SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20192020
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 No. 001-37387


ASSOCIATED CAPITAL GROUP, INC.
(Exact name of Registrant as specified in its charter)


Delaware
47-3965991
(State of other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
191 Mason Street, Greenwich, CT 06830
   
(Address of principle executive offices)
(Zip Code)


(203) 629-9595

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareACNew 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes    No 


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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. (Check one)::

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 Section13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No 


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 October 31, 201930, 2020
Class A Common Stock, .001 par value
 3,466,2453,342,228
Class B Common Stock, .001 par value
19,022,91818,962,918







ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES


INDEX


PART I.FINANCIAL INFORMATION
Page
 
 
Item 1.
13
 
Item 2.
2329
 
Item 3.
3138
 
Item 4.
3138
 
PART II.OTHER INFORMATION * 
 
Item 1.
3239
   
Item 2.
3340
   
Item 6.
3340
   
3340


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




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


 
September 30,
2019
  
December 31,
2018
  
September 30,
2020
  
December 31,
2019
 
ASSETS            
Cash and cash equivalents(a) $350,934  $409,564  $47,331  $342,001 
Investments in securities 245,063  179,011 
Investment in GBL stock (3,016,501 shares) 58,973  50,949 
Investments in government securities (a)  330,942   29,037 
Investments in equity securities (Including GBL stock with a value of $34.0 million and $57.2 million, respectively) (a)  213,586   271,320 
Investments in affiliated registered investment companies 152,453  142,135   146,391   159,311 
Investments in partnerships(a) 143,658  118,729   127,965   145,372 
Receivable from brokers(a) 23,702  24,629   21,065   23,141 
Investment advisory fees receivable 1,287  4,394   1,160   9,582 
Receivable from affiliates 738  1,309   588   4,369 
Deferred tax assets, net 4,403  9,422 
Goodwill and intangible assets 3,519  3,519 
Deferred tax assets and taxes receivable (including taxes receivable of $2,132 in 2020 and $0 for 2019)  10,059   1,820 
Goodwill  3,519   3,519 
Other assets(a)  8,395   10,772   23,003   13,297 
Investments in government securities held in trust  175,002   0 
Assets of discontinued operations (including receivable from affiliates of $31)  0   8,137 
Total assets $993,125  $954,433  $1,100,611  $1,010,906 
              
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY              
Payable to brokers $10,557  $5,511  $8,443  $14,889 
Income taxes payable 3,888  3,577   897   3,622 
Compensation payable 11,594  11,388   7,445   19,536 
Securities sold, not yet purchased 25,475  9,574 
Securities sold, not yet purchased (a)  12,827   16,419 
Payable to affiliates 472  515   455   483 
Accrued expenses and other liabilities  2,643   7,820 
Accrued expenses and other liabilities (a)  6,088   6,037 
Deferred underwriting fee payable  6,125   0 
Liabilities of discontinued operations (including payable to affiliates $986)  0   2,100 
Total liabilities 54,629  38,385   42,280   63,086 
              
Redeemable noncontrolling interests  49,699   49,800 
Redeemable noncontrolling interests (a)  204,164   50,385 
              
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; 6,569,254 and 6,537,768 shares issued, respectively; 3,473,355 and 3,530,752 shares outstanding, respectively 6  6 
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized; 19,196,792 shares issued; 19,022,918 and 19,054,404 shares outstanding, respectively 19  19 
Preferred stock, $0.001 par value; 10,000,000 shares authorized; NaN issued and outstanding  0   0 
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized; 6,629,254 and 6,569,254 shares issued, respectively; 3,369,896 and 3,452,381 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 and 19,022,918 shares outstanding, respectively  19   19 
Additional paid-in capital 1,006,065  1,008,319   999,047   1,003,450 
Accumulated deficit (11,723) (39,889)  (35,241)  (701)
Treasury stock, at cost (3,095,899 and 3,007,016 shares, respectively)  (105,570)  (102,207)
Total Associated Capital Group, Inc. stockholders’ equity  888,797   866,248 
      
Treasury stock, at cost (3,259,358 and 3,116,873 shares outstanding, respectively)  (111,736)  (106,342)
Total Associated Capital Group, Inc. equity  852,095   896,432 
Noncontrolling interests (from discontinued operations in 2019)  2,072   1,003 
Total equity  854,167   897,435 
Total liabilities and equity $993,125  $954,433  $1,100,611  $1,010,906 


(a) As of September 30, 2020 and December 31, 2019, cash and cash equivalents, investments in securities, investment in partnerships, receivable from broker, other assets, securities sold, not yet purchased, accrued expenses and other liabilities and redeemable noncontrolling interests include amounts related to consolidated variable interest entities ("VIEs"). See Footnote D.

See accompanying notes.

13


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,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2019  2018  2019  2018  2020  2019  2020  2019 
Revenues                        
Investment advisory and incentive fees $2,753  $2,805  $8,199  $7,949  $1,865  $2,753  $6,424  $8,199 
Institutional research services 2,354  1,855  6,343  6,179 
Other  11   6   49   37   80   1   550   12 
Total revenues  5,118   4,666   14,591   14,165   1,945   2,754   6,974   8,211 
Expenses                            
Compensation 4,808  5,618  16,288  17,812   3,026   3,071   8,405   10,287 
Stock-based compensation 256  289  955  361 
Other operating expenses  3,063   2,258   11,384   7,187   2,471   2,276   6,422   9,072 
Total expenses  8,127   8,165   28,627   25,360   5,497   5,347   14,827   19,359 
                            
Operating loss  (3,009)  (3,499)  (14,036)  (11,195)  (3,552)  (2,593)  (7,853)  (11,148)
Other income (expense)                            
Net gain/(loss) from investments 7,606  (7,977) 42,351  (18,936)  15,603   7,613   (34,770)  42,358 
Interest and dividend income 2,618  3,466  9,699  9,338   1,218   2,581   4,675   9,541 
Interest expense  (69)  (70)  (148)  (142)  (32)  (70)  (146)  (148)
Shareholder-designated contribution  (2,782)  0   (3,007)  0 
Total other income (expense), net  10,155   (4,581)  51,902   (9,740)  14,007   10,124   (33,248)  51,751 
Income/(loss) before income taxes 7,146  (8,080) 37,866  (20,935)  10,455   7,531   (41,101)  40,603 
Income tax expense/(benefit)  1,554   (858)  7,468   (4,204)  3,564   1,638   (8,858)  8,064 
Net income/(loss) 5,592  (7,222) 30,398  (16,731)
Net income/(loss) attributable to noncontrolling interests  (359)  157   2,232   1,053 
Income/(loss) from continuing operations before noncontrolling interests  6,891   5,893   (32,243)  32,539 
Income/(loss) attributable to noncontrolling interests  937   (359)  (572)  2,232 
Income/(loss) from continuing operations  5,954   6,252   (31,671)  30,307 
Income/(loss) from discontinued operations, net of taxes and noncontrolling interests  (139)  (301)  (632)  (2,141)
Net income/(loss) attributable to Associated Capital Group, Inc.’s shareholders $5,951  $(7,379) $28,166  $(17,784) $5,815  $5,951  $(32,303) $28,166 
                            
Net income/(loss) attributable to Associated Capital Group, Inc.’s shareholders per share:                            
Basic $0.26  $(0.32) $1.25  $(0.77)
Diluted $0.26  $(0.32) $1.25  $(0.77)
Basic- Continuing operations $0.27  $0.27  $(1.41) $1.34 
Basic - Discontinued operations  (0.01)  (0.01)  (0.03)  (0.09)
Basis - Total $0.26  $0.26  $(1.44) $1.25 
                
Diluted- Continuing operations $0.27  $0.27  $(1.41) $1.34 
Diluted - Discontinued operations  (0.01)  (0.01)  (0.03)  (0.09)
Diluted - Total $0.26  $0.26  $(1.44) $1.25 
                            
Weighted average shares outstanding:                            
Basic 22,514  22,979  22,550  23,187   22,354   22,514   22,391   22,550 
Diluted 22,514  22,979  22,550  23,187   22,354   22,514   22,391   22,550 
                
Actual shares outstanding - end of period  22,333   22,496   22,333   22,496 
                
Dividends declared: $0.10  $0.10  $0.10  $0.10 


See accompanying notes.


2
4


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,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2019  2018  2019  2018  2020  2019  2020  2019 
                        
Net income/(loss) $5,592  $(7,222) $30,398  $(16,731) $5,815  $5,951  $(32,303) $28,166 
Less: Comprehensive income/(loss) attributable to noncontrolling interests  (359)  157   2,232   1,053   937   (359)  (572)  2,232 
                            
Comprehensive income/(loss) attributable to Associated Capital Group, Inc. $5,951  $(7,379) $28,166  $(17,784) $4,878  $6,310  $(31,731) $25,934 


See accompanying notes.


3
5


ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(Dollars in thousands, except per share data)
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
  
Noncontrolling
Interest
  Total  
Redeemable
Noncontrolling
Interests
 
Balance at December 31, 2019 $25  $(701) $1,003,450  $(106,342) $1,003  $897,435  $50,385 
Redemptions of noncontrolling interests  0   0   0   0   0   0   (531)
Net loss  0   (73,355)  0   0   (52)  (73,407)  (3,945)
Purchase of treasury stock  0   0   0   (3,225)  0   (3,225)  0 
Balance at March 31, 2020 $25  $(74,056) $1,003,450  $(109,567) $951  $820,803  $45,909 
Redemptions of noncontrolling interests  0   0   0   0   0   0   (1,167)
Net income/(loss)  0   35,237   0   0   (48)  35,189   2,436 
Dividends declared ($0.10 per share)  -   (2,237)  0   -   0   (2,237)  0 
Purchase of treasury stock  0   0   0   (1,068)  0   (1,068)  0 
Balance at June 30, 2020 $25  $(41,056) $1,003,450  $(110,635) $903  $852,687  $47,178 
Contributions from redeemable noncontrolling interests (1)
  0   0   0   0   0   0   156,049 
Spin-off of MGHL  0   0   (4,403)  0   (903)  (5,306)  0 
PMV Sponsor members' interest  0   0   0   0   2,072   2,072   0 
Net income  0   5,815   0   0   0   5,815   937 
Purchase of treasury stock  0   0   0   (1,101)  0   (1,101)  0 
Balance at September 30, 2020 $25  $(35,241) $999,047  $(111,736) $2,072  $854,167  $204,164 

(1) Net of deferred underwriting fees

See accompanying notes.

6


ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(Dollars in thousands, except per share data)
For the three months ended March 31, 2019, June 30, 2019 and September 30, 2019

 Associated Capital Group, Inc. shareholders     Associated Capital Group, Inc. shareholders    
 
Common
Stock
  
Accumulated
Deficit
  
Additional
Paid-in
Capital
  
Treasury
Stock
  
Total
  
Redeemable
Noncontrolling
Interests
  
Common
Stock
  
Accumulated
Deficit
  
Additional
Paid-in
Capital
  
Treasury
Stock
  Total  
Redeemable
Noncontrolling
Interests
 
Balance at December 31, 2018 $25  $(39,889) $1,008,319  $(102,207) $866,248  $49,800  $25  $(39,889) $1,008,319  $(102,207) $866,248  $49,800 
Redemptions of noncontrolling interests -  -  -  -  -  (526)  0   0   0   0   0   (526)
Net income -  23,147  -  -  23,147  1,507   0   23,147   0   0   23,147   1,507 
Purchase of treasury stock  -   -   -   (391)  (391)  -   0   0   0   (391)  (391)  0 
Balance at March 31, 2019 $25  $(16,742) $1,008,319  $(102,598) $889,004  $50,781  $25  $(16,742) $1,008,319  $(102,598) $889,004  $50,781 
Redemptions of noncontrolling interests -  -  -  -  -  (2,197)  0   0   0   0   0   (2,197)
Net income -  (932) -  -  (932) 1,084   0   (932)  0   0   (932)  1,084 
Dividends declared ($0.10 per share) -  -  (2,254) -  (2,254) -   -   -   (2,254)  -   (2,254)  - 
Purchase of treasury stock  -   -   -   (1,630)  (1,630)  -   0   0   0   (1,630)  (1,630)  0 
Balance at June 30, 2019 $25  $(17,674) $1,006,065  $(104,228) $884,188  $49,668  $25  $(17,674) $1,006,065  $(104,228) $884,188  $49,668 
Redemptions of noncontrolling interests -  -  -  -  -  390   0   0   0   0   0   390 
Net income -  5,951  -  -  5,951  (359)  0   5,951   0   0   5,951   (359)
Purchase of treasury stock  -   -   -   (1,342)  (1,342)  -   0   0   0   (1,342)  (1,342)  0 
Balance at September 30, 2019 $25  $(11,723) $1,006,065  $(105,570) $888,797  $49,699  $25  $(11,723) $1,006,065  $(105,570) $888,797  $49,699 


See accompanying notes.


