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Represents the summation of multiple captions from the condensed consolidated statements of financial condition. At June 30, 2022 and December 31, 2021, marketable securities held in the trust account through PMV were comprised of U.S Treasury Bills which mature in less than one year with an amortized cost and fair value of approximately $175 million, respectively. Such investments are categorized as Level 1. Included in Receivable and investment in note receivable from affiliates in the condensed consolidated statements of financial condition. Does not include an estimate for projected future dividends. Debit adjustments to Total equity reflect the amortization of the discount related to the issuance of PMV SPAC’s redeemable noncontrolling interest. 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Table of Contents

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 June 30, 2022

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)

 

Registrants 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 July 28, 2022

Class A Common Stock, .001 par value

 

3,048,405

Class B Common Stock, .001 par value

 

18,962,754

 

As of July 28, 2022, 3,048,405 shares of class A common stock and 18,962,754 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 215,910 Phantom Restricted Stock Awards outstanding as of June 30, 2022.

 

 

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

 

INDEX

 

 

 

Page

PART I. FINANCIAL INFORMATION  

 

 

 

Item 1.

Unaudited Condensed Consolidated Financial Statements:

 

 

Condensed Consolidated Statements of Financial Condition (Unaudited)

3

 

Condensed Consolidated Statements of Income (Unaudited)

4

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

5

 

Condensed Consolidated Statements of Equity (Unaudited)

6

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

7

 

Notes to the Condensed Consolidated Financial Statements:

 
 

A. Organization

9

 

B. Revenue

10

 

C. Investments in Securities

11

 

D. Investment Partnerships and Other Entities

12

 

E. Fair Value

14

 

F. Income Taxes

16

 

G. Earnings per Share

17

 

H. Equity

17

 

I. Goodwill

19

 

J. Guarantees, Contingencies and Commitments

19

 

K. Subsequent Events

19

     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

 

 

 

Item 4.

Controls and Procedures

27

 

 

 

PART II.

OTHER INFORMATION *

 

 

 

 

Item 1.

Legal Proceedings

29

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

 

 

Item 6.

Exhibits

30

 

 

 

 

Signature

32

 

*         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)

 

  

June 30,

  

December 31,

 
  

2022

  

2021

 

ASSETS

        
         

Cash and cash equivalents (includes U.S. Treasury Bills with maturities of less than 3 months)

 $344,258  $319,048 

Investments in U.S. Treasury Bills with greater than 3 month maturities

  24,979   60,996 

Investments in equity securities (includes GBL stock with a value of $50.5 million and $60.4 million, respectively)

  247,758   273,087 

Investments in affiliated registered investment companies

  124,483   134,548 

Investments in partnerships

  146,620   154,460 

Receivable from brokers

  22,184   42,478 

Investment advisory fees receivable

  1,324   8,315 

Receivable and investment in note receivable from affiliates

  102   10,094 

Income taxes receivable, including deferred tax assets, net

  8,179   - 

Goodwill

  3,519   3,519 

Other assets

  21,189   21,682 

Investments in marketable securities held in trust

  175,420   175,109 

Total assets

 $1,120,015  $1,203,336 
         

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

        
         

Payable to brokers

 $12,107  $9,339 

Income taxes payable, including deferred tax liabilities, net

  -   8,575 

Compensation payable

  5,941   19,730 

Securities sold, not yet purchased

  3,569   12,905 

Accrued expenses and other liabilities

  2,181   3,580 

Deferred underwriting fee payable

  6,125   6,125 

PMV warrant liability

  908   5,280 

Total liabilities

  30,831   65,534 
         

Redeemable noncontrolling interests

  203,327   202,456 
         

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; 3,052,505 and 3,095,169 shares outstanding, respectively

  6   6 

Class B Common Stock, $0.001 par value; 100,000,000 shares authorized; 19,196,792 shares issued; 18,962,754 and 18,962,918 outstanding, respectively

  19   19 

Additional paid-in capital

  990,147   990,069 

Retained earnings

  20,159   68,435 

Treasury stock, at cost (3,576,913 and 3,534,085 shares, respectively)

  (123,037)  (121,427)

Total Associated Capital Group, Inc. equity

  887,294   937,102 

Noncontrolling interests

  (1,437)  (1,756)

Total equity

  885,857   935,346 

Total liabilities and equity

 $1,120,015  $1,203,336 

 

As of June 30, 2022 and December 31, 2021, certain balances include amounts related to consolidated variable interest entities (“VIEs”) and voting interest entities (“VOEs”). See Footnote D.

