ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

UNAUDITED

(Dollars in thousands, except per share data)

 

 

As of June 30, 2024 and December 31, 2023, certain balances include amounts related to a consolidated variable interest entity (“VIE”) and voting interest entity (“VOE”). See Note 4.

 

See accompanying notes.

 

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED

(In thousands, except per share data)

 

 

See accompanying notes.

 

 

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED

(Dollars in thousands)

 

 

See accompanying notes.

 

 

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

UNAUDITED

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)

 

 

 

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED (continued)

(Dollars in thousands)

 

 

See accompanying notes.

 

 

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(UNAUDITED)

 

1.    Organization

 

Unless we have indicated otherwise, or the context otherwise requires, references in this report to “Associated Capital Group, Inc.”, "Associated Capital", “AC Group”, “the Company”, “AC”, “we”, “us” and “our” or similar terms are to Associated Capital Group, Inc., its predecessors and its subsidiaries.

 

We are a Delaware corporation that provides alternative investment management, and we derive investment income from proprietary investments of cash and other assets in our operating business.

 

Gabelli & Company Investment Advisors, Inc. (“GCIA”), a wholly-owned subsidiary of AC, and its wholly-owned subsidiary, Gabelli & Partners, LLC (“Gabelli & Partners”), collectively serve as general partners or investment managers to investment funds, including limited partnerships and offshore companies (collectively, “Investment Partnerships”) and separate accounts. We primarily manage assets across a range of risk and event arbitrage portfolios and in equity event-driven value strategies. The businesses earn management and incentive fees from their advisory activities. Management fees are largely based on a percentage of assets under management. Incentive fees are based on the percentage of the investment returns of certain clients’ portfolios. GCIA is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended.

 

Basis of Presentation

 

The unaudited interim condensed consolidated financial statements of AC Group included herein have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP in the United States for complete financial statements. The unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position, results of operations and cash flows of the Company for the interim periods presented and are not necessarily indicative of a full year’s results. These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

The interim condensed consolidated financial statements include the accounts of AC Group and its subsidiaries. All intercompany transactions and balances have been eliminated. The details on the impact of consolidating certain partnership entities on the condensed consolidated financial statements can be seen in Note 4. Investment Partnerships and Other Entities.

 

For the three and six months ended June 30, 2024 and 2023, there were no items related to other comprehensive income.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported on the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

 

Recent Accounting Developments

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require disclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold and further disaggregation of income taxes paid for individually significant jurisdictions. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact that this guidance will have on the disclosures within our consolidated financial statements.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), which improves reportable segment disclosure requirements. The new standard will require enhanced disclosures about a public company’s significant segment expenses and more timely and detailed segment information reporting throughout the fiscal period, including for companies with a single reportable segment. The standard is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024, and early adoption is permitted. We are currently evaluating the impact that this guidance will have on our consolidated financial statements and related disclosures.

 

---

 

2.    Revenue

 

The Company’s major revenue sources are as follows for the three and six months ended June 30, 2024 and 2023 (in thousands):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Investment advisory and incentive fees
Asset-based advisory fees		$	1,217			$	1,291			$	2,444			$	2,606
Performance-based advisory fees			1				-				1				1
Sub-advisory fees			1,271				989				2,951				2,084
Total investment advisory and incentive fees			2,489				2,280				5,396				4,691
Other			106				102				210				156
Total revenues		$	2,595			$	2,382			$	5,606			$	4,847

 

3.    Investments in Securities

 

Investments in securities at June 30, 2024 and December 31, 2023, consisted of the following (in thousands):

 

		June 30, 2024								December 31, 2023
		Cost				Fair Value				Cost				Fair Value
Debt - Trading Securities:
U.S. Treasury Bills		$	45,133			$	46,060			$	88,300			$	89,155
Equity Securities:
Common stocks			219,878				225,108				198,269				191,346
Mutual funds			651				1,384				566				1,186
Other investments			4,609				3,631				5,166				4,051
Total investments in equity securities			225,138				230,123				204,001				196,583
Total investments in securities		$	270,271			$	276,183			$	292,301			$	285,738

 

Securities sold, not yet purchased at June 30, 2024 and December 31, 2023, consisted of the following (in thousands):

 

		June 30, 2024								December 31, 2023
		Cost				Fair Value				Cost				Fair Value
Common stocks		$	5,782			$	5,998			$	5,227			$	5,035
Other investments			105				394				631				883
Total securities sold, not yet purchased		$	5,887			$	6,392			$	5,858			$	5,918

 

Investments in affiliated registered investment companies at June 30, 2024 and December 31, 2023, consisted of the following (in thousands):

 

		June 30, 2024								December 31, 2023
		Cost				Fair Value				Cost				Fair Value
Closed-end funds		$	40,270			$	55,021			$	39,680			$	53,048
Mutual funds			50,783				73,903				50,136				73,703
Total investments in affiliated registered investment companies		$	91,053			$	128,924			$	89,816			$	126,751

 

 

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4.    Investment Partnerships and Other Entities

 

The Company is a general partner or co-general partner of various affiliated entities whose underlying assets consist primarily of marketable securities (“Affiliated Entities”). The Company had investments in Affiliated Entities totaling $102.0 million and $107.4 million at June 30, 2024 and December 31, 2023, respectively. The Company also had investments in unaffiliated partnerships, offshore funds and other entities of $38.6 million and $35.6 million at June 30, 2024, and December 31, 2023, respectively (“Unaffiliated Entities”). We evaluate each entity to determine its appropriate accounting treatment and disclosure. Certain of the Affiliated Entities, and none of the Unaffiliated Entities, are consolidated.

 

Investments in partnerships that are not required to be consolidated are accounted for using the equity method and are included in investments in partnerships on the condensed consolidated statements of financial condition. The Company reflects the equity in earnings of these Affiliated Entities and Unaffiliated Entities as net gain/(loss) from investments on the condensed consolidated statements of income.

 

Capital may generally be redeemed from Affiliated Entities on a monthly basis upon adequate notice as determined in the sole discretion of each entity’s investment manager. Capital invested in Unaffiliated Entities may generally be redeemed at various intervals ranging from monthly to annually upon notice of 30 to 95 days. Certain Unaffiliated Entities and Affiliated Entities may require a minimum investment period before capital can be voluntarily redeemed (a “Lockup Period”). No investment in any Investment Partnership has an unexpired Lockup Period. The Company has no material outstanding capital commitments to any Affiliated or Unaffiliated Entity.