4
7

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(Dollars in thousands, except per share data)
For the three months ended March 31, 2018, June 30, 2018, and September 30, 2018

  Associated Capital Group, Inc. shareholders    
 
 
 
 
Common
Stock
  
Retained
Earnings
  
Additional
Paid-in
Capital
  
GBL 4%
PIK Note
  
Accumulated
Comprehensive
Income
  
Treasury
Stock
  
Total
  
Redeemable
Noncontrolling
Interests
 
Balance at December 31, 2017 $25  $13,800  $1,010,505  $(50,000) $6,712  $(62,895) $918,147  $46,230 
Reclassifications pursuant to adoption of new accounting guidance  -   6,712   -   -   (6,712)  -   -   - 
Redemptions of noncontrolling interests  -   -   -   -   -   -   -   (1,971)
Consolidation of certain investment funds  -   -   -   -   -   -   -   6,488 
Net loss  -   (22,229)  -   -   -   -   (22,229)  (143)
Stock-based compensation expense  -   -   72   -   -   -   72   - 
Proceeds from payment of GBL 4% PIK Note  -   -   -   10,000   -   -   10,000   - 
Exchange of GBL stock for AC stock  -   -   -   -   -   (17,737)  (17,737)  - 
Purchase of treasury stock  -   -   -   -   -   (459)  (459)  - 
Balance at March 31, 2018 $25  $(1,717) $1,010,577  $(40,000) $-  $(81,091) $887,794  $50,604 
Redemptions of noncontrolling interests  -   -   -   -   -   -   -   (336)
Net income/(loss)  -   11,824   -   -   -   -   11,824   1,039 
Proceeds from payment of GBL 4% PIK Note  -   -   -   20,000   -   -   20,000   - 
Dividends declared ($0.10 per share)      (2,302)                  (2,302)  - 
Purchase of treasury stock  -   -   -   -   -   (5,380)  (5,380)  - 
Balance at June 30, 2018 $25  $7,805  $1,010,577  $(20,000) $-  $(86,471) $911,936  $51,307 
Redemptions of noncontrolling interests  -   -   -   -   -   -   -   (345)
Net income/(loss)  -   (7,379)  -   -   -   -   (7,379)  157 
Proceeds from payment of GBL 4% PIK Note  -   -   -   20,000   -   -   20,000   - 
Purchase of treasury stock  -   -   -   -   -   (732)  (732)  - 
Balance at September 30, 2018 $25  $426  $1,010,577  $-  $-  $(87,203) $923,825  $51,119 

See accompanying notes.

5


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

 Nine Months Ended 
 September 30,  
Nine Months Ended
September 30,
 
 2019  2018  2020  2019 
Operating activities            
Net income/(loss) $30,398  $(16,731)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Equity in net gains from partnerships (5,029) (3,697)
Net income (loss) $(32,875) $30,398 
Loss from discontinued operations, net of taxes  632   2,141 
Loss from continuing operations  (32,243)  32,539 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
from continuing activities        
Equity in net (gains) losses from partnerships  (4,316)  (5,029)
Deferred income taxes 5,019  -   (5,923)  4,739 
Depreciation and amortization 18  15   40   10 
Stock-based compensation expense -  72 
Loss on exchange offer -  2,127 
Donated securities 1,875  -   441   1,875 
Unrealized gains on securities (18,450) - 
Realized gains on sales of securities (220) - 
Unrealized (gains) losses on securities  37,511   (18,450)
Realized gains (losses) on sales of securities  1,017   (220)
(Increase) decrease in assets:              
Investments in trading securities (54,357) 1,983   (283,070)  (54,341)
Investments in partnerships:              
Contributions to partnerships (22,671) (8,077)  (4,229)  (22,671)
Distributions from partnerships 2,772  9,512   24,841   2,772 
Receivable from affiliates 571  451   3,600   688 
Goodwill and intangible assets -  (97)
Receivable from brokers 927  19,706   2,077   856 
Investment advisory fees receivable 3,107  4,372   8,423   3,107 
Income taxes receivable  (2,207)  8 
Other assets 8,609  5,983   1,260   8,604 
Increase (decrease) in liabilities:              
Payable to brokers 5,046  44   (6,446)  4,766 
Income taxes payable and deferred tax liabilities 311  (4,656)
Income taxes payable  (2,833)  311 
Payable to affiliates (43) 161   122   176 
Compensation payable 206  (5,994)  (12,092)  723 
Accrued expenses and other liabilities  (2,917)  (557)  1,824   (2,784)
Total adjustments  (75,226)  21,348   (239,960)  (74,860)
Net cash provided by (used in) operating activities $(44,828) $4,617 
Net cash used in operating activities $(272,203) $(42,321)


6
8

ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED (continued)
(Dollars in thousands)
 
 
Nine Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2019  2018  2020  2019 
Investing activities            
Purchases of securities $(1,366) $-  $(434) $(1,366)
Proceeds from sale of securities 2,699  - 
Proceeds from sales of securities  8,406   2,699 
Return of capital on securities 1,326  -   1,320   1,326 
Purchase of building (6,250) -   (11,084)  (6,250)
Proceeds from note receivable  -   15,000 
Net cash provided by (used in) investing activities  (3,591)  15,000 
Investment of cash in Trust Account  (175,000)  0 
Net cash used in investing activities  (176,792)  (3,591)
              
Financing activities              
Contributions from redeemable noncontrolling interests  162,020   0 
Redemptions of redeemable noncontrolling interests (2,333) (2,652)  0   (2,333)
Dividends paid (4,513) (4,666)  (4,486)  (4,513)
Purchase of treasury stock (3,363) (6,571)  (5,395)  (3,363)
Proceeds from payment of GBL 4% PIK Note -  50,000 
Contributions from nonredeemable noncontrolling interests  2,072   0 
Proceeds from promissory note from Executive Chairman 2,124  -   0   2,124 
Repayment of promissory note to Executive Chairman  (2,126)  -   0   (2,126)
Net cash provided by (used in) financing activities  (10,211)  36,111 
Net increase (decrease) in cash and cash equivalents (58,630) 55,728 
Cash, restricted cash and cash equivalents at beginning of period 409,764  293,112 
Increase in cash from consolidation  -   47 
Cash, restricted cash and cash equivalents at end of period $351,134  $348,887 
Net cash used in financing activities  154,211   (10,211)
Cash flows of discontinued operations        
Net cash provided by (used in) operating activities  114   (2,507)
Net decrease in cash and cash equivalents  (294,670)  (58,630)
Cash and cash equivalents at beginning of period  342,001   398,363 
Cash and cash equivalents at end of period $47,331  $339,733 
              
Supplemental disclosures of cash flow information:              
Cash paid for interest $136  $141  $114  $79 
Cash paid for taxes $2,200  $304  $2,000  $2,200 
        
Reconciliation to cash, restricted cash and cash equivalents      
Cash and cash equivalents 350,934  348,887 
Restricted cash included in receivable from brokers  200   200 
Cash, restricted cash and cash equivalents $351,134  $349,087 
Non-cash activity:Non-cash activity: 
- On September 21, 2020 a deferred underwriting fee of $6.1 million was recorded with an offset to redeemable noncontrolling interests.
        

Non-cash activity:
-On January 1, 2018, AC was deemed to have control over certain investment funds which resulted in their consolidation and an increase of approximately $47 of cash and cash equivalents, $6,441 of net assets and an increase of approximately $6,488 of redeemable noncontrolling interests.
-During the first quarter of 2018, AC completed an exchange offer with respect to its Class A shares. The Company exchanged 666,805 GBL Class A shares valued at $17,737 for 493,954 Class A shares.

See accompanying notes.


7
9


ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20192020
(Unaudited)


A.  Basis of Presentation and Significant Accounting Policies

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.
 
The Spin-off and Related TransactionsOrganization
 
We are a Delaware corporation that provides alternative investment management institutional research and underwriting services. In addition, we derive investment income/(loss) from proprietary trading of cash and other assets awaiting deployment in our operating business.
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”).
 
We conduct our investment management activities through our wholly-owned subsidiary Gabelli & Company Investment Advisers, Inc. (“GCIA” f/k/a Gabelli Securities, 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 business earns management and incentive fees from its 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.
  
We provide our institutional research and underwriting services through G.research, LLC (“G.research”), an indirect wholly-owned subsidiary of the Company. G.research is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is regulated by the Financial Industry Regulatory Authority (“FINRA”). G.research's revenues are derived primarily from institutional research services.
We may make direct investments in operating businesses using a variety of techniques and structures. For example,We added Gabelli Special Purpose Acquisition Vehicles (“SPAC”) in April 2018,2018.  Gabelli Value for Italy (VALU), our initial vehicle launched and listed on the Company sponsored a €110Italian Borsa, approached its second anniversary at the apex of the pandemic in Italy.  In light of this challenge, the board voted to commence liquidation which was completed on July 8, 2020.  The VALU effort successfully canvassed private company opportunities in Italy, with deal flow expanding throughout Europe.  We believe the platform is in place to further expand our direct investment efforts across the European continent.

A private company owns 84%of the economics and controls 97% of AC Group’s outstanding voting shares.

PMV Consumer Acquisition Corp.

On September 22, 2020, Associated Capital announced the $175 million initial public offering of its first 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 Gabelli Valueconsumer 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 Italy S.p.a., an Italian company listedthat initial business combination.

The Sponsor and PMV have been consolidated in the financial statements of AC as of September 30, 2020 because AC has a controlling financial interest in these entities.  This resulted in total assets of $1.1 billion at September 30, 2020, inclusive of $177.7 million of assets, $6.6 million of liabilities and $155.0 million of redeemable noncontrolling interests and $2.1 million of noncontrolling interests relating to PMV and the Sponsor. In addition to PMV and the Sponsor, there are several other entities that are consolidated within the financial statements. The details to the impact of consolidating these entities on the London Stock Exchange’s Borsa Italiana AIM segmentcondensed consolidated financial statements can be seen in Footnote D. Investment Partnerships and Other Entities

See footnote D for a further discussion of PMV Consumer Acquisition Corp. as well as their registration statement and Form 10Q as of September 30, 2020 both located on the U.S. Securities and Exchange Commission website https://www.sec.gov/edgar/searchedgar/companysearch.html under the symbol “VALU”PMVC. VALU was created

10

Associated Capital Group, Inc. 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 1-for 1 basis to acquirethe holders of each class of GAMCO’s common stock (the “Spin-off”).
Morgan Group Holding Co. Merger and Spin-Off
On October 31, 2019, the Company closed on a small- to medium-sized Italian franchise business with the potential for international expansion, particularlytransaction whereby Morgan Group Holding Co., (“Morgan Group”) a company that trades in the United States.over the counter market under the symbol “MGHL” and is under common control of AC’s majority shareholder, acquired all of the Company’s interest in G.research 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 and consolidated the entity, which includes G.research.  The transaction has been accounted for pursuant to Accounting Standards Codification (“ASC”) 805-50, Transactions Between Entities Under Common Control.  A common-control transaction is similar to a business combination, however, does not meet the definition of a business combination because there is no change in control over the entity by the parent.
 
In connection withOn March 16, 2020, the Spin-off, GAMCOCompany 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 upon close of the spin-off.
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 promissory note (the “GAMCO Note”)ratio of 1‑for‑100 that was effective on June 10, 2020.

