UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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 001-37387

ASSOCIATED CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware
 
47-3965991
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

191 Mason Street, Greenwich, CT
 
06830
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code (203) 629-9595
Securities registered pursuant to Section 12(b) of the Act:

 
Title of each class
 
Trading
Symbol
 
Name of each exchange on
which registered
Class A Common Stock, par value $0.001 per share
 
AC
 
New York Stock Exchange

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 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 and post 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 an emerging growth company.  See the 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 Exchange Act Rule 12b-2) Yes No ☒.
 
Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock, as of the latest practical date.

Class  
Outstanding at November 3, 2021
 
Class A Common Stock, .001 par value
 
3,095,169

Class B Common Stock, .001 par value
 
18,962,918


As of November 3, 2021, 3,095,169 shares of class A common stock and 18,962,918 shares of class B common stock were outstanding. GGCP, Inc., a private company controlled by the Company’s Executive Chairman, held 77,165 shares of class A common stock and indirectly held 18,423,741 shares of class B common stock. Other executive officers and directors of GGCP, Inc. held 29,866 and 36,758 shares of class A and class B common stock, respectively. In addition, there are 222,905 Phantom Restricted Stock Awards outstanding as of September 30, 2021.



ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

INDEX

PART I.
FINANCIAL INFORMATION
Page
     
Item 1.
3
     
Item 2.
24
     
Item 3.
31
     
Item 4.
31
     
PART II.
OTHER INFORMATION *
 
     
Item 1.
33
     
Item 2.
33
     
Item 6.
34
     
  36

*
Items other than those listed above have been omitted because they are not applicable.

2

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
(Dollars in thousands, except per share data)

   
September 30,
2021
   
December 31,
2020
 
ASSETS
           
             
Cash and cash equivalents
 
$
569,776
   
$
39,509
 
Investments in U.S. Treasury Bills
   
49,996
     
344,453
 
Investments in equity securities (Including GBL stock with a value of $65.6 million and $48.9 million, respectively)
   
273,456
     
249,887
 
Investments in affiliated registered investment companies
   
142,525
     
170,605
 
Investments in partnerships
   
149,964
     
123,994
 
Receivable from brokers
   
43,481
     
24,677
 
Investment advisory fees receivable
   
1,410
     
7,346
 
Receivable and investment in note receivable from affiliates
   
5,661
     
4,743
 
Deferred tax assets, net
    -
     
2,207
 
Goodwill
   
3,519
     
3,519
 
Other assets
   
19,360
     
28,565
 
Investments in marketable securities held in trust
   
175,085
     
175,040
 
Total assets
 
$
1,434,233
   
$
1,174,545
 
                 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
               
                 
Payable to brokers
 
$
243,282
   
$
6,496
 
Income taxes payable, including deferred tax liabilities, net
   
12,406
     
9,746
 
Compensation payable
   
17,307
     
18,567
 
Securities sold, not yet purchased
   
13,603
     
17,571
 
Payable to affiliates
   
-
     
2,188
 
Accrued expenses and other liabilities
   
4,939
     
5,635
 
Deferred underwriting fee payable
   
6,125
     
6,125
 
PMV warrant liability
    5,590
      -  
Total liabilities
   
303,252
     
66,328
 
                 
Redeemable noncontrolling interests
   
199,793
     
206,828
 
                 
Commitments and contingencies (Note J)
           
                 
Equity:
               
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and outstanding
           
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized; 6,629,254 shares
issued, respectively; 3,099,471 and 3,311,127 shares outstanding, respectively
   
6
     
6
 
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized; 19,196,792 shares issued;
18,962,918 outstanding, respectively
   
19
     
19
 
Additional paid-in capital
   
992,018
     
999,047
 
Retained earnings
   
61,212
     
13,649
 
Treasury stock, at cost (3,529,783 and 3,318,127 shares, respectively)
   
(121,270
)
   
(113,783
)
Total Associated Capital Group, Inc. equity
   
931,985
     
898,938
 
Noncontrolling interests
   
(797
)
   
2,451
 
Total equity
   
931,188
     
901,389
 
Total liabilities and equity
 
$
1,434,233
   
$
1,174,545
 

As of September 30, 2021 and December 31, 2020, certain balances include amounts related to consolidated variable interest entities (“VIEs”) and voting interest entities (“VOEs”).  See Footnote D.