 

See accompanying notes.

 

3

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED

(In thousands, except per share data)

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 
  

2022

  

2021

  

2022

  

2021

 

Revenues

                

Investment advisory and incentive fees

 $2,451  $2,388  $4,937  $4,613 

Other revenues

  95   101   191   201 

Total revenues

  2,546   2,489   5,128   4,814 

Expenses

                

Compensation

  3,007   5,023   6,940   8,891 

Management fee

  -   4,320   -   6,983 

Other operating expenses

  1,750   3,557   3,705   5,716 

Total expenses

  4,757   12,900   10,645   21,590 

Operating loss

  (2,211)  (10,411)  (5,517)  (16,776)

Other income/(loss)

                

Net gain/(loss) from investments

  (37,803)  42,306   (53,413)  73,627 

Interest and dividend income

  1,932   6,811   2,736   8,000 

Interest expense

  (46)  (63)  (79)  (154)

Shareholder-designated contribution

  -   (439)  (208)  (2,176)

Total other income/(loss), net

  (35,917)  48,615   (50,964)  79,297 

Income/(loss) before income taxes

  (38,128)  38,204   (56,481)  62,521 

Income tax expense/(benefit)

  (8,036)  9,020   (12,884)  14,610 

Income/(loss) before noncontrolling interests

  (30,092)  29,184   (43,597)  47,911 

Income/(loss) attributable to noncontrolling interests

  (205)  (532)  2,476   (360)

Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders

 $(29,887) $29,716  $(46,073) $48,271 
                 

Net income/(loss) per share attributable to Associated Capital Group, Inc.'s shareholders:

                

Basic

 $(1.36) $1.34  $(2.09) $2.18 

Diluted

 $(1.36) $1.34  $(2.09) $2.18 
                 

Weighted average shares outstanding:

                

Basic

  22,036   22,118   22,045   22,169 

Diluted

  22,036   22,118   22,045   22,169 
                 

Actual shares outstanding

  22,015   22,101   22,015   22,101 

 

See accompanying notes.

 

4

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED

(Dollars in thousands)

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 
  

2022

  

2021

  

2022

  

2021

 
                 

Net income/(loss) before noncontrolling interests

 $(30,092) $29,184  $(43,597) $47,911 

Less: Comprehensive income/(loss) attributable to noncontrolling interests

  (205)  (532)  2,476   (360)
                 

Comprehensive income/(loss) attributable to Associated Capital Group, Inc.

 $(29,887) $29,716  $(46,073) $48,271 

 

See accompanying notes.

 

5

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

UNAUDITED

(Dollars in thousands)

 

For the three months ended March 31, 2022 and three months ended June 30, 2022

 

  

Associated Capital Group, Inc. shareholders

             
          

Additional

                  

Redeemable

 
  

Common

  

Retained

  

Paid-in

  

Treasury

      

Noncontrolling

  

Total

  

Noncontrolling

 
  

Stock

  

Earnings

  

Capital

  

Stock

  

Total

  

Interests

  

Equity

  

Interests

 

Balance at December 31, 2021

 $25  $68,435  $990,069  $(121,427) $937,102  $(1,756) $935,346  $202,456 

Redemptions of noncontrolling interests

  -   -   -   -   -   -   -   (486)

Net income/(loss)

  -   (16,186)  -   -   (16,186)  197   (15,989)  2,484 

Purchase of treasury stock

  -   -   -   (293)  (293)  -   (293)  - 

Accretion of redeemable noncontrolling interest

  -   -   (584)  -   (584)  (292)  (876)  876 

Other changes to redeemable noncontrolling interests

  -   -   -   -   -   -   -   (10)

Balance at March 31, 2022

 $25  $52,249  $989,485  $(121,720) $920,039  $(1,851) $918,188  $205,320 

Redemptions of noncontrolling interests

  -   -   -   -   -   -   -   (486)