 

Consolidated Entities

 

The following table reflects the net impact of the consolidated investment partnerships (“Consolidated Entities”) on the condensed consolidated statements of financial condition (in thousands):

 

		June 30, 2024
		Prior to				Consolidated
Assets		Consolidation				Entities				As Reported
Cash and cash equivalents		$	337,777			$	3,540			$	341,317
Investments in U.S. Treasury Bills			39,863				6,197				46,060
Investments in equity securities			172,456				57,667				230,123
Investments in affiliated registered investment companies			182,362				(53,438	)			128,924
Investments in partnerships			160,488				(19,895	)			140,593
Receivable from brokers			19,010				10,288				29,298
Investment advisory fees receivable			1,234				(6	)			1,228
Other assets(1)			28,499				2,974				31,473
Total assets		$	941,689			$	7,327			$	949,016
Liabilities, redeemable noncontrolling interests and equity
Securities sold, not yet purchased		$	6,043			$	349			$	6,392
Payable to brokers and other liabilities(1)			20,167				1,290				21,457
Redeemable noncontrolling interests			-				5,688				5,688
Total equity			915,479				-				915,479
Total liabilities, redeemable noncontrolling interests and equity		$	941,689			$	7,327			$	949,016

 

 

 

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		December 31, 2023
		Prior to				Consolidated
Assets		Consolidation				Entities				As Reported
Cash and cash equivalents		$	299,508			$	17,979			$	317,487
Investments in U.S. Treasury Bills			79,714				9,441				89,155
Investments in equity securities			149,154				47,429				196,583
Investments in affiliated registered investment companies			181,641				(54,890	)			126,751
Investments in partnerships			163,226				(20,252	)			142,974
Receivable from brokers(1)			25,026				5,242				30,268
Investment advisory fees receivable			4,714				(3	)			4,711
Other assets(1)			33,444				2,424				35,868
Total assets		$	936,427			$	7,370			$	943,797
Liabilities, redeemable noncontrolling interests and equity
Securities sold, not yet purchased		$	5,639			$	279			$	5,918
Payable to brokers and other liabilities(1)			23,813				988				24,801
Redeemable noncontrolling interests			-				6,103				6,103
Total equity			906,975				-				906,975
Total liabilities, redeemable noncontrolling interests and equity		$	936,427			$	7,370			$	943,797

 

(1) Represents the summation of multiple assets and liabilities from the condensed consolidated statements of financial condition.

 

The following table reflects the net impact of the consolidated entities on the condensed consolidated statements of income (in thousands):

 

		Three Months Ended June 30, 2024
		Prior to				Consolidated
		Consolidation				Entities				As Reported
Total revenues		$	2,703			$	(108	)		$	2,595
Operating loss			(3,270	)			(404	)			(3,674	)
Total other income, net			7,250				2				7,252
Income/(loss) before noncontrolling interests			2,985				(91	)			2,894
Income/(loss) attributable to noncontrolling interests, net of taxes			-				(91	)			(91	)
Net income		$	2,985			$	-			$	2,985

 

		Three Months Ended June 30, 2023
		Prior to				Consolidated
		Consolidation				Entities				As Reported
Total revenues		$	2,489			$	(107	)		$	2,382
Operating loss			(3,107	)			(364	)			(3,471	)
Total other income, net			8,003				608				8,611
Income/(loss) before noncontrolling interests			3,371				(71	)			3,300
Income/(loss) attributable to noncontrolling interests, net of taxes			-				(71	)			(71	)
Net income		$	3,371			$	-			$	3,371

 

 

		Six Months Ended June 30, 2024
		Prior to				Consolidated
		Consolidation				Entities				As Reported
Total revenues		$	5,823			$	(217	)		$	5,606
Operating loss			(7,877	)			(767	)			(8,644	)
Total other income, net			29,697				180				29,877
Income/(loss) before noncontrolling interests			16,806				(55	)			16,751
Income/(loss) attributable to noncontrolling interests, net of taxes			-				(55	)			(55	)
Net income		$	16,806			$	-			$	16,806

 

 

 

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		Six Months Ended June 30, 2023
		Prior to				Consolidated
		Consolidation				Entities				As Reported
Total revenues		$	5,067			$	(220	)		$	4,847
Operating loss			(7,843	)			(761	)			(8,604	)
Total other income/(loss), net			35,625				(2,279	)			33,346
Income/(loss) before noncontrolling interests			21,125				197				21,322
Income/(loss) attributable to noncontrolling interests, net of taxes			-				197				197
Net income		$	21,125			$	-			$	21,125

 

Variable Interest Entity

 

We have one investment partnership that is consolidated as a VIE as of June 30, 2024 and December 31, 2023 because AC is the primary beneficiary of the entity. With respect to the consolidated VIE, its assets may only be used to satisfy its obligations. The investors and creditors of the consolidated VIE have no recourse to the Company’s general assets. In addition, the Company neither benefits from such VIE’s assets nor bears the related risk beyond its beneficial interest in the VIE.

 

The following table presents the balances related to the VIE that is consolidated and included on the condensed consolidated statements of financial condition as well as the Company’s net interest in that VIE (in thousands):

 

		June 30, 2024				December 31, 2023
Cash and cash equivalents		$	294			$	302
Investments in equity securities			9,544				9,695
Receivable from brokers			234				166
Accrued expenses and other liabilities			(23	)			(46	)
Redeemable noncontrolling interests			(451	)			(451	)
AC Group's net interests in consolidated VIEs		$	9,598			$	9,666

 

 

Voting Interest Entity

 

We have one investment partnership that is consolidated as a VOE as of June 30, 2024 and December 31, 2023 because AC has a controlling interest in the entity. This resulted in the consolidation of $70.6 million of assets, $1.8 million of liabilities, and $5.2 million of redeemable noncontrolling interests at June 30, 2024 and $72.4 million of assets, $1.4 million of liabilities, and $5.6 million of redeemable noncontrolling interests at December 31, 2023. AC’s net interest in the consolidated VOE at June 30, 2024 and December 31, 2023 was $63.6 million and $65.4 million, respectively.  

 

Equity Method Investments

 

The Company’s equity method investments include investments in partnerships and offshore funds. The Company evaluates each of its equity method investments to determine if any are significant as defined in the regulations applicable to smaller reporting companies promulgated by the SEC. As of and for the three and six months ended June 30, 2024, no individual equity method investment held by the Company met the significance criteria. As such, the Company is not required to present summarized income statement information for any of its equity method investments. 