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(Dollars in thousands, except per share data)

   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2021
   
2020
    2021     2020  
Revenues
                       
Investment advisory and incentive fees
 
$
2,014
   
$
1,865
    $ 6,627     $ 6,424  
Other
   
98
     
80
      299       550  
Total revenues
   
2,112
     
1,945
      6,926       6,974  
Expenses
                               
Compensation
   
2,819
     
3,026
      11,710       8,405  
Management fee
   
226
     
-
      7,209       -  
Other operating expenses
   
(764
)
   
2,471
      4,952       6,422  
Total expenses
   
2,281
     
5,497
      23,871       14,827  
                                 
Operating loss
   
(169
)
   
(3,552
)
    (16,945 )     (7,853 )
Other income (expense)
                               
Net gain/(loss) from investments
   
5,676
     
15,603
      79,303       (34,770 )
Interest and dividend income
   
1,119
     
1,218
      9,119       4,675  
Interest expense
   
(97
)
   
(32
)
    (251 )     (146 )
Shareholder-designated contribution
   
(541
)
   
(2,782
)
    (2,717 )     (3,007 )
Total other income (expense), net
   
6,157
     
14,007
      85,454       (33,248 )
Income/(loss) before income taxes
   
5,988
     
10,455
      68,509       (41,101 )
Income tax expense/(benefit)
   
484
     
3,564
      15,094       (8,858 )
Income/(loss) from continuing operations, net of taxes
   
5,504
     
6,891
      53,415       (32,243 )
Income/(loss) from discontinued operations, net of taxes
   
-
     
(139
)
    -       (632 )
Income/(loss) before noncontrolling interests
   
5,504
     
6,752
      53,415       (32,875 )
Income/(loss) attributable to noncontrolling interests
   
4,001
     
937
      3,641       (572 )
Net income/(loss) attributable to Associated Capital Group, Inc.’s shareholders
 
$
1,503
   
$
5,815
    $ 49,774     $ (32,303 )
                                 
Net income/(loss) per share attributable to Associated Capital Group, Inc.’s shareholders:
                               
Basic - Continuing operations
 
$
0.07
   
$
0.27
    $ 2.25     $ (1.41 )
Basic - Discontinued operations
   
-
     
(0.01
)
    -       (0.03 )
Basic - Total
 
$
0.07
   
$
0.26
    $ 2.25     $ (1.44 )
                                 
Diluted - Continuing operations
 
$
0.07
   
$
0.27
    $ 2.25     $ (1.41 )
Diluted - Discontinued operations
   
-
     
(0.01
)
    -       (0.03 )
Diluted - Total
 
$
0.07
   
$
0.26
    $ 2.25     $ (1.44 )
                                 
Weighted average shares outstanding:
                               
Basic
   
22,084
     
22,354
      22,141       22,391  
Diluted
   
22,084
     
22,354
      22,141       22,391  
                                 
Actual shares outstanding:
   
22,062
     
22,333
      22,062       22,333  

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
UNAUDITED
(Dollars in thousands)
 
   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2021
   
2020
    2021     2020
 
                         
Net income/(loss)
 
$
5,504
   
$
6,752
    $ 53,415     $ (32,875 )
Less: Comprehensive income/(loss) attributable to noncontrolling interests
   
4,001
     
937
      3,641       (572 )
                                 
Comprehensive income/(loss) attributable to Associated Capital Group, Inc.
 