On August 5, 2020 the distribution of Morgan Group shares was completed to AC Group in the original principal amountshareholders of $250 million used to partially capitalize the Company. During the year ended December 31, 2018, AC received principal repayments totaling $50 millionrecord as of July 30, 2020. Based on the GAMCO Note which fully satisfieddistribution ratio, on the outstanding principal balance. The GAMCO Note bore interest at 4% per annum and had an original maturitydistribution date, AC stockholders of November 30, 2020. In addition, GCIA acquired 4,393,055record as of 5:00 pm, New York City time, on the record date, received  approximately. 0.022356 shares of GAMCO Class AMorgan Group common stock for $150 millioneach share of AC common stock they held on the record date.

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

The historical financial results of Morgan Group have been reflected in connection with the Spin-off.Company’s consolidated financial statements as discontinued operations in both the condensed consolidated statements of income and financial condition for all periods presented through August 5, 2020.

11

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. In the opinion of management, 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, 2018.2019.
 
The Company separately presented investments in debt securities and investments in equity securities in the condensed consolidated statement of financial condition as of September 30, 2020. A reclassification was made to conform prior period information as of December 31, 2019 to the current period presentation. This change has also been made to the corresponding notes to condensed consolidated financial statements.

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.

Investments in government securities held in trust account

At September 30, 2020, government securities of our consolidated SPAC, PMV, are held in a trust account and consist of U.S. Treasury Bills accounted for as held-to-maturity in accordance with ASC 320 “Investments – Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying condensed consolidated balance sheet and adjusted for the amortization or accretion of premiums or discounts.

12

Recent Accounting Developments
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends the guidance in GAAP for the accounting for leases. ASU 2016-02 requires a lessee to recognize assets and liabilities arising from most operating leases in the condensed consolidated statement of financial position. The new standard was effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. The Company adopted this ASU effective January 1, 2019 with no material impact on its condensed consolidated financial statements.
 
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 Statement 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. For public companies,As a smaller reporting company pursuant to ASU 2019-10, the ASU is effective for annualthe Company on January 1, 2023. This guidance will be effective for the Company on January 1, 2023 using a prospective transition method and any interim impairment tests for periods beginning after December 15, 2019.early adoption is permitted.  The Company is currently evaluating the potential effect of this new guidance andon the impact it will have on its condensedCompany’s consolidated financial statements.
 
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.Measurement. This ASU adds certain disclosure requirements and modifies or eliminates requirements under current GAAP. This ASU is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company has early adopted the eliminated and modified disclosure requirements and is currently evaluating this guidance as it relates to the new disclosure requirements.effective January 1, 2019.

B.  Revenue
 
The Company’s revenue is accounted for as contracts with customers, and the timing of revenue recognition is based on the Company’s analysis of the provisions of each respective contract. Depending upon the specific terms, revenue may be recognized over time or at a point in time. Modifications to contracts may affect the timing of the satisfaction of performance obligations, the determination of the transaction price, and the allocation of the price to performance obligations, any of which may impact the timing of the recognition of the related revenue.
 
The Company’s major revenue sources are as follows:
 
Investment advisory and incentive fees. The Company and its subsidiaries act as general partner, investment manager or sub-advisor to investment funds and/or separately managed accounts of institutional investors (e.g., corporate pension plans). The fees that are paid to the Company are set forth in the offering documents for the investment fund or the separately managed account agreement. Investment advisory and incentive fee revenue consists of:


a.
Asset-based advisory fees – The Company receives a management fee, payable monthly in advance based on value of the net assets of the client. It is generally set at a rate of 1%-1.5% per annum. Asset-based management fee revenue is recognized only as the services are performed over the period.



b.
Performance-based advisory fees – Certain client contracts call for additional fees and or allocations of income tied to a certain percentage, generally 20%, of the investment performance of the account over a measurement period, typically the calendar year. In addition, the contracts provide that performance-based fees or allocations become fixed in the event of an investor redemption prior to the end of the measurement period. In the event that an account suffers a loss in one period, it must be recovered before incentive fees are earned by the Company; this is commonly referred to as a “high water mark” provision. While the Company’s performance obligation is satisfied over time, the Company does not recognize performance-based fees until the end of the measurement period or the time of the investor redemption when the uncertainty surrounding the amount of the variable consideration is resolved.



c.
Sub-advisory fees – Pursuant to agreements with other investment advisors, the Company receives a percentage of advisory fees received by such advisors from certain of their investment fund clients. These fees may be either asset- or performance-based. In addition, they may be subject to reduction by certain expenses as set forth in the respective agreements. Sub-advisory fee revenue which is asset-based is recognized ratably as the services are performed over the relevant contractual performance period. Sub-advisory fee revenue which is performance-based is recognized only when it becomes fixed and not subject to adjustment.

The Company reserves the right to waive or reduce asset-based and performance-based fees with respect to certain investors in the investment funds which may include investments by employees and other related parties. Advisory and incentive fees payable by investment funds are typically approved by third-party administrators and paid directly from the accounts’ assets. Such fees attributable to separate accounts may be subject to review and approval by the client and may be paid either from the accounts’ assets or directly by the client.
Our advisory fee revenues are influenced by both the amount of assets under management (“AUM”) and the investment performance of our products. An overall decline in the prices of securities may cause our advisory fees to decline by either causing the value of our AUM to decrease or causing our clients to withdraw funds in favor of investments they perceive to offer greater opportunity or lower risk. Similarly, success in the investment management business is dependent on investment performance as well as distribution and client servicing. Good performance can stimulate sales of our investment products and tends to keep withdrawals and redemptions low, which generates higher asset-based management fees. Conversely, poor performance, both in absolute terms and/or relative to peers and industry benchmarks, tends to result in decreased sales, increased withdrawals and redemptions and in the loss of clients, with corresponding decreases in revenues to us.
Institutional Research Services. The Company, through G.research, generates institutional research services revenues via hard dollar payments or through commissions on securities transactions executed on an agency basis on behalf of clients. Clients include institutional investors (e.g., hedge funds and asset managers) as well as affiliated mutual funds and managed accounts. These revenues consist of:

a.
Hard dollar payments – The Company receives direct payments for research services provided to related and unrelated parties. The Company may or may not have contracts for such services. Where a contract for such services is in place, the contractual fee for the period is recognized ratably over the contract period, typically a calendar year, which is considered the period over which the Company satisfies its performance obligation. Payments for contracts with affiliated parties are collected monthly. For other payments where no research contract exists, revenue is not recognized until agreement is reached with the client that the Company has satisfied its performance obligation. At that time, a value is assigned to those services and an invoice is presented to the client for payment.

b.
Commissions – Commissions are charged on the execution of securities transactions made on behalf of client accounts on an agency basis and are based on a rate schedule. The Company meets its performance obligations and recognizes commission revenue when the related securities transactions are executed and the security is transferred to or from the customer. Commissions earned are typically collected from the clearing brokers utilized by G.research on a daily or weekly basis.

c.
Selling concessions – The Company participates as a member of the selling group of underwritten equity offerings and receives compensation based on the difference between what its clients pay for the securities sold to its institutional clients and what the issuer receives. The terms of the selling concessions are set forth in contracts between the Company and the underwriter. The Company meets its performance obligations and recognizes selling commissions upon the sale of the related securities to its clients.

d.
Sales manager fees – The Company participates as sales manager of at-the-market offerings of certain affiliated closed-end funds and receives a tiered percentage of proceeds as stipulated in agreements between the Company, the funds and the funds’ investment adviser and as approved by the funds’ board of directors. The Company meets its performance obligations and recognizes sales manager fees upon sale of the related closed-end funds. Sales manager fees earned are typically collected from the clearing brokers utilized by G.research on a daily or weekly basis.
Institutional research revenues are impacted by the perceived value of the research product provided to clients, the volume of securities transactions and the acquisition or loss of new client relationships.
Other. Other revenues include (a) underwriting fees representing gains, losses, and fees, net of syndicate expenses, arising from public equity and debt offerings in which G.research acts as underwriter or agent and are accrued as earned, and (b) other miscellaneous revenues.
 
Total revenues by type were as follows for the three and nine months ended September 30, 20192020 and 2018,2019, respectively (in thousands):
 
 Three months ended September 30,  Nine months ended September 30,  Three months ended September 30,  Nine months ended September 30, 
 2019  2018  2019  2018  2020  2019  2020  2019 
Investment advisory and incentive fees
                        
Asset-based advisory fees $1,723  $1,879  $5,208  $5,561  $1,161  $1,723  $4,284  $5,208 
Performance-based advisory fees 35  27  61  34   8   35   8   61 
Sub-advisory fees  995   899   2,930   2,354   696   995   2,132   2,930 
  2,753   2,805   8,199   7,949   1,865   2,753   6,424   8,199 
                            
Institutional research services
            
Hard dollar payments 520  541  1,470  2,236 
Commissions 1,365  1,284  4,207  3,844 
Selling concessions -  15  75  84 
Sales manager fees  469   15   591   15 
  2,354   1,855   6,343   6,179 
            
Other
                            
Underwriting fees 5  -  24  19 
Miscellaneous  6   6   25   18   80   1   550   12 
  11   6   49   37   80   1   550   12 
            
Total $5,118  $4,666  $14,591  $14,165  $1,945  $2,754  $6,974  $8,211 
11
14



C.  Investment in Securities
 
Investments in United States Treasury Bills and Notes with maturities of greater than three months at the time of purchase are classified as investments indebt securities and those with maturities of three months or less at the time of purchase are classified as cash equivalents.
Investments in securities are stated at fair value, with any unrealized gains or losses reported in current period earnings.
Investments in securities, including GBL stock, at September 30, 20192020 and December 31, 20182019 consisted of the following (in thousands):
 
  September 30, 2019  December 31, 2018 
  Cost  Fair Value  Cost  Fair Value 
             
Government obligations $28,842  $29,335  $11,694  $11,707 
Common stocks  289,127   268,951   244,557   213,151 
Mutual funds  659   1,137   761   1,161 
Other investments  5,776   4,613   5,285   3,941 
Total investments in securities $324,404  $304,036  $262,297  $229,960 
 September 30, 2020  December 31, 2019 
  Cost  Fair Value  Cost  Fair Value 
             
Trading Securities            
Government securities $330,795  $330,942  $28,428  $29,037 
Total investments in debt securities $330,795  $330,942  $28,428  $29,037 


Investments in equity securities at September 30, 2020 and December 31, 2019 consisted of the following (in thousands):
 September 30, 2020  December 31, 2019 
  Cost  Fair Value  Cost  Fair Value 
             
Equity Securities            
Common stocks $244,611  $205,413  $271,627  $262,562 
Mutual funds  555   1,128   1,207   2,196 
Other investments  8,040   7,045   7,847   6,562 
Total investments in securities $253,206  $213,586  $280,681  $271,320 

Securities sold, not yet purchased at September 30, 20192020 and December 31, 20182019 consisted of the following (in thousands):
 
 September 30, 2019  December 31, 2018  September 30, 2020  December 31, 2019 
 Proceeds  Fair Value  Proceeds  Fair Value  Proceeds  Fair Value  Proceeds  Fair Value 
   
Equity securities            
Common stocks $24,894  $25,402  $10,150  $9,485  $10,730  $11,661  $13,863  $16,300 
Other investments  -   73   -   89   645   1,166   13   119 
Total securities sold, not yet purchased $24,894  $25,475  $10,150  $9,574  $11,375  $12,827  $13,876  $16,419 


Investments in affiliated registered investment companies at September 30, 20192020 and December 31, 20182019 consisted of the following (in thousands):
 
 September 30, 2019  December 31, 2018  September 30, 2020  December 31, 2019 
 Cost  Fair Value  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value 
   
            
Equity securities            
Closed-end funds $73,938  $95,017  $73,950  $85,090  $74,741  $87,307  $75,646  $99,834 
Mutual funds  47,390   57,436   49,714   57,045   48,287   59,084   48,348   59,477 
Total investments in affiliated registered investment companies $121,328  $152,453  $123,664  $142,135  $123,028  $146,391  $123,994  $159,311 