 

 

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5.    Fair Value

 

Accounting Standards Codification Topic 820, Fair Value Measurement (ASC 820) specifies a hierarchy of valuation classifications based on whether the inputs to the valuation techniques used in each valuation classification are observable or unobservable. These classifications are summarized in the three broad levels listed below:

 

•

Level 1 - Unadjusted 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 in which all significant inputs and significant value drivers are observable.

•

Level 3 - Valuations derived from valuation techniques in which significant inputs or significant value drivers are unobservable.

 

Inputs used to measure fair value might fall in different levels of the fair value hierarchy, in which case the Company defaults to the lowest level input that is significant to the fair value measurement in its entirety. These levels are not necessarily an indication of the risk or liquidity associated with the investments.

 

The following tables present assets and liabilities measured at fair value on a recurring basis, unless otherwise noted, as of the dates specified (in thousands):

 

		June 30, 2024
Assets		Level 1				Level 2				Level 3				Total
Cash equivalents		$	339,920			$	-			$	-			$	339,920
Investments in securities (including GAMCO stock):
Trading - U.S. Treasury Bills			46,060				-				-				46,060
Common stocks			221,813				1,260				2,035				225,108
Mutual funds			1,384				-				-				1,384
Other			2,778				727				126				3,631
Total investments in securities			272,035				1,987				2,161				276,183
Investments in affiliated registered investment companies:
Closed-end funds - equity securities			45,165				-				-				45,165
Preferred securities issued by Closed-end funds (a)			-				-				9,856				9,856
Mutual funds			73,903				-				-				73,903
Total investments in affiliated registered investment companies			119,068				-				9,856				128,924
Total investments held at fair value			391,103				1,987				12,017				405,107
Total assets at fair value		$	731,023			$	1,987			$	12,017			$	745,027
Liabilities
Common stocks		$	5,998			$	-			$	-			$	5,998
Other			36				358				-				394
Securities sold, not yet purchased			6,034				358				-				6,392
Total liabilities at fair value		$	6,034			$	358			$	-			$	6,392

 

(a) These securities represent privately issued, puttable and callable preferred securities issued by affiliated closed-end funds.

 

 

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		December 31, 2023
Assets		Level 1				Level 2				Level 3				Total
Cash equivalents		$	315,017			$	-			$	-			$	315,017
Investments in securities (including GAMCO stock):
Trading - U.S. Treasury Bills			89,155				-				-				89,155
Common stocks			187,963				1,348				2,035				191,346
Mutual funds			1,186				-				-				1,186
Other			3,347				485				219				4,051
Total investments in securities			281,651				1,833				2,254				285,738
Investments in affiliated registered investment companies:
Closed-end funds - equity securities			44,692				-				-				44,692
Preferred securities issued by Closed-end funds (a)			-				-				8,356				8,356
Mutual funds			73,703				-				-				73,703
Total investments in affiliated registered investment companies			118,395				-				8,356				126,751
Total investments held at fair value			400,046				1,833				10,610				412,489
Total assets at fair value		$	715,063			$	1,833			$	10,610			$	727,506
Liabilities
Common stocks		$	5,035			$	-			$	-			$	5,035
Other			579				304				-				883
Securities sold, not yet purchased			5,614				304				-				5,918
Total liabilities at fair value		$	5,614			$	304			$	-			$	5,918

 

(a) These securities represent privately issued, puttable and callable preferred securities issued by affiliated closed-end funds.

 

The following table presents additional information about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
Assets:		2024				2023				2024				2023
Beginning balance		$	12,110			$	14,741			$	10,610			$	13,774
Total gains/(losses)			100				-				100				(33	)
Purchases			-				-				3,900				1,000
Sales/return of capital			(193	)			(250	)			(2,593	)			(250	)
Ending balance		$	12,017			$	14,491			$	12,017			$	14,491
Changes in net unrealized gain/(loss) included in Net gain/(loss) from investments related to level 3 assets still held as of the reporting date		$	100			$	-			$	100			$	(33	)

 

Total realized and unrealized gains and losses for Level 3 assets are reported in net gain/(loss) from investments in the condensed consolidated statements of income.

 

During the three and six months ended June 30, 2024 and 2023, there were no transfers into or out of Level 3. 

 

The Company uses a discounted cash flow analysis when determining the fair value of privately issued preferred securities of affiliated closed-end funds that are categorized as Level 3. Projected cash flows in the discounted cash flow analysis represent the relevant security’s dividend rate plus the assumption of full principal repayment at the preferred security’s earliest available redemption date.

 

The significant unobservable input used in the fair value measurement of each of the Company’s investments in privately issued preferred securities of closed-end funds is the discount rate. The discount rate was determined using the interest rates of U.S. Treasury Bills that are held over a similar period as the preferred security. The discount rates used in the valuation of these investments as of June 30, 2024 ranged from 4.51% to 5.36% with a weighted average of 5.15% calculated based on the relative fair value. Significant changes in the discount rate could result in a significantly higher or lower fair value measurement of these Level 3 investments.

 

The Company uses the market approach as the valuation technique to value its investment in common stocks classified as Level 3, specifically considering recent transactions.

 

 

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6.    Income Taxes

 

The effective tax rate (“ETR”) for the six months ended June 30, 2024 and  June 30, 2023 was 21.1% and 13.8%, respectively. The ETR in the year to date periods of 2024 and 2023 differ from the U.S. corporate tax rate of 21% primarily due to (a) deferred tax benefits from a foreign investment, (b) state and local taxes (net of federal benefit) and (c) the deductibility of officers' compensation. The increase in the ETR for the six months ended June 30, 2024 was primarily due to deferred tax benefits from a foreign investment which reduced the prior year's rate.

 

At June 30, 2024 the Company had net deferred tax assets, before valuation allowance of approximately $6.5 million that were recorded within income taxes receivable in the condensed consolidated statements of financial condition. The Company believes that it is more-likely-than-not that the benefit from a portion of the shareholder-designated charitable contribution carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance of $0.2 million and $0.4 million as of June 30, 2024 and December 31, 2023, respectively, on the deferred tax assets related to these charitable contribution carryforwards.

 

As of and for the six month periods ended June 30, 2024 and December 31, 2023, the Company has not identified any uncertain tax positions.

 

The Company remains subject to income tax examination by the IRS for the years 2020 through 2022 and state examinations for years after 2017.

 

7.    Earnings per Share

 

Basic earnings per share is computed by dividing net income/(loss) attributable to our shareholders by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net income/(loss) attributable to our shareholders by the weighted average number of shares, plus any potentially dilutive securities (if any), outstanding during the period.