Net income/(loss)

  -   (29,887)  -   -   (29,887)  83   (29,804)  (288)

Dividends declared ($0.10 per share)

  -   (2,203)  -   -   (2,203)  -   (2,203)  - 

Purchase of treasury stock

  -   -   -   (1,317)  (1,317)  -   (1,317)  - 

Accretion of redeemable noncontrolling interest

  -   -   662   -   662   331   993   (993)

Other changes to redeemable noncontrolling interests

  -   -   -   -   -   -   -   (226)

Balance at June 30, 2022

 $25  $20,159  $990,147  $(123,037) $887,294  $(1,437) $885,857  $203,327 

 

See accompanying notes.

 

For the three months ended March 31,2021 and three months ended June 30, 2021

 

  

Associated Capital Group, Inc. shareholders

             
          

Additional

                  

Redeemable

 
  

Common

  

Retained

  

Paid-in

  

Treasury

      

Noncontrolling

  

Total

  

Noncontrolling

 
  

Stock

  

Earnings

  

Capital

  

Stock

  

Total

  

Interests

  

Equity

  

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/(loss)

  -   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 interest

  -   -   (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 

 

See accompanying notes.

 

6

 

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)

 

  

Six Months Ended

 
  

June 30,

 
  

2022

  

2021

 

Operating activities

        

Net income/(loss)

 $(43,597) $47,911 

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

        

Equity in net/(gains) losses from partnerships

  7,653   (14,718)

Depreciation and amortization

  161   200 

Deferred income taxes

  (12,986)  9,673 

Donated securities

  127   1,848 

Unrealized (gains)/losses on securities

  53,057   (51,865)

Dividends received as securities

  -   (5,066)

Realized gains on sales of securities

  (7,702)  (66)

(Increase)/decrease in assets:

        

Investments in trading securities

  14,764   252,364 

Investments in partnerships:

        

Contributions to partnerships

  (4,910)  (5,261)

Distributions from partnerships

  5,143   4,183 

Receivable from affiliates

  9,992   854 

Receivable from brokers

  16,481   (15,475)

Investment advisory fees receivable

  6,945   6,098 

Income taxes receivable

  (1,728)  (507)

Other assets

  332   2,260 

Increase/(decrease) in liabilities:

        

Payable to affiliates

  -   (2,188)

Payable to brokers

  2,768   5,738 

Income taxes payable

  (2,040)  (2,335)

Compensation payable

  (13,789)  (1,549)

Accrued expenses and other liabilities

  (1,399)  (438)

Total adjustments

  72,869   183,750 

Net cash provided by operating activities

  29,272   231,661 
         

Investing activities

        

Maturities of marketable securities held in trust

  -   175,076 

Purchases of marketable securities held in trust

  -   (175,076)

Purchases of securities

  (4,261)  (1,017)

Proceeds from sales of securities

  106   6,377 

Return of capital on securities

  1,290   242 

Net cash provided by/(used in) investing activities

 $(2,865) $5,602 

 

7

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED (continued)

(Dollars in thousands)

 

  

Six Months Ended

 
  

June 30,

 
  

2022

  

2021

 

Financing activities

        

Dividends paid

  (2,203)  (2,211)

Purchase of treasury stock

  (1,610)  (6,091)

Contributions from redeemable noncontrolling interests

  -   801 

Redemptions of redeemable noncontrolling interests

  (1,197)  - 

Net cash used in financing activities

  (5,010)  (7,501)

Net increase in cash, cash equivalents and restricted cash

  21,397   229,762 

Cash, cash equivalents and restricted cash at beginning of period

  328,594   39,509 

Cash, cash equivalents and restricted cash at end of period

 $349,991  $269,271 
         

Supplemental disclosures of cash flow information:

        

Cash paid for interest

 $79  $155 

Cash paid for taxes

 $3,869  $7,848 
         

Reconciliation of Cash, cash equivalents and restricted cash at end of period:

        

Cash and cash equivalents

 $344,258  $269,271 

Restricted cash included in receivable from broker

  5,733   - 

Cash, cash equivalents and restricted cash

 $349,991  $269,271 

 

See accompanying notes

 

8

 

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(UNAUDITED)

 

 

A.    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/(loss) from proprietary investment 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 (the “Advisers Act”).

