Deferred Consideration

12 Months Ended

Dec. 31, 2019

12. Deferred Consideration

Deferred consideration represents an obligation the Company assumed in connection with the ETFS Acquisition. The obligation is for fixed payments to ETFS Capital of physical gold bullion equating to 9,500 ounces of gold per year through March 31, 2058 and then subsequently reduced to 6,333 ounces of gold continuing into perpetuity (“Contractual Gold Payments”).

The Contractual Gold Payments are paid from advisory fee income generated by any Company-sponsored financial product backed by physical gold and are subject to adjustment and reduction for declines in advisory fee income generated by such products, with any reduction remaining due and payable until paid in full. ETFS Capital’s recourse is limited to such advisory fee income and it has no recourse back to the Company for any unpaid amounts that exceed advisory fees earned. ETFS Capital ultimately has the right to claw back Gold Bullion Securities Ltd. (a physically backed gold ETP issuer) if the Company fails to remit any amounts due.

The Company determined the present value of the deferred consideration of $173,024 and $161,540 at December 31, 2019 and December 31, 2018, respectively, using

a d

iscounted

ash

flow model w

hereby

forward-looking gold prices which were extrapolated from the last observable price (beyond 2025), discounted at a rate of 10.0% and a perpetual growth rate of 1.5%. Current amounts payable were $13,953 and $11,765 and long-term amounts payable were $159,071 and $149,775, respectively, at December 31, 2019 and December 31, 2018, respectively.

During the years ended December 31, 2019 and 2018, the Company recognized the following in respect of deferred consideration:


	Years Ended December 31,
	2019			2018
Contractual Gold Payments	$	13,226		$	8,512
Contractual Gold Payments—gold ounces paid		9,500			6,835	(1)
(Loss)/gain on revaluation of deferred consideration—gold payments (2)	$	(11,293	)	$	12,220

(1)	Represents payments during the period April 11, 2018 through December 31, 2018.

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