The Company recognizes all equity derivatives as either assets or liabilities measured at fair value and includes them in either investmentsinvestment in securities or securities sold, not yet purchased on the condensed consolidated statements of financial condition. From time to time, the Company and/or the partnerships and offshoreconsolidated funds that the Company consolidates will enter into hedging transactions to manage their exposure to foreign currencies and equity prices related to their proprietary investments.
The following table identifies the fair values of all derivatives held by the Company (in thousands):
 Asset Derivatives Liability Derivatives 
 
Statement of
Financial Condition
Location
 Fair Value 
Statement of
Financial Condition
Location
 Fair Value 

 
 
September 30,
2019
  
December 31,
2018
  
September 30,
2019
  
December 31,
2018
 
Derivatives designated as hedging instruments under FASB ASC 815-20             
Foreign exchange contractsReceivable from brokers $79  $204 Payable to brokers $-  $- 
                   
Sub total  $79  $204   $-  $- 
                   
Derivatives not designated as hedging instruments under FASB ASC 815-20                 
Equity contractsInvestments in securities $77  $464 Securities sold, not yet purchased $73  $89 
                   
Sub total  $77  $464   $73  $89 
                   
Total derivatives  $156  $668   $73  $89 

The following table identifies gains and losses of all derivatives held by the Company (in thousands):
Type of Derivative Income Statement Location Three Months ended September 30,  Nine Months ended September 30, 
    2019  2018  2019  2018 
               
Foreign exchange contracts Net gain/(loss) from investments $124  $36  $177  $138 
Equity contracts Net gain/(loss) from investments  1,143   652   (324)  3,304 
                   
Total   $1,267  $688  $(147) $3,442 

At September 30, 20192020 and December 31, 2018,2019 we held derivative contracts on 2.52.2 million and 1.03.4 million equity shares, respectively, that are included in investments in securities or securities sold, not yet purchased on the condensed consolidated statements of financial condition.condition as shown in the table below. We had 2 foreign exchange contracts outstanding at December 31, 2019. Except for the foreign exchange contractcontracts entered into by the Company, these transactions are not designated as hedges for accounting purposes, and changes in fair values of these derivatives are included in net gain/(loss) from investments on the condensed consolidated statements of income.income and included in investments in securities, securities sold, not yet purchased, or receivable from or payable to brokers on the consolidated statements of financial condition.

The following table identifies the fair values of all derivatives and foreign currency positions held by the Company (in thousands):

Asset Derivatives Liability Derivatives
 Statement of Fair Value Statement of Fair Value
 Financial Condition September 30, December 31, Financial Condition September 30, December 31,
 Location 2020 2020 Location 2020 2019
Derivatives designated as hedging
instruments under FASB ASC 815-20
Foreign exchange contractsReceivable from brokers $0 $23 Payable to brokers $0 $0
                
                
Derivatives not designated as hedging
instruments under FASB ASC 815-20
Equity contracts               
Investments in securities
 
$
771 $291 Securities sold, not yet purchased
 
$
705 $119
                
Total derivatives  $771 $314   $705 $119
The following table identifies gains and losses of all derivatives held by the Company (in thousands):

Type of DerivativeIncome Statement Location 
Three Months ended
September 30,
  
Nine Months ended
September 30,
 
   2020  2019  2020  2019 
              
Foreign exchange contractsNet gain/(loss) from investments $(57) $124  $(44) $$177 
Equity contractsNet gain/(loss) from investments  99   1,143   (411)  (324)
                  
Total  $42  $1,267  $(455) $$(147)
 
The Company is a party to enforceable master netting arrangements for equity swaps entered into with major U.S. financial institutions as part of theits investment strategy of the Company’s proprietary portfolio.strategy. They are typically not used as hedging instruments. These swaps, while settled on a net basis with the counterparties, are shown gross in assets and liabilities on the condensed consolidated statements of financial condition. The swaps have a firm contract end date and are closed out and settled when each contract expires.


 
 
 
 
Gross
Amounts of
Recognized
Assets
  
Gross Amounts
Offset in the
Statements of
Financial Condition
  
Net Amounts of
Assets Presented
in the Statements
of Financial Condition
  
Gross Amounts Not Offset in the
Statements of Financial Condition
 
Financial
Instruments
  
Cash Collateral
Received
  
Net Amount
 
Swaps: (In thousands) 
September 30, 2019 $77  $-  $77  $(73) $-  $4 
December 31, 2018  416   -   416   (89)  -   327 
                         
 
 
 
 
 
Gross
Amounts of
Recognized
Liabilities
  
Gross Amounts
Offset in the
Statements of
Financial Condition
  
Net Amounts of
Liabilities Presented
in the Statements
of Financial Condition
  
Gross Amounts Not Offset in the
Statements of Financial Condition
 
 
Financial
Instruments
  
Cash Collateral
Pledged
  
Net Amount
 
Swaps: (In thousands) 
September 30, 2019 $73  $-  $73  $(73) $-  $- 
December 31, 2018  89   -   89   (89)  -   - 
         
Gross Amounts Not Offset in the
Statements of Financial Condition
 
 
Gross
Amounts of
Recognized
Assets
  
Gross Amounts
Offset in the
Statements of
Financial Condition
  
Net Amounts of
Assets Presented
in the Statements
of Financial Condition
  
Financial
Instruments
  
Cash Collateral
Received
  Net Amount 
Swaps: (In thousands) 
September 30, 2020 $771  $0  $771  $(705) $0  $66 
December 31, 2019  291   0   291   (119)  0   172 


         
Gross Amounts Not Offset in the
Statements of Financial Condition
 
 
Gross
Amounts of
Recognized
Liabilities
  
Gross Amounts
Offset in the
Statements of
Financial Condition
  
Net Amounts of
Liabilities Presented
in the Statements
of Financial Condition
  
Financial
Instruments
  
Cash Collateral
Pledged
  Net Amount 
Swaps: (In thousands) 
September 30, 2020 $705  $0  $705  $(705) $0  $0 
December 31, 2019  119   0   119   (119)  0   0 


13
16



D.  Investment Partnerships and Variable InterestOther Entities
 
The Company is general partner or co-general partner of various affiliated entities (“Affiliated Entities”) in which the Company had investments totaling $124.7$106.0 million and $100.1$124.8 million at September 30, 20192020 and December 31, 2018,2019, respectively, and whose underlying assets consist primarily of marketable securities.securities (“Affiliated Entities).   We also had investments in unaffiliated partnerships, offshore funds and other entities (“Unaffiliated Entities”) of $19.0$22.0 million and $18.6$20.5 million at September 30, 20192020 and December 31, 2018, respectively.2019, respectively (“Unaffiliated Entities”). We evaluate each entity to determine its appropriate accounting treatment and disclosure. For any entity where the Company has determined that it holds a variable interest, the Company performs an assessment to determine whether it qualifies as a variable interest entity (“VIE”). Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities (“VOEs”) under the voting interest model. Certain of the Affiliated Entities, and none of the Unaffiliated Entities, are consolidated.
 
The value of entities where consolidation isInvestments in partnerships that are not deemed appropriate isrequired to be consolidated are accounted for using the equity method and are included in investments in partnerships on condensed consolidated statements of financial condition. This caption includes investments in Affiliated Entities and Unaffiliated Entities which the Company accounts for under the equity method of accounting. 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.

PMV Consumer Acquisition Corp.

The following table highlightsCompany has determined that PMV is a voting interest entity (VOE) and since the numberSponsor has substantive control of entitiesPMV due to its ability to control the board of directors of PMV, the Sponsor consolidates the assets and liabilities of PMV.  The Company invested $4.0 million, or approximately 64% of the $6.25 million total Sponsor partnership commitment. The Sponsor is managed by company executives.  The Company has determined that we consolidatethe Sponsor is a variable interest entity (VIE) and that the Company is the primary beneficiary and therefore consolidates the assets and liabilities of the Sponsor.  However, neither AC nor PMV have a right to the benefits from nor does it bear the risks associated with the government securities held in trust assets held by PMV. Further, if the Company were to liquidate, the government securities held in trust assets would not be available to its general creditors, and as wella 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 at $10.00 per Unit, generating gross proceeds of $175,000,000.

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 owns $10 million in Class A units in PMV and the Sponsor own $6.1 million in Private Warrants which are eliminated in consolidation.

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 will only be invested in U.S. government securities.

PMV will have until September 24, 2022 to complete a business combination. If PMV is unable to complete a business combination by September 24, 2022, PMV will cease all operations except for the purpose of winding up, and as promptly as reasonably possible but not more than 10 business days thereafter, redeem the basis under which they are consolidated: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.
 
  VIEs  VOEs 
Entities consolidated at December 31, 2017  1   3 
Additional consolidated entities  -   2 
Deconsolidated entities  -   - 
Entities consolidated at September 30, 2018  1   5 
Additional consolidated entities  -   - 
Deconsolidated entities  -   - 
Entities consolidated at December 31, 2018  1   5 
Additional consolidated entities  -   - 
Deconsolidated entities  -   - 
Entities consolidated at September 30, 2019  1   5 

14
17


The following table includes the net impact by line item on the condensed consolidated statements of financial condition for the consolidated entities (in thousands):
 
 September 30, 2019  September 30, 2020 
 
Prior to
Consolidation
  
Consolidated
Entities
  
As Reported
  
Prior to
Consolidation
  
Consolidated
Entities
  As Reported 
Assets                  
Cash and cash equivalents 346,501  $4,433  $350,934  $35,808  $11,523  $47,331 
Investments in securities (including GBL stock) 167,129  136,907  304,036 
Investments in government securities  319,943   10,999   330,942 
Investments in equity securities (including GBL stock)  136,428   77,158   213,586 
Investments in affiliated investment companies 212,576  (60,123) 152,453   195,737   (49,346)  146,391 
Investments in partnerships 165,088  (21,430) 143,658   147,326   (19,361)  127,965 
Receivable from brokers 8,364  15,338  23,702   6,524   14,541   21,065 
Investment advisory fees receivable 1,308  (21) 1,287   1,189   (29)  1,160 
Other assets  17,017   38   17,055   37,238   (69)  37,169 
Investments in government securities held in trust  0   175,002   175,002 
Total assets $917,983  $75,142  $993,125  $880,193  $220,418  $1,100,611 
Liabilities and equity                     
Securities sold, not yet purchased $7,538  $17,937  $25,475  $6,397  $6,430  $12,827 
Accrued expenses and other liabilities 21,648  7,506  29,154   19,629   9,824   29,453 
Redeemable noncontrolling interests -  49,699  49,699   0   204,164   204,164 
Total equity  888,797   -   888,797   854,167   0   854,167 
Total liabilities and equity $917,983  $75,142  $993,125  $880,193  $220,418  $1,100,611 
         
 December 31, 2018 
 
Prior to
Consolidation
  
Consolidated
Entities
  
As Reported
 
Assets         
Cash and cash equivalents $396,074  $13,490  $409,564 
Investments in securities (including GBL stock) 131,764  98,196  229,960 
Investments in affiliated investment companies 193,006  (50,871) 142,135 
Investments in partnerships 138,119  (19,390) 118,729 
Receivable from brokers 7,998  16,631  24,629 
Investment advisory fees receivable 4,427  (33) 4,394 
Other assets  24,551   471   25,022 
Total assets $895,939  $58,494  $954,433 
Liabilities and equity         
Securities sold, not yet purchased $4,631  $4,943  $9,574 
Accrued expenses and other liabilities 25,060  3,751  28,811 
Redeemable noncontrolling interests -  49,800  49,800 
Total equity  866,248   -   866,248 
Total liabilities and equity $895,939  $58,494  $954,433 