 

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 with companies within the global consumer industry 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 (collectively "Consolidated PMV") have been consolidated in the financial statements of AC because AC has a controlling financial interest in these entities. This resulted in the consolidation of $162.0 million of assets, $7.2 million of liabilities, $165.0 million of redeemable noncontrolling interests, and $(1.4) million of noncontrolling interests relating to PMV and the Sponsor as of June 30, 2022 and the consolidation of $163.8 million of assets, $11.5 million of liabilities, $161.8 million of redeemable noncontrolling interests and $(1.8) million of noncontrolling interests relating to PMV and the Sponsor as of December 31, 2021.

 

See Note D for a further discussion of PMV Consumer Acquisition Corp. as well as its registration statement, Annual Reports, and Quarterly Reports, 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 held 2,417,500 shares as of June 30, 2022 and December 31, 2021, respectively.

 

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. In addition to Consolidated PMV, 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.

 

9

 

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, 2021.

 

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 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.

 

 

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, 2021 for the Company’s revenue recognition policy.

 

The Company’s major revenue sources are as follows for the three and six months ended June 30, 2022 and 2021 (in thousands):

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2022

  

2021

  

2022

  

2021

 
                 

Investment advisory and incentive fees

                

Asset-based advisory fees

 $1,309  $1,249  $2,613  $2,432 

Performance-based advisory fees

  -   47   44   56 

Sub-advisory fees

  1,142   1,092   2,280   2,125 

Sub-total

  2,451   2,388   4,937   4,613 
                 

Other

                

Miscellaneous

  95   101   191   201 
                 

Total

 $2,546  $2,489  $5,128  $4,814 

 

10

 
 

C.    Investments in Securities

 

Investments in securities at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

 

                 
  

June 30, 2022

  

December 31, 2021

 
  

Cost

  

Fair Value

  

Cost

  

Fair Value

 

Debt - Trading Securities:

                

U.S. Treasury Bills

 $24,942  $24,979  $60,992  $60,996 

Equity Securities:

                

Common stocks

  260,604   241,552   239,383   265,156 

Mutual funds

  536   923   524   1,351 

Other investments

  5,753   5,283   6,253   6,580 

Total equity securities

  266,893   247,758   246,160   273,087 

Total investments in securities

 $291,835  $272,737  $307,152  $334,083 
                 

Investments in marketable securities held in trust(1)

 $175,420  $175,420  $175,109  $175,109 

 

(1) At June 30, 2022 and December 31, 2021, marketable securities held in the trust account through PMV were comprised of U.S Treasury Bills which mature in less than one year with an amortized cost and fair value of approximately $175 million, respectively. Such investments are categorized as Level 1.

 

The Company's held to maturity investments at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

 

  

June 30, 2022

 
  

Amortized cost

  Gross Unrealized Holding Gains  Gross Unrealized Holding Losses  Estimated Fair Value 

Held to maturity:

                

Investment in note receivable from affiliate

 $-  $-  $-  $- 

 

During the three and six months ended June 30, 2022, the Company received proceeds of $5.1 million from the exercise of a put option on its investment in note receivable from affiliate. The exercise of the put option was determined to occur at the instrument's maturity date and no gain or loss was recognized.

 

  

December 31, 2021

 
  

Amortized cost

  Gross Unrealized Holding Gains  Gross Unrealized Holding Losses  Estimated Fair Value 

Held to maturity:

                

Investment in note receivable from affiliate(2)

 $5,066  $-  $-  $5,066 

 

(2) Investment in note receivable from affiliate relates to 2-Year Puttable and Callable Subordinated Notes due 2023 issued as part of a 2021 special dividend on GAMCO’s Class A Common Stock and Class B Common Stock. The Company had the intent to hold these investments until maturity, and as such they were recorded at amortized cost.