 

The computations of basic and diluted net income per share are as follows:

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(In thousands, except per share amounts)		2024				2023				2024				2023
Income before noncontrolling interests		$	2,894			$	3,300			$	16,751			$	21,322
Income/(loss) attributable to noncontrolling interests			(91	)			(71	)			(55	)			197
Net income attributable to Associated Capital Group, Inc.'s shareholders		$	2,985			$	3,371			$	16,806			$	21,125
Weighted average number of shares outstanding - basic			21,392				21,870				21,446				21,920
Weighted average number of shares outstanding - diluted			21,392				21,870				21,446				21,920
Basic and Diluted EPS		$	0.14			$	0.15			$	0.78			$	0.96

 

8.    Equity

 

Voting Rights

 

The holders of Class A Common stock (“Class A Stock”) and Class B Common stock (“Class B Stock”) have identical rights except that holders of Class A Stock are entitled to one vote per share, while holders of Class B Stock are entitled to ten votes per share on all matters to be voted on by shareholders in general. Holders of each share class, however, are not eligible to vote on matters relating exclusively to the other share class.

 

Stock Award and Incentive Plan

 

The Company’s Board of Directors periodically grants shares of Phantom Restricted Stock awards (“Phantom RSAs”). Under the terms of the grants, the Phantom RSAs vest 30% and 70% after three and five years, respectively. The Phantom RSAs will be settled by a cash payment, net of applicable withholding tax, on the vesting dates. In addition, an amount equivalent to the cumulative dividends declared on shares of the Company’s Class A Stock during the vesting period will be paid to participants on vesting.

 

 

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The Phantom RSAs are treated as a liability because cash settlement is required and compensation will be recognized over the vesting period. In determining the compensation expense to be recognized each period, the Company will re-measure the fair value of the liability at each reporting date taking into account the remaining vesting period attributable to each award and the current market value of the Company’s Class A Stock. In making these determinations, the Company will consider the impact of Phantom RSAs that have been forfeited prior to vesting (e.g., due to an employee termination). The Company has elected to consider forfeitures as they occur.

 

Based on the closing price of the Company’s Class A Stock on June 30, 2024 and December 31, 2023, the total liability recorded by the Company in compensation payable in our condensed consolidated statements of financial condition as of June 30, 2024 and December 31, 2023, with respect to the Phantom RSAs was $3.3 million and $3.5 million, respectively.

 

The following table summarizes our stock-based compensation as well as unrecognized compensation for the three and six month periods ended  June 30, 2024 and 2023, respectively. Stock-based compensation expense is included in compensation expense in the condensed consolidated statements of income (dollars in thousands, unless otherwise noted):

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Stock-based compensation expense		$	595			$	323			$	757			$	205
Remaining expense to be recognized, if all vesting conditions are met(1)											7,131				6,012
Weighted average remaining contractual term (in years)											2.2				2.2

 

(1) Does not include an estimate for projected future dividends.

 

The following table summarizes Phantom RSA ("PRSA") activity:

 

		PRSAs				Weighted Average Grant Date Fair Value
Balance at December 31, 2023			233,695			$	37.38
Granted			-				-
Forfeited			-				-
Vested			-				-
Balance at March 31, 2024			233,695			$	37.38
Granted			97,200				34.28
Forfeited			-				-
Vested			(27,300	)			35.82
Balance at June 30, 2024			303,595			$	36.53

 

Stock Repurchase Program

 

In December 2015, the Board of Directors established a stock repurchase program ("Stock Repurchase Program") authorizing the Company to repurchase up to 500,000 shares of Class A Stock. On February 7, 2017, the Board of Directors reset the available number of shares to be purchased under the stock repurchase program to 500,000 shares. On August 3, 2017 and May 8, 2018, the Board of Directors authorized the repurchase of an additional 1 million and 500,000 shares, respectively. On February 6, 2024, the Board of Directors authorized the repurchase of an additional 350,000 shares. Our stock repurchase program is not subject to an expiration date.

 

 

---

 

 

The following table presents the Company's stock repurchase activity and remaining authorization:

 

For the period ended June 30, 2024:			Number of shares purchased				Average price per share
Remaining repurchase authorization December 31, 2023			156,664
Share repurchases under stock repurchase program (1)			(117,354	)		$	33.63
Remaining repurchase authorization March 31, 2024 (2)			389,310
Share repurchases under stock repurchase program (1)			(65,469	)		$	33.88
Remaining repurchase authorization June 30, 2024			323,841
For the period ended June 30, 2023:
Remaining repurchase authorization December 31, 2022			609,352
Share repurchases under stock repurchase program (1)			(52,307	)		$	37.27
Remaining repurchase authorization March 31, 2023			557,045
Share repurchases under stock repurchase program (1)			(211,870	)		$	35.95
Remaining repurchase authorization June 30, 2023			345,175

 

(1) Repurchases totaled $2.2 million and $7.6 million for the three-month periods ended June 30, 2024 and 2023, respectively. Repurchases totaled $6.2 and $9.6 million for the six-month periods ended June 30, 2024 and 2023, respectively. 

(2) On February 6, 2024, the Board of Directors authorized the repurchase of an additional 350,000 shares.

 

Dividends

 

During the three and six-month periods ended June 30, 2024 and 2023, the Company declared dividends of $0.10 per share to Class A and Class B shareholders.  

9.    Goodwill

 

At June 30, 2024 and December 31, 2023, goodwill on the condensed consolidated statements of financial condition includes $3.4 million of goodwill related to GCIA. The Company assesses the recoverability of goodwill at least annually, or more often should events warrant, using a qualitative assessment of whether it is more likely than not that an impairment has occurred to determine if a quantitative analysis is required. There were no indicators of impairment for the three and six months ended June 30, 2024 or 2023, and as such there was no impairment analysis performed or charge recorded.

10.    Guarantees, Contingencies and Commitments

 

From time to time, the Company may be named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. We are also subject to governmental or regulatory examinations or investigations. The examinations or investigations could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. For any such matters, the condensed consolidated financial statements include the necessary provisions for losses, if any, that the Company believes are probable and estimable. Furthermore, the Company evaluates whether losses exist which may be reasonably possible and will, if material, make the necessary disclosures. Management is not aware of any probable or reasonably possible losses.

 

The Company has also entered into arrangements with various other third parties, many of which provide for indemnification of the third parties against losses, costs, claims and liabilities arising from the performance of obligations under the agreements. The Company has had no claims or payments pursuant to these or prior agreements and believes the likelihood of a claim being made is remote, and, therefore, no accrual has been made on the condensed consolidated financial statements.

11.    Subsequent Events

 

From July 1, 2024 to August 9, 2024, the Company repurchased 84,861 shares at an average price of $31.43 per share.