$
1,503
   
$
5,815
    $ 49,774     $ (32,303 )

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(Dollars in thousands)

For the Three Months Ended March 31, 2021, June 30, 2021 and September 30, 2021

   
Associated Capital Group, Inc. Shareholders
       
   
Common
Stock
   
Retained
Earnings
   
Additional
Paid-in
Capital
   
Treasury
Stock
   
Total
   
Noncontrolling
Interests
   
Total
Equity
   
Redeemable
Noncontrolling
Interests
 
Balance at December 31, 2020
 
$
25
   
$
13,649
   
$
999,047
   
$
(113,783
)
 
$
898,938
   
$
2,451
   
$
901,389
   
$
206,828
 
Contributions from redeemable noncontrolling interests
                                                           
136
 
Redemptions of noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(12,066
)
Net income
   
-
     
18,555
     
-
     
-
     
18,555
     
-
     
18,555
     
172
 
Purchase of treasury stock
   
-
     
-
     
-
     
(4,198
)
   
(4,198
)
   
-
     
(4,198
)
   
-
 
Balance at March 31, 2021
 
$
25
   
$
32,204
   
$
999,047
   
$
(117,981
)
 
$
913,295
   
$
2,451
   
$
915,746
   
$
195,070
 
Contributions from redeemable noncontrolling interests
                                                           
665
 
Net income
   
-
     
29,716
     
-
     
-
     
29,716
     
-
     
29,716
     
(532
)
Dividends declared ($0.10 per share)
   
-
     
(2,211
)
   
-
     
-
     
(2,211
)
   
-
     
(2,211
)
   
-
 
Purchase of treasury stock
   
-
     
-
     
-
     
(1,893
)
   
(1,893
)
   
-
     
(1,893
)
   
-
 
Accretion of redeemable noncontrolling interests to redemption value
   
-
     
-
     
(6,001
)
   
-
     
(6,001
)
   
(2,892
)
   
(8,893
)
   
8,893
 
Other changes to redeemable noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(7,527
)
Balance at June 30, 2021
 
$
25
   
$
59,709
   
$
993,046
   
$
(119,874
)
 
$
932,906
   
$
(441
)
 
$
932,465
   
$
196,569
 
Redemptions of redeemable noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
-
     
-
      (2,161 )
Net income
   
-
     
1,503
     
-
     
-
     
1,503
      122       1,625      
3,879
 
Purchase of treasury stock
   
-
     
-
     
-
      (1,396 )    
(1,396
)
   
-
      (1,396 )    
-
 
Accretion of redeemable noncontrolling interests to redemption value
    -       -       (1,028 )     -
      (1,028 )     (478 )     (1,506 )     1,506  
Balance at September 30, 2021
  $ 25     $ 61,212     $ 992,018     $ (121,270 )   $ 931,985     $ (797 )   $ 931,188     $ 199,793  

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(Dollars in thousands)

For the Three Months Ended March 31, 2020, June 30, 2020 and September 30, 2020

   
Associated Capital Group, Inc. Shareholders
       
   
Common
Stock
   
Accumulated
Deficit
   
Additional
Paid-in
Capital
   
Treasury
Stock
   
Total
   
Noncontrolling
Interests
   
Total
Equity
   
Redeemable
Noncontrolling
Interests
 
Balance at December 31, 2019
 
$
25
   
$
(701
)
 
$
1,003,450
   
$
(106,342
)
 
$
896,432
   
$
1,003
   
$
897,435
   
$
50,385
 
Redemptions of noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(531
)
Net loss
   
-
     
(73,355
)
   
-
     
-
     
(73,355
)
   
(52
)
   
(73,407
)
   
(3,945
)
Purchase of treasury stock
   
-
     
-
     
-
     
(3,225
)
   
(3,225
)
   
-
     
(3,225
)
   
-
 
Balance at March 31, 2020
 
$
25
   
$
(74,056
)
 
$
1,003,450
   
$
(109,567
)
 
$
819,852
   
$
951
   
$
820,803
   
$
45,909
 
Net income
   
-
     
35,237
     
-
     
-
     
35,237
     
(48
)
   
35,189
     
(1,167
)
Dividends declared ($0.10 per share)
   
-
     
(2,237
)
   
-
     
-
     
(2,237
)
   
-
     
(2,237
)
   
2,436
 
Purchase of treasury stock
   
-
     
-
     
-
     
(1,068
)
   
(1,068
)
   
-
     
(1,068
)
   
-
 
Balance at June 30, 2020
 
$
25
   
$
(41,056
)
 
$
1,003,450
   
$
(110,635
)
 