 

Securities sold, not yet purchased at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

 

       
  

June 30, 2022

  

December 31, 2021

 
  

Cost

  

Fair Value

  

Cost

  

Fair Value

 

Equity securities:

                

Common stocks

 $2,999  $2,297  $9,021  $9,838 

Other investments

  673   1,272   2,767   3,067 

Total securities sold, not yet purchased

 $3,672  $3,569  $11,788  $12,905 

 

Investments in affiliated registered investment companies at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):

 

       
  

June 30, 2022

  

December 31, 2021

 
  

Cost

  

Fair Value

  

Cost

  

Fair Value

 

Equity securities:

                

Closed-end funds

 $45,067  $58,574  $42,484  $64,381 

Mutual funds

  49,645   65,909   49,362   70,167 

Total investments in affiliated registered investment companies

 $94,712  $124,483  $91,846  $134,548 

 

11

 
 

D.    Investment Partnerships and Other Entities

 

The Company is general partner or co-general partner of various affiliated entities whose underlying assets consist primarily of marketable securities (“Affiliated Entities”). We also had investments in unaffiliated partnerships, offshore funds and other entities of $36.4 million and $41.9 million at June 30, 2022, and December 31, 2021, 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 had investments in Affiliated Entities totaling $110.2 million and $112.6 million at June 30, 2022 and December 31, 2021, respectively. 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 outstanding capital commitments to any Affiliated or Unaffiliated Entity.

 

PMV Consumer Acquisition Corp.

 

The Company consolidates the assets, liabilities and the results of operations of both PMV and Sponsor. The Company invested $4.0 million, or approximately 62% of the $6.48 million total Sponsor partnership commitment. The Sponsor is managed primarily by Company executives. The Company has determined that the Sponsor is a variable interest entity (VIE) and that the Company is the primary beneficiary and therefore consolidates the assets and liabilities and results of operations of the Sponsor. In addition, the Company has determined that PMV is a VIE due to the lack of equity at risk and is consolidated by the Sponsor, who is deemed to be the primary beneficiary. Neither AC nor PMV have a right to the benefits from nor does it bear the risks associated with the marketable securities held in trust assets held by PMV. Further, if PMV were to liquidate, the marketable securities held in trust assets would not be available to its general creditors, and as a result, the Company does not consider these assets available for the benefit of its investors.

 

The registration statement for the PMV initial public offering was declared effective on September 21, 2020. On September 24, 2020, PMV consummated the initial public offering of 17,500,000 units (the “Units” and, with respect to the shares of common stock included in the Units Sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $175,000,000. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant (“PMV Public Warrant”). Each whole PMV Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.

 

Simultaneously with the closing of the initial public offering, PMV consummated the sale of 6,150,000 warrants (the “Private Warrants”) at a price of $1.00 per Private Warrant in a private placement to the Sponsor, generating gross proceeds of $6,150,000.

 

AC invested $10 million in the Class A shares in PMV and the Sponsor invested $6.15 million in Private Warrants, both of which eliminate in the consolidation of PMV.

 

Following the closing of the initial public offering on September 24, 2020, an amount of $175,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the initial public offering and the sale of the Private Warrants was placed in a trust account (the “Trust Account”) located in the United States, which are generally invested in U.S. Treasury Bills.

 

PMV will have until September 24, 2022 (or such later date as may be approved by stockholders in an amendment to the Amended and Restated Certificate of Incorporation) to complete a business combination (the "Combination Period"). If PMV is unable to complete a business combination within the Combination Period, PMV will cease all operations except for the purpose of winding up, and as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account. The deferred fee will be forfeited by the underwriters solely in the event that we fail to complete a business combination within the required time period, subject to the terms of the underwriting agreement.

 

12

 

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

 

  

June 30, 2022

 
  

Prior to

  

Consolidated

     

Assets

 

Consolidation

  

Entities

  

As Reported

 

Cash and cash equivalents

 $343,177  $1,081  $344,258 

Investments in U.S. Treasury Bills

  24,979   -   24,979 

Investments in securities

  157,029   90,729   247,758 

Investments in affiliated registered investment companies

  174,032   (49,549)  124,483 

Investments in partnerships

  164,204   (17,584)  146,620 

Receivable from brokers

  9,631   12,553   22,184 

Investment advisory fees receivable

  1,329   (5)  1,324 

Other assets(1)