 December 31, 2019 
  
Prior to
Consolidation
  
Consolidated
Entities
  As Reported 
Assets         
Cash and cash equivalents $328,834  $13,167  $342,001 
Investments in government securities  25,050   3,987   29,037 
Investments in equity securities (including GBL stock)  157,623   113,697   271,320 
Investments in affiliated investment companies  211,024   (51,713)  159,311 
Investments in partnerships  167,781   (22,409)  145,372 
Receivable from brokers  6,750   16,391   23,141 
Investment advisory fees receivable  9,604   (22)  9,582 
Other assets  22,976   29   23,005 
Assets of discontinued operations  8,137   0   8,137 
Total assets $937,779  $73,127  $1,010,906 
Liabilities and equity            
Securities sold, not yet purchased $4,625  $11,794  $16,419 
Accrued expenses and other liabilities  33,618   10,949   44,567 
Liabilities of discontinued operations  2,100       2,100 
Redeemable noncontrolling interests  1   50,384   50,385 
Total equity  897,435   0   897,435 
Total liabilities and equity $937,779  $73,127  $1,010,906 
15
18


The following table includes the net impact by line item on the condensed consolidated statements of income for the consolidatedconsolidate entities (in thousands):
 
 Three Months Ended September 30, 2019 
 
Prior to
Consolidation
  
Consolidated
Entities
  
As Reported
 
Total revenues $5,299  $(181) $5,118 
Total expenses  8,251   (124)  8,127 
Operating loss (2,952) (57) (3,009)
Total other income/(expense), net  10,457   (302)  10,155 
Income/(loss) before income taxes 7,505  (359) 7,146 
Income tax expense  1,554   -   1,554 
Net income/(loss) before NCI 5,951  (359) 5,592 
Net loss attributable to noncontrolling interests  -   (359)  (359)
Net income $5,951  $-  $5,951 
         
 Three Months Ended September 30, 2018 
 
Prior to
Consolidation
  
Consolidated
Entities
  
As Reported
 
Total revenues $4,683  $(17) $4,666 
Total expenses  7,698   467   8,165 
Operating loss (3,015) (484) (3,499)
Total other income/(expense), net  (5,222)  641   (4,581)
Income/(loss) before income taxes (8,237) 157  (8,080)
Income tax benefit  (858)  -   (858)
Net income/(loss) before NCI (7,379) 157  (7,222)
Net income attributable to noncontrolling interests  -   157   157 
Net loss $(7,379) $-  $(7,379)
         
 Nine Months Ended September 30, 2019  Three Months Ended September 30, 2020 
 
Prior to
Consolidation
  
Consolidated
Entities
  
As Reported
  
Prior to
Consolidation
  
Consolidated
Entities
  As Reported 
Total revenues $15,117  $(526) $14,591  $2,117  $(172) $1,945 
Total expenses  27,370   1,257   28,627   4,754   743   5,497 
Operating loss (12,253) (1,783) (14,036)  (2,637)  (915)  (3,552)
Total other income, net  47,887   4,015   51,902   12,040   1,967   14,007 
Income before income taxes 35,634  2,232  37,866   9,403   1,052   10,455 
Income tax expense  7,468   -   7,468   3,456   108   3,564 
Net income before NCI 28,166  2,232  30,398 
Net income attributable to noncontrolling interests  -   2,232   2,232 
Income before NCI  5,947   944   6,891 
Income/(loss) attributable to NCI  (7)  944   937 
Income from continuing operations  5,954   0   5,954 
Loss from discontinued operations, net of taxes  (139)  0   (139)
Net income $28,166  $-  $28,166  $5,815  $0  $5,815 
         
 Nine Months Ended September 30, 2018 
 
Prior to
Consolidation
  
Consolidated
Entities
  
As Reported
 
Total revenues $14,215  $(50) $14,165 
Total expenses  23,913   1,447   25,360 
Operating loss (9,698) (1,497) (11,195)
Total other income/(expense), net  (12,290)  2,550   (9,740)
Income/(loss) before income taxes (21,988) 1,053  (20,935)
Income tax benefit  (4,204)  -   (4,204)
Net income/(loss) before NCI (17,784) 1,053  (16,731)
Net income attributable to noncontrolling interests  -   1,053   1,053 
Net loss $(17,784) $-  $(17,784)


 Three Months Ended September 30, 2019 
  
Prior to
Consolidation
  
Consolidated
Entities
  As Reported 
Total revenues $2,935  $(181) $2,754 
Total expenses  5,471   (124)  5,347 
Operating loss  (2,536)  (57)  (2,593)
Total other income, net  10,426   (302)  10,124 
Income before income taxes  7,890   (359)  7,531 
Income tax expense  1,638   0   1,638 
Net income before NCI  6,252   (359)  5,893 
Net income/(loss) attributable to NCI  0   (359)  (359)
Income from continuing operations  6,252   0   6,252 
Loss from discontinued operations, net of taxes  (301)  0   (301)
Net income $5,951  $0  $5,951 

 Nine Months Ended September 30, 2020 
  
Prior to
Consolidation
  
Consolidated
Entities
  As Reported 
Total revenues $6,669  $305  $6,974 
Total expenses  13,131   1,696   14,827 
Operating loss  (6,462)  (1,391)  (7,853)
Total other income/(expense), net  (34,181)  934   (33,248)
Loss before income taxes  (40,643)  (457)  (41,101)
Income tax benefit  (8,965)  108   (8,858)
Net loss before NCI  (31,678)  (565)  (32,243)
Net loss attributable to NCI  (7)  (565)  (572)
Loss from continuing operations  (31,671)  0   (31,671)
Loss from discontinued operations, net of taxes  (632)  0   (632)
Net loss $(32,303) $0  $(32,303)

 Nine Months Ended September 30, 2019 
  
Prior to
Consolidation
  
Consolidated
Entities
  As Reported 
Total revenues $8,737  $(526) $8,211 
Total expenses  18,102   1,257   19,359 
Operating loss  (9,365)  (1,783)  (11,148)
Total other income, net  47,736   4,015   51,751 
Income before income taxes  38,371   2,232   40,603 
Income tax expense  8,064   0   8,064 
Net income before NCI  30,307   2,232   32,539 
Net income/(loss) attributable to NCI  0   2,232   2,232 
Income from continuing operations  30,307   0   30,307 
Loss from discontinued operations, net of taxes  (2,141)  0   (2,141)
Net income $28,166  $0  $28,166 
16
19


Variable Interest Entities

With respect to theeach 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 the VIEVIEs that isare consolidated and included on the condensed consolidated statements of financial condition as well as the Company’s net interest in this VIEthese VIEs (in thousands):

 
September 30,
2019
  
December 31,
2018
  
September 30,
2020
  
December 31,
2019
 
            
Cash and cash equivalents $1,986  $2,560  $4,027  $2,224 
Investments in securities(1) 9,255  7,253   22,521   18,454 
Receivable from brokers 473  553   1,491   2,601 
Other assets -  (11)
Investments in partnerships and affiliates  8,022   8,363 
Accrued expenses and other liabilities (41) (31)  (823)  (329)
Nonredeemable noncontrolling interests  (2,072)  0 
Redeemable noncontrolling interests  (447)  (419)  (10,292)  (9,592)
AC Group's net interests in consolidated VIE $11,226  $9,905 
AC Group’s net interests in consolidated VIEs $22,874  $21,721 


(1) In 2020, includes $6.15 million in private placement warrants eliminated in consolidation with PMV.

Voting Ownership Entities

The following table presents the balances related to PMV and another investment partnership that are consolidated as VOE’s and included on the condensed consolidated statements of financial condition as well as the Company’s net interest in these VOE’s (in thousands):

 
September 30,
2020
  
December 31,
2019
 
       
Cash and cash equivalents $7,496  $10,943 
Investments in securities  88,615   99,231 
Receivable from brokers  13,052   13,790 
Investments in government securities held in trust  175,002   0 
Other assets  82   28 
Securities sold, not yet purchased  (6,430)  (11,794)
Accrued expenses and other liabilities  (9,842)  (10,665)
Redeemable noncontrolling interests  (193,873)  (40,792)
AC Group’s net interests in consolidated VOEs $74,102  $60,741 

E.  Fair Value
 
The following tables present information about the Company’s assets and liabilities by major category measured at fair value on a recurring basis as of September 30, 20192020 and December 31, 20182019 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. Investments in certain entities that calculate net asset value per share and other investments that are not held at fair value are provided as separate items to permit reconciliation of the fair value of investments included in the fair value hierarchy to the total amounts presented in the condensed consolidated statements of financial condition.
 

The following tables present assets and liabilities measured at fair value on a recurring basis as of the dates specified (except for Investment Partnerships) (in thousands):
 
 September 30, 2019  September 30, 2020 
Assets 
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
  
Significant Other
Observable
Inputs (Level 2)
  
Significant
Unobservable
Inputs (Level 3)
  
Investments
Using NAV as
Fair Value (a)
  
Other Assets
Not Held at
Fair Value (b)
  Total  
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
  
Significant Other
Observable
Inputs (Level 2)
  
Significant
Unobservable
Inputs (Level 3)
  Total 
Cash equivalents $349,848  $-  $-  $-  $-  $349,848  $39,552  $0  $0  $39,552 
Investments in partnerships  -   -   -   139,401   4,257   143,658 
Investments in securities (including GBL stock):                
Gov't obligations 29,335        -  -  29,335 
Investments in government securities:                
Trading - Gov’t securities  330,942           330,942 
Total investments in government securities  330,942   0   0   330,942 
Investments in equity securities (including GBL stock):                 
Common stocks 268,361  501  89  -  -  268,951   198,266   7,111   36   205,413 
Mutual funds 1,137  -  -  -  -  1,137   1,128   0   0   1,128 
Other  316   88   4,209   -   -   4,613   1,269   771   5,005   7,045 
Total investments in securities  299,149   589   4,298   -   -   304,036 
Total investments in equity securities  200,663   7,882   5,041   213,586 
Investments in affiliated registered investment companies:Investments in affiliated registered investment companies:                                
Closed-end funds 95,017  -  -  -  -  95,017   87,307   0   0   87,307 
Mutual funds  57,436   -   -   -   -   57,436   59,084   0   0   59,084 
Total investments in affiliated registered investment companies  152,453   -   -   -   -   152,453   146,391   0   0   146,391 
Total investments  451,602   589   4,298   139,401   4,257   600,147 
Total investments held at fair value  677,996   7,882   5,041   690,919 
Total assets at fair value $801,450  $589  $4,298  $139,401  $4,257  $949,995  $717,548  $7,882  $5,041  $730,471 
Liabilities                                  
Common stocks $25,402  $-  $-  $-  $-  $25,402  $11,661  $0  $0  $11,661 
Other  -   73   -   -   -   73   461   705   0   1,166 
Securities sold, not yet purchased $25,402  $73  $-  $-  $-  $25,475  $12,122  $705  $0  $12,827 


 December 31, 2019 
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 $343,428  $0  $0  $343,428 
Investments in government securities:                
Trading - Gov’t securities  29,037   0   0   29,037 
Total investments in government securities  29,037   0   0   29,037 
Investments in equity securities (including GBL stock):             
Common stocks  257,520   4,444   89   262,562 
Mutual funds  2,196   0   0   2,196 
Other  2,428   509   4,134   6,562 
Total investments in equity securities  262,144   4,953   4,223   271,320 
Investments in affiliated registered investment companies:             
Closed-end funds  99,834   0   0   99,834 
Mutual funds  59,477   0   0   59,477 
Total investments in affiliated registered investment companies  159,311   0   0   159,311 
Total investments held at fair value  450,492   4,953   4,223   459,668 
Total assets at fair value $793,920  $4,953  $4,223  $803,096 
Liabilities                
Common stocks $16,300  $0  $0  $16,300 
Other  0   119   0   119 
Securities sold, not yet purchased $16,300  $119  $0  $16,419 
17
21

  December 31, 2018 
Assets 
Quoted Prices in Active
Markets for Identical
Assets (Level 1)
  
Significant Other
Observable
Inputs (Level 2)
  
Significant
Unobservable
Inputs (Level 3)
  
Investments
Using NAV as
Fair Value (a)
  
Other Assets
Not Held at
Fair Value (b)
  Total 
Cash equivalents $407,239  $-  $-  $-  $-  $407,239 
Investments in partnerships  -   -   -   114,449   4,280   118,729 
Investments in securities (including GBL stock):                     
Gov't obligations  11,707   -   -   -   -   11,707 
Common stocks  205,978   7,161   12   -   -   213,151 
Mutual funds  1,161   -   -   -   -   1,161 
Other  19   464   3,458   -   -   3,941 
Total investments in securities  218,865   7,625   3,470   -   -   229,960 
Investments in affiliated registered investment companies:                     
Closed-end funds  85,090   -   -   -   -   85,090 
Mutual funds  57,045   -   -   -   -   57,045 
Total investments in affiliated registered investment companies  142,135   -   -   -   -   142,135 
Total investments  361,000   7,625   3,470   114,449   4,280   490,824 
Total assets at fair value $768,239  $7,625  $3,470  $114,449  $4,280  $898,063 
Liabilities                        
Common stocks $9,485  $-  $-  $-  $-  $9,485 
Other  -   89   -   -   -   89 
Securities sold, not yet purchased $9,485  $89  $-  $-  $-  $9,574 


(a)
Amounts include certain equity method investments in Investment Partnerships which qualify for investment company specialized accounting. These Investment Partnerships account for their financial assets and liabilities using fair value measures and, therefore, the Company’s investment approximates fair value. At September 30, 2019 and December 31, 2018, investments in these Investment Partnerships were $131,082 and $105,020, respectively. In addition, certain investments in Investment Partnerships were held by a consolidated entity. At September 30, 2019 and December 31, 2018, these amounts were $8,319 and $9,429, respectively. None of these investments have been classified in the fair value hierarchy.