$
851,784
   
$
903
   
$
852,687
   
$
47,178
 
Contributions from redeemable noncontrolling interests
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
156,049
 
Spin-off of MGHL
   
-
     
-
     
(4,403
)
   
-
     
(4,403
)
   
(903
)
   
(5,306
)
   
-
 
PMV Sponsor members' interest
   
-
     
-
     
-
     
-
     
-
     
2,072
     
2,072
     
-
 
Net income
   
-
     
5,815
     
-
     
-
     
5,815
     
-
     
5,815
     
937
 
Purchase of treasury stock
   
-
     
-
     
-
     
(1,101
)
   
(1,101
)
   
-
     
(1,101
)
   
-
 
Balance at September 30, 2020
 
$
25
   
$
(35,241
)
 
$
999,047
   
$
(111,736
)
  $ 852,095    
$
2,072
   
$
854,167
   
$
204,164
 

See accompanying notes.

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
 (Dollars in thousands)

    
For the Nine Months Ended
September 30,
 
   
2021
   
2020
 
Operating activities
           
Net income/(loss)
 
$
53,415
   
$
(32,875
)
Less: (Loss) from discontinued operations, net of taxes
   
-
     
632
 
Income/(loss) from continuing operations
   
53,415
     
(32,243
)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
               
Equity in net (gains) losses from partnerships
   
(15,530
)
   
(4,316
)
Depreciation and amortization
   
289
     
40
 
Deferred income taxes
   
8,411
     
(5,923
)
Donated securities
   
2,052
     
441
 
Unrealized (gains)/losses on securities
   
(39,384
)
   
37,511
 
Dividends received as securities     (5,066 )     -  
Realized gains on sales of securities
   
(23,860
)
   
1,017
 
(Increase)/decrease in assets:
               
Investments in trading securities
   
295,687
     
(283,070
)
Investments in partnerships:
               
Contributions to partnerships
   
(13,562
)
   
(4,229
)
Distributions from partnerships
   
6,333
     
24,841
 
Receivable from affiliates
   
4,148
     
3,600
 
Receivable from brokers
   
(20,646
)
   
2,077
 
Investment advisory fees receivable
   
5,989
     
8,423
 
Income taxes receivable
   
(507
)
   
(2,207
)
Other assets
    697      
1,260
 
Increase/(decrease) in liabilities:
               
Payable to affiliates
   
(2,188
)
   
122
 
Payable to brokers
   
236,786
     
(6,446
)
Income taxes payable
   
(3,037
)
   
(2,833
)
Compensation payable
   
(1,260
)
   
(12,092
)
Accrued expenses and other liabilities
   
(696
)
   
1,824
 
Total adjustments
   
434,656
     
(239,960
)
Net cash provided by operating activities
   
488,071
     
(272,203
)
                 
Investing activities
               
Maturities of marketable securities held in trust
    175,085
      -
 
Purchases of marketable securities held in trust
    (175,085 )     -
 
Purchases of securities
   
(2,452
)
   
(434
)
Proceeds from sales of securities
   
16,724
     
8,406
 
Return of capital on securities
   
38,982
     
1,320
 
Purchase of building
   
-
     
(11,084
)
Investment of cash in Trust Account
    -       (175,000 )
Net cash provided by/(used in) investing activities
 
$
53,254
   
$
(176,792
)

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED (continued)
(Dollars in thousands)
 
    
Nine Months Ended
September 30,
 
   
2021
   
2020
 
Financing activities
           
Dividends paid
   
(2,211
)
   
(4,486
)
Purchase of treasury stock
   
(7,487
)
   
(5,395
)
Contributions from redeemable noncontrolling interests
   
-
   
162,020
 
Redemptions of redeemable noncontrolling interests     (1,360)       -  
Contributions from nonredeemable noncontrolling interests
    -       2,072  
Net cash provided by (used in) financing activities
   
(11,058
)
   
154,211
 
Cash flows from discontinued operations
               
Net cash provided by operating activities
    -       114  
Net increase in cash and cash equivalents
   
530,267
     
(294,670
)
Cash and cash equivalents at beginning of period
   
39,509
     
342,001
 
Cash and cash equivalents at end of period
 
$
569,776
   
$
47,331
 
                 
Supplemental disclosures of cash flow information:
               
Cash paid for interest
 
$
252
   
$
114
 
Cash paid/(received) for taxes
 
$
10,296
   
$
2,000
 

See accompanying notes

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021
 (UNAUDITED)

A.   Organization

Unless we have indicated otherwise, or the context otherwise requires, references in this report to “Associated Capital Group, Inc.,” “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/(loss) from proprietary investment of cash and other assets in our operating business.
 