  37,768   (4,779)  32,989 

Investments in marketable securities held in trust

  -   175,420   175,420 

Total assets

 $912,149  $207,866  $1,120,015 

Liabilities and equity

            

Securities sold, not yet purchased

 $3,153  $416  $3,569 

Accrued expenses and other liabilities(1)

  12,802   14,460   27,262 

Redeemable noncontrolling interests

  -   203,327   203,327 

Total equity(2)

  896,194   (10,337)  885,857 

Total liabilities and equity

 $912,149  $207,866  $1,120,015 

 

  

December 31, 2021

 
  

Prior to

  

Consolidated

     

Assets

  Consolidation   Entities   As Reported 

Cash and cash equivalents

 $315,009  $4,039  $319,048 

Investments in U.S. Treasury Bills

  60,996   -   60,996 

Investments in securities

  184,229   88,858   273,087 

Investments in affiliated registered investment companies

  186,474   (51,926)  134,548 

Investments in partnerships

  174,683   (20,223)  154,460 

Receivable from brokers

  21,993   20,485   42,478 

Investment advisory fees receivable

  8,320   (5)  8,315 

Other assets(1)

  39,400   (4,105)  35,295 

Investments in marketable securities held in trust

  -   175,109   175,109 

Total assets

 $991,104  $212,232  $1,203,336 

Liabilities and equity

            

Securities sold, not yet purchased

 $11,199  $1,706  $12,905 

Accrued expenses and other liabilities(1)

  33,825   18,804   52,629 

Redeemable noncontrolling interests

  -   202,456   202,456 

Total equity(2)

  946,080   (10,734)  935,346 

Total liabilities and equity

 $991,104  $212,232  $1,203,336 

 

(1) Represents the summation of multiple captions from the condensed consolidated statements of financial condition.

(2) Debit adjustments to Total equity reflect the amortization of the discount related to the issuance of PMV SPAC’s redeemable noncontrolling interest. The discount is amortized through an adjustment to additional paid-in capital and noncontrolling interest (proportionate to ownership interest in PMV Sponsor) and is also adjusted periodically for income/loss allocated to redeemable noncontrolling interest.

 

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, 2022

 
  

Prior to

  

Consolidated

     
  

Consolidation

  

Entities

  

As Reported

 

Total revenues

 $2,734  $(188) $2,546 

Operating loss

  (1,462)  (749)  (2,211)

Total other income/(loss), net

  (36,461)  544   (35,917)

Income/(loss) before noncontrolling interests

  (29,887)  (205)  (30,092)

Income/(loss) attributable to noncontrolling interests, net of taxes

  -   (205)  (205)

Net income/(loss)

 $(29,887) $-  $(29,887)

 

  

Three Months Ended June 30, 2021

 
  

Prior to

  

Consolidated

     
  

Consolidation

  

Entities

  

As Reported

 

Total revenues

 $4,801  $(2,312) $2,489 

Operating loss

  (6,156)  (4,255)  (10,411)

Total other income, net

  44,847   3,768   48,615 

Income/(loss) before noncontrolling interests

  29,671   (487)  29,184 

Income/(loss) attributable to noncontrolling interests, net of taxes

  -   (532)  (532)

Net income

 $29,671  $45  $29,716 

 

13

 
  

Six Months Ended June 30, 2022

 
  

Prior to

  

Consolidated

     
  

Consolidation

  

Entities

  

As Reported

 

Total revenues

 $5,506  $(378) $5,128 

Operating loss

  (4,103)  (1,414)  (5,517)

Total other income/(loss), net

  (54,854)  3,890   (50,964)

Income/(loss) before noncontrolling interests

  (46,073)  2,476   (43,597)

Income/(loss) attributable to noncontrolling interests, net of taxes

  -   2,476   2,476 

Net income/(loss)

 $(46,073) $-  $(46,073)

 

  

Six Months Ended June 30, 2021

 
  

Prior to

  

Consolidated

     
  

Consolidation

  

Entities

  

As Reported

 

Total revenues

 $6,941  $(2,127) $4,814 

Operating loss

  (12,008)  (4,768)  (16,776)