(b)
Amounts include certain equity method investments which are not accounted for under a fair value measure. In accordance with GAAP, certain equity method investees do not account for both their financial assets and liabilities under fair value measures; therefore, the Company’s investment in such equity method investees may not represent fair value.
Investments using NAV as fair value shown in the above tables include investments in Affiliated and Unaffiliated Entities. 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 may require a minimum investment period before capital can be voluntarily redeemed (a “Lockup Period”). No investment in an Unaffiliated Entity has an unexpired Lockup Period. The Company has no outstanding capital commitments to any Affiliated or Unaffiliated Entity.
The following table presents additional information about assets by major category 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 September 30, 2019  Three months ended September 30, 2018  Three months ended September 30, 2020  Three months ended September 30, 2019 
 
Common
Stocks
  Other  Total  
Common
Stocks
  Other  Total  
Common
Stocks
  Other  Total  
Common
Stocks
  Other  Total 
                                    
Beginning balance $191  $4,255  $4,446  $590  $4,465  $5,055  $36  $4,988  $5,024  $191  $4,255  $4,446 
Total gains/(losses) (102) (46) (148) 2  2  4   0   17   17   (102)  (46)  (148)
Purchases -  -  -  -  15  15   0   0   0   0   0   0 
Sales -  -  -  -  -  -   0   0   0   0   0   0 
Transfers  -   -   -   (580)  53   (527)  0   0   0   0   0   0 
Ending balance $89  $4,209  $4,298  $12  $4,535  $4,547  $36  $5,005  $5,041  $89  $4,209  $4,298 
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 $(102) $(46) $(148) $2  $2  $4  $0  $17  $17  $(102) $(46) $(148)


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.
  
 Nine months ended September 30, 2020  Nine months ended September 30, 2019 
  
Common
Stocks
  Other  Total  
Common
Stocks
  Other  Total 
                   
Beginning balance $89  $4,134  $4,223  $12  $3,458  $3,470 
Consolidated fund  0   0   0   0   0   0 
Total gains/(losses)  (53)  (6)  (59)  14   751   765 
Purchases  0   0   0   0   0   0 
Sales  0   (41)  (41)  0   0   0 
Transfers  0   918   918   63   0   63 
Ending balance $36  $5,005  $5,041  $89  $4,209  $4,298 
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 $(53) $(18) $(71) $14  $751  $765 
During the three months ended September 30, 2018, the Company transferred an investment with a value of approximately $580,000 from Level 3 to Level 1. The reclassification was due to increased availability of market price quotations and was based on the value at the beginning of the period in which the transfer occurred.
  Nine months ended September 30, 2019  Nine months ended September 30, 2018 
  
Common
Stocks
  Other  Total  
Common
Stocks
  Other  Total 
                   
Beginning balance $12  $3,458  $3,470  $618  $1,169  $1,787 
Consolidated fund                  984   984 
Total gains/(losses)  14   751   765   (1)  (2,413)  (2,414)
Purchases  -   -   -   -   4,773   4,773 
Sales  -   -   -   -   (31)  (31)
Transfers  63   -   63   (605)  53   (552)
Ending balance $89  $4,209  $4,298  $12  $4,535  $4,547 
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 $14  $751  $765  $-  $(2,429) $(2,429)


During the nine months ended September 30, 2020 and 2019, the Company transferred an investmentinvestments with a value of approximately $918,000 and $63,000, respectively, from Level 1 to Level 3 due to the unavailability of observable inputs.  During

At September 30,2020, assets held in the nine months ended September 30, 2018, the Company transferredtrust account through PMV were comprised of U.S. Treasury Bills with an investment with aamortized cost and fair value of approximately $605,000 from Level 3 to Level 1 due to increased availability of market price quotations.$175 million

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F.  Income Taxes
 
The effective tax rate (“ETR”) for the three months ended September 30, 20192020 and September 30, 20182019 was 21.7%34.1% and 10.6%21.7%, respectively. The ETR in the third quarter of 2020 differs from the standard corporate tax rate of 21% primarily due (a) state and local taxes (net of federal benefit), (b) deferred tax asset valuation allowances related to the carryforward of charitable contributions and the (c) rate differential on the carryback of a net operating loss.  The ETR in the third quarter of 2019 differs from the standard corporate tax rate of 21% primarily due to (a) state and local taxes (net of federal benefit), the benefit of (a)(b) the donation of appreciated securities and (b)(c) the dividends received deduction.

The ETR infor the third  quarter  of  2018nine months ended September 30, 2020 and September 30, 2019 was 21.5% and 19.9%, respectively.  The 2020 year-to-date ETR differs from the standard corporate tax rate of 21% primarily due to (a) state and local taxes (net of federal benefit), (b) deferred tax asset valuation allowances related to the carryforward of charitable contributions and the impact(c) rate differential on the carryback of (a) income attributable to noncontrolling interests, (b) the donation of appreciated securities, and (c) the dividends received deduction.
The ETR for the nine months ended September 30, 2019 and September 30, 2018 was 19.7% and 20.1%, respectively.a net operating loss.  The 2019 year-to-date ETR differs from the standard corporate tax rate of 21% primarily due to (a) state and local taxes (net of federal benefit), (b) the donation of appreciated securities and (c) the dividends received deduction, and (d) income attributable to noncontrolling interests.interest consolidated partnerships. 



G. Earnings Per Share
 
Basic earnings per share is computed by dividing net income/(loss) per share 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) per share attributable to our shareholders by the weighted average number of shares outstanding during the period adjusted for thebecause there are no dilutive effect ofsecurities outstanding RSAs. There were no outstanding AC RSAs during the nine months ended September 30, 2019 and 2018.periods presented.
 

The computations of basic and diluted net income/(loss) per share are as follows:follows (in thousands, except per share data):
 
  Three Months Ended September 30,  Nine Months Ended September 30, 
(amounts in thousands, except per share amounts) 2019  2018  2019  2018 
Basic:            
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders $5,951  $(7,379) $28,166  $(17,784)
Weighted average shares outstanding  22,514   22,979   22,550   23,187 
Basic net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders per share $0.26  $(0.32) $1.25  $(0.77)
                 
Diluted:                
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders $5,951  $(7,379) $28,166  $(17,784)
                 
Weighted average share outstanding  22,514   22,979   22,550   23,187 
Dilutive restricted stock awards  -   -   -   - 
Total  22,514   22,979   22,550   23,187 
Diluted net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders per share $0.26  $(0.32) $1.25  $(0.77)
 Three Months Ending September 30, 
(In thousands, except per share amounts) 2020  2019 
Basic:      
Income from continuing operations $5,954  $6,252 
Loss from discontinued operations, net of taxes  (139)  (301)
Net income attributable to Associated Capital Group, Inc.’s shareholders $5,815  $5,951 
         
Weighted average shares outstanding  22,354   22,514 
         
Basic net income per share attributable to Associated Capital Group, Inc.’s shareholders:        
Continuing operations $0.27  $0.27 
Discontinued operations  (0.01)  (0.01)
Total $0.26  $0.26 
         
Diluted:        
Income from continuing operations $5,954  $6,252 
Loss from discontinued operations, net of taxes  (139)  (301)
Net income attributable to Associated Capital Group, Inc.’s shareholders $5,815  $5,951 
         
Weighted average share outstanding  22,354   22,514 
         
Diluted net income per share attributable to Associated Capital Group, Inc.'s shareholders:        
Continuing operations $0.27  $0.27 
Discontinued operations  (0.01)  (0.01)
Total $0.26  $0.26 
         
         


 Nine Months Ending September 30, 
(In thousands, except per share amounts) 2020  2019 
Basic:      
Income/(loss) from continuing operations $(31,671) $30,307 
Loss from discontinued operations, net of taxes  (632)  (2,141)
Net income/(loss) attributable to Associated Capital Group, Inc.’s shareholders $(32,303) $28,166 
         
Weighted average shares outstanding  22,391   22,550 
         
Basic net income per share attributable to Associated Capital Group, Inc.’s shareholders:        
Continuing operations $(1.41) $1.34 
Discontinued operations  (0.03)  (0.09)
Total $(1.44) $1.25 
         
Diluted:        
Income from continuing operations $(31,671) $30,307 
Income/(loss) from discontinued operations, net of taxes  (632)  (2,141)
Net income/(loss) attributable to Associated Capital Group, Inc.’s shareholders $(32,303) $28,166 
         
Weighted average share outstanding  22,391   22,550 
         
Diluted net income per share attributable to Associated Capital Group, Inc.'s shareholders:        
Continuing operations $(1.41) $1.34 
Discontinued operations  (0.03)  (0.09)
Total $(1.44) $1.25 
H.  Stockholders’ Equity

H.Stockholders’ Equity

Shares outstanding were 22.522.3 million and 22.622.5 million at September 30, 20192020 and December 31, 2018,2019, respectively.

Dividends

During the nine months ended September 30, 20192020 and 2018,2019, the Company declared dividends of $0.10 per share to class A and class B shareholders.

Stock Repurchase Program

For the three months ended September 30, 20192020 and 2018,2019, the Company repurchased approximately 3630 thousand and 2036 thousand shares at an average price of $36.75$37.03 per share and $36.27$36.75 per share for a total investment of $1.3$1.1 million and $0.7$1.3 million, respectively.  During the nine months ended September 30, 20192020 and 2018,2019, the Company repurchased approximately 89143 thousand and 66889 thousand shares at an average price of $37.81$37.86 and $36.37$37.81 per share for a total investment of $5.4 million and $3.4 million, and $24.3 million, respectively.
Exchange Offers
In February 2018, AC completed an exchange offer with respect to its Class A shares. Tendering shareholders received 1.35 GAMCO Class A shares for each AC Class A share, together with cash in lieu of any fractional share. Upon completion of the offer, shareholders tendered 493,954 Class A shares in exchange for 666,805 GAMCO Class A shares with a value of $17.7 million.
In October 2018, the Company completed an exchange offer with respect to its Class A shares. Tendering shareholders received 1.9 GAMCO Class A shares for each AC Class A share, together with cash in lieu of any fractional share. Upon completion of the offer, shareholders tendered 373,581 shares in exchange for 709,749 GAMCO shares with a value of approximately $14.6 million.
 