Gabelli & Company Investment Advisors, Inc. (“GCIA”) 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 in equity event-driven value strategies, across a range of risk and event arbitrage portfolios. 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 (the “Advisers Act”).

In April 2018, the Company sponsored a €110 million initial public offering of its first special purpose acquisition corporation, the Gabelli Value for Italy S.p.a., an Italian company listed on the London Stock Exchange’s Borsa Italiana AIM segment under the symbol “VALU”. VALU was created to acquire a small-to medium-sized Italian franchise business with the potential for international expansion, particularly in the United States. Gabelli Value for Italy S.p.a was subsequently liquidated on July 8, 2020 at the apex of the pandemic in Italy.
 
PMV Consumer Acquisition Corp.
 
On September 22, 2020, Associated Capital announced the $175 million initial public offering of its special purpose acquisition corporation, PMV Consumer Acquisition Corp. (NYSE:PMVC).

PMV Consumer Acquisition Corp. (“PMV”) was created to pursue an initial business combination following the consumer globally with companies having an enterprise valuation in the range of $200 million to $3.5 billion. PMV Consumer Acquisition Holding Company, LLC (“Sponsor”) was created to assist PMV in sourcing, analyzing and consummating acquisition opportunities for that initial business combination.

The Sponsor and PMV have been consolidated in the financial statements of AC beginning in September 2020 because AC has a controlling financial interest in these entities. This resulted in the consolidation of $177.1 million of assets, $12.0 million of liabilities, $158.6 million of redeemable noncontrolling interests, $(0.8) million of noncontrolling interests relating to PMV and the Sponsor as of September 30, 2021. In addition, there are several other entities that are consolidated within the financial statements. The details on the impact of consolidating these entities on the condensed consolidated financial statements can be seen in Note D. Investment Partnerships and Other Entities.

See Note D for a further discussion of PMV Consumer Acquisition Corp. as well as its registration statement, Annual Report on Form 10-K/A for the year ended December 31, 2020, and Quarterly Reports on Form 10-Q, which are all located on the U.S. Securities and Exchange Commission website https://www.sec.gov under the symbol PMVC.

AC Spin-off
 
On November 30, 2015, GAMCO Investors, Inc. (“GAMCO” or “GBL”) distributed all the outstanding shares of each class of AC common stock on a pro rata one-for-one basis to the holders of each class of GAMCO’s common stock (the “Spin-off”).

As part of the Spin-off, AC received 4,393,055 shares of GAMCO Class A common stock for $150 million. The Company currently holds 2,485,900 shares as of September 30, 2021.
 
Morgan Group Spin-off
 
On October 31, 2019, the Company closed on a transaction whereby Morgan Group Holding Co., (“Morgan Group”) a company that trades in the over-the-counter market under the symbol “MGHL” and under common control of AC’s majority shareholder, acquired all of the Company’s interest in G.research LLC, the Company’s former institutional research business, for 50,000,000 shares of Morgan Group common stock. In addition, immediately prior to the closing, 5.15 million Morgan Group shares were issued under a private placement for $515,000. Subsequent to the transaction and private placement, the Company had an 83.3% ownership interest in Morgan Group. The transaction was accounted for pursuant to ASC 805-50, Transactions Between Entities Under Common Control. For transactions between entities under common control, there is no change in basis in the net assets received and therefore they are recorded at their historical cost.
 
10

On March 16, 2020, the Company announced that its Board of Directors approved the spin-off of Morgan Group to AC’s shareholders in which AC would distribute to its shareholders on a pro rata basis the 50,000,000 shares of Morgan Group that it owns.
 