 

On August 7, 2024, the Board of Directors approved a $0.20 per share shareholder designated charitable contribution. If all eligible shares outstanding were registered to participate, the total contribution would total $4.3 million.

 

On August 7, 2024, the Board of Directors increased the buyback authorization under the Stock Repurchase Program by 200,000 shares of Class A Stock.

 

 

---

 

ITEM 2:    MANAGEMENT’S DISCUSSION AND ANALYSIS (“MD&A”) OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Introduction

 

MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s unaudited interim consolidated financial statements and accompanying notes thereto included in this Quarterly Report on Form 10-Q, as well as the Company’s audited annual financial statements included in our Form 10-K filed with the SEC on March 21, 2024 to help provide an understanding of our financial condition, changes in financial condition and results of operations. Unless the context otherwise requires, all references to “we,” “us,” “our,” “AC Group” or the “Company” refer collectively to Associated Capital Group, Inc., a holding company, and its subsidiaries through which our operations are actually conducted.

 

Overview

 

We are a Delaware corporation, incorporated in 2015, that provides alternative investment management services and operates a direct investment business that over time invests in businesses that fit our criteria. Additionally, we derive income from proprietary investments.

 

Alternative Investment Management

 

We conduct our investment management activities through our wholly-owned subsidiary Gabelli & Company Investment Advisers, Inc. (“GCIA”) and its wholly-owned subsidiary, Gabelli & Partners, LLC (“Gabelli & Partners”). GCIA is an investment adviser registered with the Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). GCIA and Gabelli & Partners together serve as general partners or investment managers to investment funds, including limited partnerships and offshore companies (collectively, “Investment Partnerships”) and separate accounts. We primarily manage assets across a range of risk and event arbitrage portfolios and in equity event-driven value strategies. The business earns management and incentive fees from its advisory activities. Management fees are largely based on a percentage of assets under management (“AUM”). Incentive fees are based on a percentage of the investment returns of certain client portfolios.

 

We manage assets on a discretionary basis and invest in a variety of U.S. and foreign securities mainly in the developed global markets. We primarily employ absolute return strategies with the objective of generating positive returns. We serve a wide variety of investors globally including private wealth management clients, corporations, corporate pension and profit-sharing plans, foundations and endowments.

 

In merger arbitrage, the goal is to earn absolute positive returns. We introduced our first limited partnership, Gabelli Arbitrage (renamed Gabelli Associates Fund), in February 1985. Our typical investment process begins at the time of deal announcement, buying shares of the target at a discount to the stated deal terms, earning the spread until the deal closes, and reinvesting the proceeds in new deals in a similar manner. By owning a diversified portfolio of transactions, we mitigate the adverse impact of single deal-specific risks.

 

As the business and investor base expanded, we launched an offshore version in 1989. Building on our strengths in global event-driven value investing, several investment vehicles have been added to balance investors’ geographic, strategic and sector-specific needs. Today, we manage investments in multiple categories, including merger arbitrage, long/short value and other strategies.

 

Proprietary Capital

 

Proprietary capital is earmarked for our direct investment business that invests in new and existing businesses, using a variety of techniques and structures. We launched our direct private equity and merchant banking activities in August 2017. The direct investment business is developing along several core pillars:

●

Gabelli Private Equity Partners, LLC (“GPEP”), formed in August 2017 with $150 million of authorized capital as a “fundless” sponsor.

●

Gabelli Principal Strategies Group, LLC (“GPS”) was created in December 2015 to pursue strategic operating initiatives broadly.

 

Our direct investing efforts are organized to invest in various ways, including growth capital, leveraged buyouts and restructurings, with an emphasis on small and mid-sized companies. Our investment sourcing is across a variety of channels including direct owners, private equity funds, classic agents, and corporate carve outs (which are positioned for accelerated growth, as businesses seek to enhance shareholder value through financial engineering). The Company’s direct investing vehicles allow us to acquire companies and create long-term value with no pre-determined exit timetable. 

 

 

 

We have a proprietary portfolio of cash and investments which we expect to use to invest primarily in funds that we will manage, provide seed capital for new products, expand our geographic presence, develop new markets and pursue strategic acquisitions and alliances.

 

Financial Highlights

 

The following is a summary of the Company’s financial performance for the quarters ended June 30, 2024 and 2023:

 

($000s except per share data or as noted)

 

		Second Quarter
		2024				2023
AUM - end of period (in millions)		$	1,362			$	1,549
AUM - average (in millions)		$	1,446			$	1,640
Net income per share-diluted		$	0.14			$	0.15
Book value per share at June 30		$	42.87			$	41.41

 

Condensed Consolidated Statements of Income

 

Investment advisory and incentive fees, which are based on the amount and composition of AUM in our funds and accounts, represent our largest source of revenues. Growth in revenues depends on good investment performance, which influences the value of existing AUM as well as contributes to higher investment and lower redemption rates and attracts additional investors while maintaining current fee levels. Growth in AUM is also dependent on being able to access various distribution channels, which is usually based on several factors, including performance and service. In light of the ongoing dynamics created by the conflicts in the Middle East and the Ukraine and their impact on the global economy and markets, we could experience higher volatility in the short-term returns of our funds.

 

Incentive fees generally consist of an incentive allocation on the absolute gain in a portfolio generally equating to 20% of the economic profit, as defined in the agreements governing the investment vehicle or account. We recognize such revenue only when the measurement period has been completed, generally in December or at the time of an investor redemption.

 

Compensation includes variable and fixed compensation and related expenses paid to officers, portfolio managers, sales, trading, research and all other professional staff. Variable compensation is paid to sales personnel and portfolio management and may represent up to 55% of revenues.

 

Management fee expense is incentive-based compensation equal to 10% of adjusted aggregate pre-tax profits paid to the Executive Chair or his designees for his services pursuant to an employment agreement.

 

Other operating expenses include general and administrative operating costs.

 

Other income and expense includes net gains and losses from investments (which include both realized and unrealized gains and losses from securities and equity in earnings of investments in partnerships), interest and dividend income, and interest expense. Net gains and losses from investments are derived from our proprietary investment portfolio consisting of various public and private investments and from consolidated investment funds.

 

Net income attributable to noncontrolling interests represents the share of net income attributable to third-party limited partners of certain partnerships and offshore funds we consolidate. Please refer to Notes 1 and 4 in our condensed consolidated financial statements included elsewhere in this report.