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 (a) holders of Class A Stock are entitled to one1 vote per share, while holders of Class B Stock are entitled to ten10 votes per share on all matters to be voted on by shareholders in general, and (b) holdersgeneral. 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

On November 30, 2015,The Company maintains 1 stock award and incentive plan (the “Plan”) approved by the shareholders on May 3, 2016, which is designed to provide incentives to attract and retain individuals key to the success of AC through direct or indirect ownership of our common stock. Benefits under the Plan may be granted in connection withany one or a combination of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents and other stock or cash-based awards. A maximum of 2 million shares of Class A Stock have been reserved for issuance under the Spin-off,Plan by the Company issued 554,100 AC RSA shares to GAMCO employees (including GAMCO employees who became AC employees) who held 554,100 GAMCO RSA shares at that date. The purposeCompensation Committee of the issuance was to ensure that any employee who had GAMCO RSAs were granted an equal numberBoard of AC RSAs so thatDirectors (the “Compensation Committee”) which is responsible for administering the total value ofPlan. Under the RSAs post-spin-off was equivalent toPlan, the total value pre-spin-off. In accordance with GAAP, we have allocated the stock compensation costs of both the ACCompensation Committee may grant RSAs and either incentive or nonqualified stock options with a term not to exceed ten years from the GAMCO RSAs between GAMCOgrant date and AC based upon the allocation of each employee’s responsibilities between the companies. The vesting of the GAMCO RSAs outstanding was accelerated in the first quarter of 2018. There were no AC RSAs outstanding at an exercise price that it may determine. Through September 30, 2019 and 2018 and during2020, approximately 700,000 shares have been awarded under the nine month periods then ended.Plan leaving approximately 1.3 million shares for future grants.
There were no RSAs issued by AC during the three and nine months ended September 30, 2019 or 2018.

In August and December 2018, the Company’s Board of Directors approved the grant of 172,800 shares of Phantom Restricted Stock awards (“Phantom RSAs”). Under the terms of the grants, which were effective August 8 and December 31 of 2018, 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 common stock during the vesting period will be paid to participants on vesting. Based on the price of the Company’s stock, the total value of the Phantom RSAs was $6.1 million as of the grant dates.

Pursuant to ASCAccounting Standards Codification (“ASC”) 718, the Phantom RSAs will beare 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-measurere-measures 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 considerconsiders 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 Common Stock on September 30, 2020 and December 31, 2019, the total liability recorded by the Company in compensation payable as of September 30, 2020 and December 31, 2019, with respect to the Phantom RSAs was $1.7 million and $2.0 million, respectively.

For the three and nine month periods ended September 30, 2020, the Company recorded approximately $0.1 million and ($0.3) million in stock-based compensation expense net of forfeitures, respectively.  For the three and nine month periods ending September 30, 2019, the Company recorded approximately $0.3 million and $1.0 million in stock-based compensation expense, respectively.  This expense is included in compensation expense in the consolidated statements of income.
 
As of September 30, 2019,2020, there were 157,30088,650 unvested Phantom RSAs outstanding. The unrecognized compensation cost related to these was $4.0$1.6 million which is expected to be recognized over a weighted-average period of 2.12.8 years.On February 4, 2020, 23,000 Phantom RSA’s were forfeited by teammates who transferred to Morgan Group.
For the nine and three months ended September 30, 2019 the Company recorded approximately $1.0 million and $0.3 million in stock-based compensation expense, respectively.  For the nine and three months ended September 30, 2018 the Company recorded approximately $0.4 million and $0.3 million in stock-based compensation expense, respectively.
I.  Goodwill and Identifiable Intangible AssetsAs of  December 31, 2019, 119,650 awarded but unvested Phantom RSAs were outstanding.

I.Goodwill and Identifiable Intangible Assets
 
At September 30, 2019,2020, goodwill and intangible assets 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 no0 indicators of impairment for the three months ended September 30, 20192020 or September 30, 2018,2019, and as such there was no impairment analysis performed or charge recorded.
J.  Commitments and Contingencies

J. Commitments and Contingencies
 
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 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 believes, however, that such amounts, both those that are probable and those that are reasonably possible, are not material to the Company’s financial condition, results of operations or cash flows at September 30, 2019.
G.research has agreed to indemnify clearing brokers for losses they may sustain from customer accounts introduced by G.research that trade on margin. At each of September 30, 20192020 and December 31, 2018, the total amount of customer balances subject to indemnification (i.e., unsecured margin debits) was immaterial.2019.
 
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.

K. Related Party Transactions
K.Discontinued Operations

On April 23, 2019,As a result of the Company issued a promissory noteMorgan Group spin-off, the results of its operations through August 5, 2020 have been classified in the consolidated statements of income as discontinued operations for $2.1 million to our Executive Chairman.  The promissory noteall periods presented.  There was re-paid with interest at 1% per annumno gain or loss on May 28, 2019.
L. Subsequent Events
On October 11, 2019, the research service agreements betweenspin-off for the Company, and two wholly-owned subsidiariesit was a tax-free spin-off to AC’s shareholders.

Other than a transition services agreement, Associated Capital does not have any significant continuing involvement in the operations of GBL, GAMCO Asset Management, Inc.Morgan Group after the spin-off, and Gabelli Funds, LLC, were agreedAssociated Capital will not have the ability to be terminated effectiveinfluence operating or financial policies of Morgan Group.  All stockholders received 0.022356 shares of Morgan Group stock for each share of AC stock that they held on the record date for the distribution.

Operating results for the period from January 1, 2020.  Additionally, compensation2020 through August 5, 2020 and other related coststhe three and nine month periods ending September 30, 2019 are expected to decrease.summarized below:

   
Three Months Ended
September 30, (1)
  
Nine Months Ended
September 30, (1)
 
  2020  2019  2020  2019 
Revenues            
Institutional research services $446  $2,354  $2,924  $6,343 
Other  37   10   36   37 
Total revenues  483   2,364   2,960   6,380 
Expenses                
Compensation  296   1,993   2,276   6,956 
Other operating expenses  266   787   1,699   2,312 
Total expenses  562   2,780   3,975   9,268 
Operating loss  (79)  (416)  (1,015)  (2,888)
Other income (expense)                
Net loss from investments  (5)  (7)  (8)  (7)
Interest and dividend income  2   38   81   158 
Total other income (expense), net  (3)  31   73   151 
Income/(loss) from discontinued operations before income taxes  (82)  (385)  (942)  (2,737)
Income tax provision/(benefit)  62   (84)  (205)  (596)
Income/(loss) from discontinued operations, net of taxes  (144)  (301)  (737)  (2,141)
Net income/(loss) attributable to noncontrolling interests  (5)  0   (105)  0 
Net income/(loss) attributable to GAMCO Investors, Inc.'s discontinued operations, net of taxes $(139) $(301) $(632) $(2,141)

On October 31, 2019,(1) During 2020 reflects the Company closed on the transaction wherebyperiods through August 5, 2020.

The assets and liabilities of Morgan Group Holding Co. (“Morgan Group”), an entity under common control ofhave been classified in the majority shareholder of AC, acquired G.research in exchange for 50 million shares of its 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, AC has an 83.3% ownership interest in Morgan Group and will consolidate the entity, which now includes G.research.  As the transaction is among entities under common control, all assets, liabilities and noncontrolling interest will be accounted for at historical cost.  As Morgan Group is a shell company with minimal assets and income and G.research will continue to be consolidated both before and after the transaction, ACs consolidated statement of financial condition as of December 31, 2019 as assets and statementliabilities of discontinued operations will not be materially different.and consist of the following:

   
December 31,
2019
 
    
Cash and cash equivalents $6,587 
Receivable from brokers  1,009 
Receivable from affiliates  31 
Deferred tax assets  184 
Other assets  326 
Total assets of discontinued operations  8,137 
     
Income taxes payable  54 
Compensation payable  710 
Accrued expenses and other liabilities  1,336 
Total liabilities of discontinued operations  2,100 
     
Noncontrolling interests from discontinued operations  1,003 
     
Net assets of discontinued operations $5,034 

The following table summarizes the net impact of the spin-off to the Company’s stockholders’ equity (deficiency) as of August 5, 2020:

Decrease in additional paid-in capital $(4,403)
Decrease in noncontrolling interest  (903)
Total $(5,306)

L.Subsequent Events
 
During the period from October 1, 20192020 to November 8,  2019,9, 2020, the Company repurchased 7,11029,471 shares at an average price of $36.39$33.85 per share.


On November 8, 2019, the Company9, 2020, AC’s board of directors declared a semi-annual dividend of $0.10 per share, which is payable January 9,on December 15, 2020 to class A and class B shareholders of record on December 26, 2019.
1, 2020.

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ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INCLUDING QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK) (“MD&A”)
ITEM 2:MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INCLUDING QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK) (“MD&A”)
 
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 8, 201916, 2020 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 that provides alternative investment management, institutional research and underwriting services. In addition, we derive investment income/(loss) from proprietary trading of cash and other assets awaiting deployment in our operating business.

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”).

In connection withOn August 5, 2020 (the “Spin-Off Date”), AC distributed to its stockholders all of the Spin-off, GAMCO issued a promissory note (the “GAMCO Note”common stock of Morgan Group Holdings Company (“MGHL”) to AC Group in the original principal amount of $250 million used to partially capitalizeand its subsidiaries held by the Company.  DuringMGHL owns and operates, directly or indirectly, the year ended December 31, 2018, ACinstitutional research businesses previously owned and operated by AC.  In the spin-off, each holder of AC’s common Stock of record as of 5:00 p.m. New York City time on July 30, 2020 (the “Record Date”), received principal repayments totaling $50 million on the GAMCO Note which fully satisfied the outstanding principal balance. The GAMCO Note bore interest at 4% per annum and had an original maturity date0.022356 share of November 30, 2020. In addition, Gabelli & Company Investment Advisers, Inc. (“GCIA” f/k/a Gabelli Securities, Inc.) acquired 4,393,055 shares of GAMCO Class AMGHL common stock for $150 millioneach share of AC common stock held on the Record Date.  Subsequent to the spin-off, AC no longer consolidates the financial results of MGHL for the purposes of its own financial reporting and the historical financial results of MGHL have been reflected in connection with the Spin-off.Company’s consolidated financial statements as discontinued operations for all periods presented through the spin-off Date.

Event-Driven Asset Management

We conduct our investment management activities through our wholly-owned subsidiary Gabelli & Company Investment Advisers, Inc. (“GCIA” f/k/a Gabelli Securities, 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 business earns management and incentive fees from its 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.
Event-Driven Asset Management

The event driven asset management business approaches its 35th anniversary in February 2020.  The divisionalternative investment strategies focus on fundamental, active, event drivenevent-driven special situations and merger arbitrage.  It is ledMerger activity in the third quarter topped $1 trillion, an increase of 94% compared to the second quarter and the strongest quarter for deal making since the second quarter of 2018.  Returns for the quarter were driven by merger arbitrage portfolios,completed deals, as well as continued progress on deals in the “Associates Funds” which returned an unleveraged +3.51%pipeline.  For third quarter, our gross return was 3.15%, (2.6% net of fees (+5.17% gross) for the first nine months of 2019. This strategy benefits from corporate merger and acquisitions (“M&A”) activity which reached $2.8 trillion globally in the first nine months of 2019.  Healthcare, E&P and technology were the most active sectors for deals. Our arbitrage team expects deal making to remain vibrant as the drivers for M&A remain unchanged.fees).  The strategy is offered domestically through partnerships and separately managed accounts.to institutional investors.  Internationally, the strategy is offered through corporations anda number of vehicles, including EU regulated UCITS structures.  The team continues to build new channel partnerships including managingstructures and the London Stock Exchange listed investment company, Gabelli Merger Plus Trust (“GMP”) an LSE-listed investment company.  While these initiatives serve to deepen and lengthen the franchise, they also broaden the client base globally.(GMP-LN).

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Institutional Research Services

We provide our institutional research and underwriting services through G.research, LLC (“G.research”), an indirect wholly-owned subsidiary of the Company. G.research is a broker-dealer registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is regulated by the Financial Industry Regulatory Authority (“FINRA”). G.research's revenues are derived primarily from institutional research services.
On October 31, 2019, the Company closed on the transaction whereby Morgan Group Holding Co. (“Morgan Group”), an entity under common control of the majority shareholder of AC, acquired G.research in exchange for 50 million shares of its stock.  In addition, management acquired 5.15 million Morgan Group shares under a private placement for $515,000.  Subsequent to the transaction and private placement, AC hashad an 83.3% ownership interest in Morgan Group and will consolidateconsolidated the entity, which now includesincluded G.research.
 
On March 16, 2020 our board of directors approved the distribution of AC’s Morgan Group Holdings to shareholders.

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.