On May 5, 2020, the Morgan Group board approved a reverse stock split of the issued and outstanding shares of their common stock, par value $0.01 per share, in a ratio of 1‑for‑100 that was effective on June 10, 2020.

Associated Capital held 83.3% of the outstanding shares of Morgan Group through August 5, 2020.

On August 5, 2020, Morgan Group shares held by the Company were distributed to the Company’s shareholders of record as of July 30, 2020. Based on the distribution ratio, AC stockholders of record received approximately 0.022356 shares of Morgan Group common stock for each share of AC common stock held.
 
The historical financial results of Morgan Group have been reflected in the Company’s condensed consolidated financial statements as discontinued operations for all periods presented through the date of the spin-off.

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.
 
The interim condensed consolidated financial statements include the accounts of AC Group and its subsidiaries. All material intercompany transactions and balances have been eliminated.
 
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, 2020.
 
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.
 
Investment in Marketable Securities held in trust account
 
Marketable securities of our consolidated SPAC, PMV, are held in short-term investments such as money market funds that invest primarily in U.S. Treasury Bills or directly in U.S. Treasury Bills. At December 31, 2020 such investments were accounted for as held to maturity. During the nine-month period ended September 30, 2021, those held to maturity investments matured and were invested primarily in U.S. Treasury Bills recorded at fair value, which approximates their carrying values due to their short maturity profiles.

Recent Accounting Developments
 
In June 2016, the FASB issued ASU 2016-13, Accounting for Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Currently, U.S. GAAP requires an “incurred loss” methodology that delays recognition until it is probable a loss has been incurred. Under ASU 2016-13, the allowance for credit losses must be deducted from the amortized cost of the financial asset to present the net amount expected to be collected. The condensed consolidated statements of income will reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. In November 2019, the FASB issued ASU 2019-10, which deferred the effective date of this guidance for smaller reporting companies for three years. This guidance is effective for the Company on January 1, 2023 and requires a modified retrospective transition method, which will result in a cumulative-effect adjustment in retained earnings upon adoption. Early adoption is permitted. The Company is currently assessing the potential impact of this new guidance on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other, to simplify the process used to test for impairment of goodwill. Under the new standard, an impairment loss must be recognized in an amount equal to the excess of the carrying amount of a reporting unit over its fair value, limited to the total amount of goodwill allocated to that reporting unit. As a smaller reporting company pursuant to ASU 2019-10, the ASU is effective for the Company on January 1, 2023. This guidance will be effective for the Company on January 1, 2023 using a prospective transition method and early adoption is permitted. The Company is currently evaluating the potential effect of this new guidance on the Company’s consolidated financial statements.
 
11

B.  Revenue
     
Refer to the Company’s audited consolidated financial statements included in our Annual Report on Form 10K for the year ended December 31, 2020 for the Company’s revenue recognition policy.
    
The Company’s major revenue sources are as follows for the three and nine months ended September 30, 2021 and 2020 (in thousands):
   

 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2021
   
2020
    2021
    2020
 
Investment advisory and incentive fees
                       
Asset-based advisory fees
 
$
1,280
   
$
1,161
    $ 3,712     $ 4,284  
Performance-based advisory fees
   
64
     
8
      120       8  
Sub-advisory fees
   
670
     
696
      2,795       2,132  
     
2,014
     
1,865
      6,627       6,424  
                                 
Other
                               
Miscellaneous
   
98
     
80
      299       550  
     
98
     
80
      299       550  
                                 
Total
 
$
2,112
   
$
1,945
    $ 6,926     $ 6,974  
   
C.  Investments in Securities
 

Investments in securities at September 30, 2021 and December 31, 2020 consisted of the following (in thousands):
 
   
September 30, 2021
   
December 31, 2020
 
   
Cost
   
Fair Value
   
Cost
   
Fair Value
 
Debt - Trading Securities:
                       
U.S. Treasury Bills
 
$
49,993
   
$
49,996
   
$
344,367
   
$
344,453
 
Equity Securities:
                               
Common stocks
   
243,577