 

Condensed Consolidated Statements of Financial Condition

 

We ended the second quarter of 2024 with approximately $880.6 million in cash and investments, net of securities sold, not yet purchased of $6.4 million. This includes $341.3 million of cash and cash equivalents; $46.1 million of U.S. Treasury obligations; $223.7 million of securities, net of securities sold, not yet purchased, including shares of GAMCO Investors, Inc. ("GAMCO") with a market value of $57.3 million; and $269.5 million invested in affiliated and third-party funds and partnerships, including investments in affiliated closed end funds which have a value of $55.0 million and more limited liquidity. Our financial resources provide flexibility to pursue strategic objectives that may include acquisitions, lift-outs, seeding new investment strategies, and co-investing, as well as shareholder compensation in the form of share repurchases and dividends.

 

Total shareholders’ equity was $915.5 million or $42.87 per share as of June 30, 2024, compared to $907.0 million or $42.11 per share as of December 31, 2023. Shareholders’ equity per share is calculated by dividing the total equity by the number of common shares outstanding. The increase in equity from the end of 2023 was largely attributable to income for the year to date period.

 

 

 

 

RESULTS OF OPERATIONS

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Revenues
Investment advisory and incentive fees		$	2,489			$	2,280			$	5,396			$	4,691
Other revenues			106				102				210				156
Total revenues			2,595				2,382				5,606				4,847
Expenses
Compensation			3,942				3,789				7,762				7,359
Management fee			442				544				2,424				3,087
Other operating expenses			1,885				1,520				4,064				3,005
Total expenses			6,269				5,853				14,250				13,451
Operating loss			(3,674	)			(3,471	)			(8,644	)			(8,604	)
Other income
Net gain/(loss) from investments			(159	)			3,297				16,635				23,808
Interest and dividend income			7,860				5,968				13,843				11,161
Interest expense			(69	)			(156	)			(152	)			(254	)
Shareholder-designated contribution			(380	)			(498	)			(449	)			(1,369	)
Total other income, net			7,252				8,611				29,877				33,346
Income before income taxes			3,578				5,140				21,233				24,742
Income tax expense			684				1,840				4,482				3,420
Income before noncontrolling interests			2,894				3,300				16,751				21,322
Income/(loss) attributable to noncontrolling interests			(91	)			(71	)			(55	)			197
Net income attributable to Associated Capital Group, Inc.'s shareholders		$	2,985			$	3,371			$	16,806			$	21,125
Net income per share attributable to Associated Capital Group, Inc.'s shareholders:
Basic		$	0.14			$	0.15			$	0.78			$	0.96
Diluted		$	0.14			$	0.15			$	0.78			$	0.96
Weighted average shares outstanding (thousands):
Basic			21,392				21,870				21,446				21,920
Diluted			21,392				21,870				21,446				21,920

 

 

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

 

Revenues

 

Total revenues in the second quarter were $2.6 million compared to $2.4 million in the second quarter of 2023.  Revenues generated by the GAMCO International SICAV – GAMCO Merger Arbitrage (the “SICAV”) were $1.3 million versus $1.0 million in the prior year period. All other revenues were $1.3 million compared to $1.4 million in the year-ago quarter.

 

Starting in December 2023, the SICAV revenue recognized by the Company for its services increased to 100% of the revenues received by Gabelli Funds, LLC. In turn, AC now pays the marketing expenses of the SICAV that were previously paid by Gabelli Funds and remits an admin fee to GAMCO for administrative services provided to the SICAV. This change better aligns the financial arrangements with the services rendered by each party. The net effect of this change did not have a material impact on our operating results.

 

Incentive fees are not recognized until the uncertainty surrounding the amount of variable consideration ends and the fee is crystalized, typically on an annual basis on December 31. There were no material unrecognized incentive fees for the quarters ended June 30, 2024 and 2023.

 

 

 

 

Expenses

 

Compensation, which includes variable compensation, salaries, bonuses and benefits, was $3.9 million and $3.8 million for the three month periods ended June 30, 2024 and 2023, respectively, primarily driven by higher stock-based compensation expense in 2024 offset partially by lower variable based compensation expense in 2024 driven by lower average AUM. 

 

Management fee expense represents incentive-based and entirely variable compensation in the amount of 10% of income before management fee and income taxes and excluding the impact of consolidating entities and is payable to Mario J. Gabelli, Executive Chair, or his designee pursuant to his employment agreement. Management fee expense of $0.4 million was recorded for the three-month period ended June 30, 2024 compared to $0.5 million for the three-month period ended June 30, 2023. 

 

Other operating expenses were $1.9 million during the three months ended June 30, 2024 compared to $1.5 million in the prior year's quarter driven primarily by marketing expenses on the newly realigned SICAV.

 

Other

 

Net gain/(loss) from investments is primarily related to the performance of our securities portfolio and investments in partnerships. Investment losses were $0.2 million in the 2024 quarter compared to gains of $3.3 million in the comparable 2023 quarter.

 

Interest and dividend income increased to $7.9 million in the 2024 quarter from $6.0 million in the 2023 quarter primarily driven by increased interest income as a result of higher sustained interest rates in the 2024 quarter.

 

Shareholder-designated contributions in the 2024 quarter decreased to $0.4 million compared to $0.5 million in the prior year’s quarter, driven by timing of contributions.

 

Income taxes

 

The effective tax rate for the three months ended June 30, 2024 and 2023 was 19.1% and 35.8%, respectively. The difference in effective tax rate period over period is primarily driven by deferred tax benefits from a foreign investment which reduced the current quarter's effective tax rate.

 

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

 

Revenues

 

Total revenues for the six months ended June 30, 2024 were $5.6 million compared to $4.8 million in the six months ended June 30, 2023. Revenues generated by the GAMCO International SICAV – GAMCO Merger Arbitrage (the “SICAV”) were $3.0 million versus $2.1 million in the prior year period. All other revenues were $2.6 million compared to $2.7 million in the year-ago quarter driven by lower average AUM in 2024.

 

Starting in December 2023, the SICAV revenue recognized by the Company for its services increased to 100% of the revenues received by Gabelli Funds, LLC. In turn, AC now pays the marketing expenses of the SICAV that were previously paid by Gabelli Funds and remits an admin fee to GAMCO for administrative services provided to the SICAV. This change better aligns the financial arrangements with the services rendered by each party.

 

Expenses

 

Compensation, which includes variable compensation, salaries, bonuses and benefits, was $7.8 million and $7.4 million for the six month periods ended June 30, 2024 and 2023, respectively, primarily driven by higher stock-based compensation expense in 2024, offset partially by lower variable based compensation expense. 