Total other income, net

  74,903   4,394   79,297 

Income/(loss) before noncontrolling interests

  48,285   (374)  47,911 

Income/(loss) attributable to noncontrolling interests, net of taxes

  -   (360)  (360)

Net income/(loss)

 $48,285  $(14) $48,271 

 

Variable Interest Entities

 

With respect to each consolidated VIE, its assets may only be used to satisfy its obligations. The investors and creditors of any 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 VIEs that are consolidated and included on the condensed consolidated statements of financial condition as well as the Company’s net interest in these VIEs (in thousands):

 

  

June 30,

  

December 31,

 
  

2022

  

2021

 
         

Cash and cash equivalents

 $1,495  $1,911 

Investments in securities

  9,411   11,227 

Receivable from brokers

  27   1,106 

Investments in partnerships and affiliates

  -   - 

Investments in marketable securities held in trust

  175,420   175,109 

Other assets

  33   103 

Accrued expenses and other liabilities(1)

  (6,569)  (7,074)

PMV warrant liability

  (908)  (5,280)

Redeemable noncontrolling interests

  (165,437)  (162,314)

Nonredeemable noncontrolling interests

  1,437   1,757 

AC Group's net interests in consolidated VIEs

 $14,909  $16,545 

 

(1) Represents the summation of multiple captions from the condensed consolidated statements of financial condition.

 

Voting Interest Entities

 

We have an investment partnership that is consolidated as a VOE for both 2022 and 2021 because AC has a controlling interest in the entity. This resulted in the consolidation of $103.6 million of assets, $7.8 million of liabilities, and $37.9 million of redeemable noncontrolling interests at June 30, 2022 and $109.3 million of assets, $8.4 million of liabilities, and $40.1 million of redeemable noncontrolling interests at December 31, 2021. AC’s net interest in the consolidated VOE for 2022 and 2021 was $57.9 million and $60.8 million, respectively.

 

Equity Method Investments

 

The Company’s equity method investments include investments in partnerships and offshore funds. These equity method investments are not consolidated but on an aggregate basis exceed 10% of the Company’s consolidated total assets or income.

 

 

E.    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.

 

14

 

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, 2022

 

Assets

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

  

Significant Other Observable Inputs (Level 2)

  

Significant Unobservable Inputs (Level 3)

  

Total

 

Cash equivalents

 $342,351  $-  $-  $342,351 

Investments in securities (including GBL stock):

                

Trading - U.S. Treasury Bills

  24,979   -   -   24,979 

Common stocks

  237,409   2,046   2,097   241,552 

Mutual funds

  923   -   -   923 

Other

  3,885   1,164   234   5,283 

Total investments in securities

  267,196   3,210   2,331   272,737 

Investments in affiliated registered investment companies:

                

Closed-end funds

  48,174   -   10,400   58,574 

Mutual funds

  65,909   -   -   65,909 

Total investments in affiliated registered investment companies

  114,083   -   10,400   124,483 

Total investments held at fair value

  381,279   3,210   12,731   397,220 

Total assets at fair value

 $723,630  $3,210  $12,731  $739,571 

Liabilities

                

Common stocks

 $2,297  $-  $-  $2,297 

Other

  808   464   -   1,272 

Securities sold, not yet purchased

  3,105   464   -   3,569 

PMV warrant liability

  908   -   -   908 

Total liabilities at fair value

 $4,013  $464  $-  $4,477 

 

  

December 31, 2021

 

Assets

 

Quoted Prices in Active Markets for Identical Assets (Level 1)

  

Significant Other Observable Inputs (Level 2)

  

Significant Unobservable Inputs (Level 3)

  

Total

 

Cash equivalents

 $314,172  $-  $-  $314,172 

Investments in securities (including GBL stock):

                

Trading - U.S. Treasury Bills

  60,996   -   -   60,996 

Common stocks

  260,763   2,320   2,073   265,156 

Mutual funds

  1,351   -   -   1,351 

Other

  4,833   1,220   527   6,580 

Total investments in securities

  327,943   3,540   2,600   334,083 

Investments in affiliated registered investment companies:

                

Closed-end funds

  56,381   -   8,000   64,381 

Mutual funds

  70,167   -   -