, our disclosure controls and procedures were effective at a reasonable assurance level in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules, regulations and forms of the SEC, including ensuring that such material information is accumulated by and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
In addition to the risk factor and other information set forth below and elsewhere in this Report, you should carefully consider the information set forth in Part 1, Item1A. “Risk Factors” in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020 and our Quarterly Report on Form
10-Q
for the quarter ended June 30, 2021.
We plan to instruct trades and perform other operational processes in respect of crypto basket ETPs that we intend to launch in Europe. Operational failures could materially affect our business and harm investors in these products.
We intend to launch products indexed to baskets of cryptocurrencies in Europe. We plan to outsource the administrator, transfer agent and custodial functions for these products. While we typically outsource portfolio management services to third-party
sub-advisers
for our products, in this case, we will instead act as determination agent and place buy and sell orders directly with a broker to rebalance these crypto basket ETPs in line with the indices. These rebalances will occur either quarterly or annually depending on the product. Expanding trading volumes may increase the risk of trading errors. The failure of any of our vendors to provide us and our products with the outsourced services and our failure to correctly place trade orders could lead to operational issues and result in financial loss to us and/or investors in our products.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent sales of Unregistered Securities
None.
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Use of Proceeds
Not applicable.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information with respect to purchases made by or on behalf of the Company or any “affiliated purchaser” of shares of our common stock.

|  | Total Number of Shares Purchased |  |  | Average Price Paid Per Share |  |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |  |  | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
Period |  |  |  |  |  |  |  |  |  |  | (in thousands) |
July 1, 2021 to July 31, 2021 |  |  | — |  |  | $ | — |  |  |  | — |  |  |  |  |
August 1, 2021 to August 31, 2021 |  |  | — |  |  | $ | — |  |  |  | — |  |  |  |  |
September 1, 2021 to September 30, 2021 |  |  | — |  |  | $ | — |  |  |  | — |  |  |  |  |
Total |  |  | — |  |  | $ | — |  |  |  | — |  |  | $ | 17,685 |

(1) | On April 24, 2019, our Board of Directors extended the term of our share repurchase program for three years through April 27, 2022. There were no shares repurchased during the three months ended September 30, 2021. As of September 30, 2021, $17.7 million remained under this program for future repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS

Exhibit No. |  | Description
3.1 |  | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)
3.2 |  | Certificate of Designations of Series A Non-Voting Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on April 13, 2018)
3.3 |  | Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K, filed with the SEC on February 26, 2019)
4.1 |  | Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)
4.2 |  | Amended and Restated Stockholders Agreement among the Registrant and certain investors dated December 21, 2006 (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)
4.3 |  | Securities Purchase Agreement among the Registrant and certain investors dated December 21, 2006 (incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)
4.4 |  | Securities Purchase Agreement among the Registrant and certain investors dated October 15, 2009 (incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)
4.5 |  | Third Amended and Restated Registration Rights Agreement dated October 15, 2009 (incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form 10, filed with the SEC on March 31, 2011)
4.6 |  | Investor Rights Agreement, dated April 11, 2018, between the Registrant and ETFS Capital (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on April 13, 2018)
4.7 |  | Indenture, dated as of June 16, 2020, by and between the Registrant and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on June 17, 2020)
4.8 |  | Form of Global Note, representing the Registrant’s 4.25% Convertible Senior Notes due 2023 (included as Exhibit A to the Indenture filed as Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on June 17, 2020)
4.9 |  | Indenture, dated as of June 14, 2021, by and between the Registrant and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on June 14, 2021)
4.10 |  | Form of Global Note, representing the Registrant’s 3.25% Convertible Senior Notes due 2026 (included as Exhibit A to the Indenture filed as Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on June 14, 2021)
31.1(1) |  | Certification of Chief Executive Officer and Principal Executive Officer pursuant to Rule 13a-14 of the Exchange Act
31.2 (1) |  | Certification of Chief Financial Officer and Principal Financial Officer pursuant to Rule 13a-14 of the Exchange Act
32 (1) |  | Section 1350 Certification
101 (1) |  | Financial Statements from the Quarterly Report on Form 10-Q of the Company for the three months ended September 30, 2021, formatted in XBRL: (i) Consolidated Balance Sheets at September 30, 2021 (Unaudited) and December 31, 2020; (ii) Consolidated Statements of Operations and Comprehensive Income/(Loss) for the three and nine months ended September 30, 2021 and September 30, 2020 (Unaudited); (iii) Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and September 30, 2020 (Unaudited) (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and September 30, 2020 (Unaudited); and (v) Notes to Consolidated Financial Statements, as blocks of text and in detail.

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Exhibit No. |  | Description
101.SCH (1) |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL (1) |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF (1) |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB (1) |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE (1) |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 (1) |  | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibit 101.*)

(1) | Filed herewith.

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized on this 5
th
day of November 2021.

WISDOMTREE INVESTMENTS, INC.
By: |  | /s/ Jonathan Steinberg
|  | Jonathan Steinberg
|  | Chief Executive Officer (Principal Executive Officer)
WISDOMTREE INVESTMENTS, INC.
By: |  | /s/ Bryan Edmiston
|  | Bryan Edmiston
|  | Chief Financial Officer (Principal Financial Officer)

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