 

Management fee expense represents incentive-based and entirely variable compensation in the amount of 10% of income before management fee and income taxes and excluding the impact of consolidating entities and is payable to Mario J. Gabelli, Executive Chair, or his designee pursuant to his employment agreement. Management fee expense was $2.4 million and $3.1 million for the six month periods ended June 30, 2024 and 2023, respectively. 

 

Other operating expenses were $4.1 million during the six months ended June 30, 2024 compared to $3.0 million in the prior year period driven primarily by marketing expenses on the newly realigned SICAV.

 

 

 

 

Other

 

Net gain/(loss) from investments is primarily related to the performance of our securities portfolio and investments in partnerships. Investment gains were $16.6 million in the 2024 period compared to $23.8 million in the 2023 period.

 

Interest and dividend income increased to $13.8 million in the 2024 period from $11.2 million in the 2023 period primarily driven by increased interest income as a result of higher sustained interest rates in the 2024 period.

 

Shareholder-designated contributions for the six months ended June 30, 2024 decreased to $0.4 million compared to $1.4 million in the prior year period, driven by timing of contributions.

 

Income taxes

 

The effective tax rate for the six months ended June 30, 2024 and 2023 was 21.1% and 13.8%, respectively. The difference in effective tax rate period over period is primarily driven by deferred tax benefits from a foreign investment which reduced the prior year's effective tax rate

 

ASSETS UNDER MANAGEMENT

 

Our revenues are highly correlated to the level of assets under management and fees associated with our various investment products, rather than our own corporate assets. Assets under management, which are directly influenced by the level and changes of the overall equity markets, can also fluctuate through acquisitions, the creation of new products, and the addition of new accounts or the loss of existing accounts. Since various equity products have different fees, changes in our business mix may also affect revenues. At times, the performance of our equity products may differ markedly from popular market indices, and this can also impact our revenues.

 

Assets under management were $1.4 billion as of June 30, 2024 compared to $1.6 billion at December 31, 2023. The decrease from year-end was primarily attributable to investor outflows.

 

Assets Under Management (in millions)

 

														% Change From
		June 30,				December 31,				June 30,				December 31,				June 30,
		2024				2023				2023				2023				2023
Merger Arbitrage(a)		$	1,127			$	1,312			$	1,286				(14.1	)			(12.4	)
Long/Short Value			199				244				230				(18.4	)			(13.5	)
Other			36				35				33				2.9				9.1
Total AUM		$	1,362			$	1,591			$	1,549				(14.4	)			(12.1	)

 

(a) Includes $468, $621, and $579 of sub-advisory AUM related to GAMCO International SICAV - GAMCO Merger Arbitrage, $66, $69, and $66 of sub-advisory AUM related to Gabelli Merger Plus+ Trust Plc and $128, $240 and $141 of 100% U.S. Treasury Fund managed by GAMCO at June 30, 2024, December 31, 2023 and June 30, 2023, respectively.

 

Fund flows for the three months ended June 30, 2024 (in millions):

 

		March 31, 2024				Market Appreciation/ (Depreciation)				Foreign Currency(1)				Net Inflows/ (Outflows)				June 30, 2024
Merger Arbitrage		$	1,262			$	(25	)		$	(4	)		$	(106	)		$	1,127
Long/Short Value			251				(6	)			-				(46	)			199
Other			36				-				-				-				36
Total AUM		$	1,549			$	(31	)		$	(4	)		$	(152	)		$	1,362

 

(1) Reflects the impact of currency fluctuations of non-US dollar denominated classes of investment funds.

 

The majority of our AUM have calendar year-end measurement periods, and our incentive fees are primarily recognized in the fourth quarter. Assets under management decreased on a net basis by $187 million for the quarter ended June 30, 2024 due to net investor outflows of $152 million, market depreciation of $31 million and the impact of currency fluctuations in non-US dollar denominated classes of investment funds of $4 million.

 

 

 

 

Liquidity and Capital Resources

 

Our principal assets consist of cash and cash equivalents; treasury securities; marketable securities, primarily equities, including 2.4 million shares of GAMCO; and interests in affiliated and third-party funds and partnerships. Although Investment Partnerships may be subject to restrictions as to the timing of distributions, the underlying investments of such Investment Partnerships are generally liquid, and the valuations of these products reflect that underlying liquidity.

 

Summary cash flow data is as follows (in thousands):

 

		Six Months Ended
		June 30,
		2024				2023
Cash flows provided by (used in):
Operating activities		$	28,623			$	179,403
Investing activities			(640	)			676
Financing activities			(8,662	)			(15,058	)
Net increase in cash, cash equivalents and restricted cash			19,321				165,021
Cash, cash equivalents and restricted cash at beginning of period			347,057				221,269
Cash, cash equivalents and restricted cash at end of period		$	366,378			$	386,290

 

 

We require relatively low levels of capital expenditures and have a highly variable cost structure where costs increase and decrease based on the level of revenues we receive. Our revenues, in turn, are highly correlated to the level of AUM and to investment performance. We anticipate that our available liquid assets should be sufficient to meet our cash requirements as we build out our operating business. At June 30, 2024, we had cash and cash equivalents of $341.3 million, Investments in U.S. Treasury Bills of $46.1 million and $223.7 million of investments net of securities sold, not yet purchased of $6.4 million. Included in cash and cash equivalents as of June 30, 2024 is $3.5 million which is held by consolidated investment funds and may not be readily available for the Company to access.

 

Net cash provided by operating activities was $28.6 million for the six months ended June 30, 2024. Operating cash flows in 2024 are driven by our net income of $16.8 million, $22.9 million of net decreases in securities, and net distributions from investment partnerships of $4.1 million. These were offset partially by adjustments for noncash items, primarily gains on investments securities and partnership investments and deferred taxes of $13.8 million, and $1.4 million of net receivables/payables. Net cash used in investing activities was $0.6 million primarily due to purchases of securities of $5.0 million, partially offset by proceeds from sales of securities of $3.5 million and return of capital on securities of $0.9 million. Net cash used in financing activities was $8.7 million resulting primarily from stock buyback payments of $6.2 million, dividends paid of $2.1 million and redemptions of redeemable noncontrolling interests of $0.4 million.

 

Net cash provided by operating activities was $179.4 million for the six months ended June 30, 2023 due to $186.3 million of net decreases of securities and net distributions from investment partnerships and our net income of $21.3 million, partially offset by $19.4 million of adjustments for noncash items, primarily gains on investments securities and partnership investments and deferred taxes and $8.8 million of net receivables/payables. Net cash provided by investing activities was $0.7 million primarily due to return of capital on securities of $1.0 million and proceeds from sales of securities of $0.8 million, partially offset by purchases of securities of $1.1 million. Net cash used in financing activities was $15.1 million resulting primarily from stock buyback payments of $9.6 million, redemptions of redeemable noncontrolling interests of $3.3 million and dividends paid of $2.2 million.  

 

Critical Accounting Policies and Estimates

 

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from those estimates. See Note 1 and the Company’s Critical Accounting Policies in Management’s Discussion and Analysis ("MD&A") of Financial Condition and Results of Operations in AC’s 2023 Annual Report on Form 10-K filed with the SEC on March 21, 2024 for details on Critical Accounting Policies.

 

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk ITEM 4.

 

Smaller reporting companies are not required to provide the information required by this item.

 

 

 

Controls and Procedures

 

Disclosure Controls and Procedures

 

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of and for the period covered by this report.

 

Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting as defined by Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Forward-Looking Information

 

Our disclosure and analysis in this report contain some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements because they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. They also appear in any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance of our products, expenses, the outcome of any legal proceedings, and financial results. Although we believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know about our business and operations, there can be no assurance that our actual results will not differ materially from what we expect or believe. Some of the factors that could cause our actual results to differ from our expectations or beliefs include, without limitation:

 

•

the adverse effect from a decline in the securities markets

 

•

a decline in the performance of our products

 

•

a general downturn in the economy

 

•

changes in government policy or regulation

 

•

changes in our ability to attract or retain key employees

 

•

unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations

 

We also direct your attention to any more specific discussions of risk contained in our Form 10 and other public filings. We are providing these statements as permitted by the Private Litigation Reform Act of 1995. We do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our expectations or if we receive any additional information relating to the subject matters of our forward-looking statements.

 

 

 

PART II:   Other Information

 

ITEM 1:    Legal Proceedings

 

Currently, we are not subject to any legal proceedings that individually or in the aggregate involved a claim for damages in excess of 10% of our consolidated assets. From time to time, we may be named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. We are also subject to governmental or regulatory examinations or investigations. Examinations or investigations can result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. For any such matters, the condensed consolidated financial statements include the necessary provisions for losses that we believe are probable and estimable. Furthermore, we evaluate whether there exist losses which may be reasonably possible and, if material, make the necessary disclosures. However, management believes such matters, both those that are probable and those that are reasonably possible, are not material to the Company’s condensed consolidated financial condition, operations, or cash flows at June 30, 2024. See also Note 10, Guarantees, Contingencies and Commitments, to the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

 

ITEM 1A:   Risk Factors.

 

Smaller reporting companies are not required to provide the information required by this item.

 

ITEM 2:          Unregistered Sales of Equity Securities And Use Of Proceeds

 

The following table provides information for our repurchase of our Class A Stock during the quarter ended June 30, 2024:

 

Period		Total Number of Shares Repurchased				Average Price Paid Per Share, net of Commissions				Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs				Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
04/01/24 - 04/30/24			14,749			$	32.75				14,749				374,561
05/01/24 - 05/31/24			23,795				33.83				23,795				350,766
06/01/24 - 06/30/24			26,925				34.54				26,925				323,841
Totals			65,469			$	33.88				65,469

 

 

 

 

 

ITEM 6:                     (a) Exhibits

 

Exhibit Number		Description of Exhibit
2.1		Separation and Distribution Agreement, dated November 30, 2015, between GAMCO Investors, Inc., a Delaware corporation (“GAMCO”), and Associated Capital Group, Inc., a Delaware corporation (the “Company”). (Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K dated November 30, 2015 filed with the Securities and Exchange Commission on December 4, 2015).
3.1		Amended and Restated Certificate of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K dated November 19, 2015 filed with the Securities and Exchange Commission on November 25, 2015).
3.2		Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company’s Report on Form 8-K dated November 19, 2015 filed with the Securities and Exchange Commission on November 25, 2015).
4.1		Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Amendment No. 4 to the Company’s Registration Statement on Form 10 filed with the Securities and Exchange Commission on October 21, 2015).
4.2		Description of The Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. (Incorporated by reference to Exhibit 4.2 of the Company’s Report on Form 10-K filed with the Commission on March 16, 2020).
10.1		Service Mark and Name License Agreement, dated November 30, 2015, by and between the Company and GAMCO. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K dated November 30, 2015 filed with the Commission on December 4, 2015).
10.2		Transitional Administrative and Management Services Agreement, dated November 30, 2015, by and between the Company and GAMCO. (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K dated November 30, 2015 filed with the Commission on December 4, 2015).
10.3		Employment Agreement between the Company and Mario J. Gabelli dated November 30, 2015 (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K dated November 30, 2015 filed with the Commission on December 4, 2015).
10.4		Promissory Note in aggregate principal amount of $250,000,000, dated November 30, 2015, issued by GAMCO in favor of the Company (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K dated November 30, 2015 filed with the Commission on December 4, 2015).
10.5		Tax Indemnity and Sharing Agreement, dated November 30, 2015, by and between the Company and GAMCO. (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K dated November 30, 2015 filed with the Commission on December 4, 2015).
10.6		2015 Stock Award Incentive Plan (Incorporated by reference to Exhibit 10.11 to Amendment No. 4 to the Company’s Registration Statement on Form 10 filed with the Securities and Exchange Commission on October 21, 2015).
10.7		Form of Indemnification Agreement by and between the Company and the Indemnitee defined therein (Incorporated by reference to Exhibit 10.7 to Amendment No. 4 to the Company’s Registration Statement on Form 10 filed with the Securities and Exchange Commission on October 21, 2015).
10.8		Agreement and Plan of Merger, dated as of October 31, 2019, by and among Morgan Group Holding Co., G.R. acquisition, LLC, G.research, LLC, Institutional Services Holdings, LLC and Associated Capital Group, Inc. (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Morgan Group Holding Co. filed with the Securities and Exchange Commission on November 6, 2019).
31.1		Certification of CEO pursuant to Rule 13a-14(a).

 

 

 

31.2		Certification of CFO pursuant to Rule 13a-14(a).
32.1		Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
97.1		Associated Capital Group, Inc. Clawback Policy (Incorporated by reference to Exhibit 97.1 to the Company's Form 10-K dated December 31, 2023 filed with the Commission on March 21, 2024).
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

 

 

SIGNATURES

 

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.

 

ASSOCIATED CAPITAL GROUP, INC.
(Registrant)
By:	/s/ Ian J. McAdams
Name:	Ian J. McAdams
Title:	Chief Financial Officer
Date: August 9, 2024