The Company’s Board of Directors established the record date of July 11, 2019, we co-hosted a conference on Rule 852(b)(6), the Dynamics30, 2020, and Implicationsdistribution date of August 5, 2020 for the Fund Industry.  During the past quarter, G.research, in cooperation with Gabelli Funds, Co. hosted the 25th Aerospace and Defense Conference in New York on September 5th.  The schedulespin-off of upcoming conferences for the balance of the year include:Morgan Group to AC’s shareholders.
 

-
the 43rd Annual Gabelli Automotive Aftermarket Conference on November 4th – 6th

-
The Gabelli – Columbia Business School Healthcare Symposium on November 22nd
Based on the distribution ratio, on the distribution date, AC stockholders of record as of 5:00 pm, New York City time, on the record date, received approximately 0.022356 shares of Morgan Group common stock for each share of AC common stock they held on the record date.
 
In addition, G.research continues to sponsor non-deal roadshows providing corporate management access to our institutional clients.
For frequent, real-time updates from our research team on social media platforms, we invite you to visit GabelliTV, our online portal, at YouTube (www.youtube.com/GabelliTV) or Facebook (www.facebook.com/GabelliTV).
Direct Investing Business

The Gabelli direct investment business was re-launched after the spin-off of Associated Capital in 2015. Our objective is to partner with management to identify and surface value through strategic direction, operational improvements and financial structuring. The compounded, accumulated knowledge of our team in sectors across our core competencies provides advantages to value creation. The steps taken since formation are expected to grow long term value.  In this effort, we seek to collaborate with the management of target companies, establish common goals, support the restructuring and growth process, and more importantly, add value by bringing in creative capital solutions and extensive industry insights. This effort follows the framework we established with Gabelli-Rosenthal, a private equity fund launched in 1985.

Our direct investment business is developing along three core pillars; Gabelli Private Equity Partners, LLC (“GPEP”), formed in August 2017 with $150 million of authorized capital as a “fund-less” sponsor; the formation of Gabelli special purpose acquisition vehicles, the SPAC business (“SPAC”), launched in April 2018; and, the formation of Gabelli Principal Strategies Group, LLC (“GPS”) to pursue strategic operating initiatives.  These businessesGabelli & Partners team is extending our marketing reach within Asia and Europe, resulting in searches, proposal and new business for the UCITs, offshore funds and SMA’s.  Gabelli & Partners currently has a relationship with more than 20 third party marketing firms, principally private banks on continental Europe.  Gabelli Value for Italy (VALU), our initial vehicle launched and listed on the Italian Borsa, approached its second anniversary at the apex of the pandemic in Italy.  In light of this challenge, the board approved a liquidation of this entity which was completed on July 8, 2020.  However, the VALU effort successfully canvassed private company opportunities in Italy, with deal flow expanding throughout Europe.  We believe the platform is in place to further expand our direct investment efforts across the European continent.

On September 22, 2020, AC 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 along 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.

PMV and Sponsor are organized to directly invest with a focus on leveraged buyoutsboth included in the consolidated results of operations and restructuringsconsolidated statement of small and mid-sized companies.   financial condition of the Company.

GPEP has the flexibility to form partnerships with former executives of global industrial conglomerates to create long term value with no pre-determined exit timetable. The Gabelli SPAC business allows us to leverage our capital markets expertise through a direct investing vehicle.  We invite you to visit our activities on the corporate website:

https://www.associated-capital-group.com/DirectInvesting

In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in China and has since spread quickly to numerous countries, including the United States. On March 11, 2020, COVID-19 was identified as a global pandemic by the World Health Organization. In response to its spread, governmental authorities have imposed restrictions on travel and congregation and the temporary closure of many non-essential businesses in affected jurisdictions, including, beginning in March 2020, in the United States. As world leaders focused on the unprecedented human and economic challenges of COVID-19, global equity markets plunged as the coronavirus pandemic spread. In March, the unfolding events led to the worst month for stocks since 2008 and the worst first quarter since 1937. In the second quarter, as a result of unprecedented fiscal and monetary stimulus and the fast tracking of potential COVID-19 vaccines, the markets rebounded strongly. During the third quarter, markets continued to recover but at a slower pace than the earlier quarter in anticipation of further fiscal and monetary stimulus.  Any potential impact to our results of operations and financial condition will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of COVID-19 and the actions taken by authorities and other entities to contain COVID-19 or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our operating results and financial condition.

The pandemic and resulting economic dislocations have had adverse consequences on our AUM, resulting in decreased revenues, and increased realized and unrealized losses on our investment portfolio partially offset by decreased variable operating and compensation expenses. As a result of this pandemic, the majority of our employees (“teammates”) are working remotely. However, there has been no material impact of remote work arrangements on our operations, including our financial reporting systems, internal control over financial reporting, and disclosure controls and procedures, and there has been no material challenge in implementing our business continuity plan.

Condensed Consolidated Statements of Income
 
Investment advisory and incentive fees, which are based on the amount and composition of assets under management (“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 facilitates the ability to attract 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.
 
Incentive fees generally consist of an incentive allocation on the absolute gain in a portfolio or a fee of 20% of the economic profit, as defined in the agreements governing the investment vehicle or account. We recognize such revenue only when the uncertainty surrounding the amount of variable consideration has ended or at the time of an investor redemption.
Institutional research services revenues consist of brokerage commissions derived from securities transactions executed on an agency basis or direct payments from institutional clients. Commission revenues vary directly with the perceived value of the research provided, as well as account execution activity and new account generation.
 
Compensation costs include variable and fixed compensation and related expenses paid to officers, portfolio managers, sales, trading, research and all other professional staff. Variable compensation paid to sales personnel and portfolio management and may represent up to 55% of certain revenue streams.
 
Management fee is incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is paid to Mario J. Gabelli or his designee for acting as Executive Chairman pursuant to his Employment Agreement so long as he is with the Company.
 
Other operating expenses include general and administrative operating costs and clearing charges and fees incurred by our brokerage operations.
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/(loss) 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 A and D in our condensed consolidated financial statements included elsewhere in this report.

Condensed Consolidated Statements of Financial Condition
 
We ended the third quarter of 20192020 with approximately $926$853 million in cash and investments, net of securities sold, not yet purchased of $25$13 million. This includes $351$47 million of cash and cash equivalents; $29 million of short-term U.S. Treasury obligations; $250$532 million of securities, net of securities sold, not yet purchased, including government obligations of $331 million, shares of GAMCO and Gabelli Value for Italy S.p.a. with market values of $59$34 million and $9 million, respectively; and $296$274 million invested in affiliated and third-party funds and partnerships, including investments in affiliated closed end funds which have a value of $95$87 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.
 
Included in the Company’s assets are $177.7 million in assets comprised primarily of $175 million of government securities held in trust, liabilities of $6.6 million and redeemable noncontrolling interest of $155.0 million related to PMV and $2.1 million of nonredeemable noncontrolling interest related to the Sponsor.
Total shareholders’ equity was $889$854 million or $39.51$38.25 per share at September 30, 20192020 compared to $866$897 million or $38.36$39.93 per share on December 31, 2018.2019. The increasedecrease in equity from the end of 20182019 is driven primarily by our net incomeloss of $28$32.3 million, $5.4 million in repurchases of Class A Common Stock of AC and the spin-off of MGHL of $5.3 million.

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RESULTS OF OPERATIONS

(in thousands, except per share data) Three months ended September 30,  Nine months ended September 30,  Three months ended September 30,  Nine months ended September 30, 
 2019  2018  2019  2018  2020  2019  2020  2019 
Revenues                        
Investment advisory and incentive fees $2,753  $2,805  $8,199  $7,949  $1,865  $2,753  $6,424  $8,199 
Institutional research services 2,354  1,855  6,343  6,179 
Other  11   6   49   37   80   1   550   12 
Total revenues  5,118   4,666   14,591   14,165   1,945   2,754   6,974   8,211 
Expenses                            
Compensation 4,808  5,618  16,288  17,812   3,026   3,071   8,405   10,287 
Stock-based compensation 256  289  955  361 
Management fee 833  -  3,959  - 
Other operating expenses  2,230   2,258   7,425   7,187   2,471   2,276   6,422   9,072 
Total expenses  8,127   8,165   28,627   25,360   5,497   5,347   14,827   19,359 
Operating loss  (3,009)  (3,499)  (14,036)  (11,195)  (3,552)  (2,593)  (7,853)  (11,148)
Other income/(expense)                            
Net gain/(loss) from investments 7,606  (7,977) 42,351  (18,936)  15,603   7,613   (34,770)  42,358 
Interest and dividend income 2,618  3,466  9,699  9,338   1,218   2,581   4,675   9,541 
Interest expense  (69)  (70)  (148)  (142)  (32)  (70)  (146)  (148)
Shareholder-designated contribution  (2,782)  -   (3,007)  - 
Total other income/(expense), net  10,155   (4,581)  51,902   (9,740)  14,007   10,124   (33,248)  51,751 
Income/(loss) before income taxes 7,146  (8,080) 37,866  (20,935)  10,455   7,531   (41,101)  40,603 
Income tax expense/(benefit)  1,554   (858)  7,468   (4,204)  3,564   1,638   (8,858)  8,064 
Net income/(loss) 5,592  (7,222) 30,398  (16,731)
Net income/(loss) attributable to noncontrolling interests  (359)  157   2,232   1,053 
Income/(loss) before noncontroling interests  6,891   5,893   (32,243)  32,539 
Income/(loss) attributable to noncontrolling interests  937   (359)  (572)  2,232 
Income/(loss from continuing operations  5,954   6,252   (31,671)  30,307 
Income/(loss) from discontinued operations, net of taxes  (139)  (301)  (632)  (2,141)
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders $5,951  $(7,379) $28,166  $(17,784) $5,815  $5,951  $(32,303) $28,166 
                            
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders per share:                            
Basic- Continuing operations $0.27  $0.27  $(1.41) $1.34 
Basic - Discontinued operations  (0.01)  (0.01)  (0.03)  (0.09)
Basis - Total $0.26  $0.26  $(1.44) $1.25 
                
Diluted- Continuing operations $0.27  $0.27  $(1.41) $1.34 
Diluted - Discontinued operations  (0.01)  (0.01)  (0.03)  (0.09)
Diluted - Total $0.26  $0.26  $(1.44) $1.25 
                
Weighted average shares outstanding:                
Basic $0.26  $(0.32) $1.25  $(0.77)  22,354   22,514   22,391   22,550 
Diluted 0.26  (0.32) 1.25  (0.77)  22,354   22,514   22,391   22,550 
                
Actual shares outstanding - end of period  22,333   22,496   22,333   22,496 


Three Months Ended September 30, 20192020 Compared To Three Months Ended September 30, 20182019

Overview

Our operating loss for the quarter was $3.0$3.6 million compared to $3.5$2.6 million for the comparable quarter of 2018.2019. The decreaseincrease in operating loss was attributable to higherlower revenues of $0.5$0.8 million and higher other operating expenses of $0.2 million.  Other income was a gain of $10.2$14.0 million in the 20192020 quarter compared to a lossgain of $(4.6)$10.1 million in the prior year’s quarter primarily due to mark-to-market changes in the value of our investment portfolio.portfolio offset by our shareholder-designated contribution of $2.8 million. The Company recorded an income tax expense in the current quarter of $1.6$3.5 million compared to a benefitan income tax expense of $(0.9)$1.6 million in the year ago quarter. Consequently, ourOur current quarter  net income from continuing operations was $5.9$6.0 million, or $0.26$0.27 per diluted share, compared to net lossa income from continuing operations of $(7.4)$6.3 million, or $(0.32)$0.27 per diluted share, in the prior year’s comparable quarter.

Revenues

Total revenues were $5.1$1.9 million for the quarter ended September 30, 2019, $0.42020, $0.8 million higherlower than the prior year period.

We earn advisory fees based on the average level of AUM in our products. Advisory fees were $1.9 million for 2020, compared to $2.8 million for 2019, unchanged for the comparable quarterprior year period, a decrease of 2018.$0.9 million.  AUM of $1.7$1.25 billion increased $0.1decreased $0.4 billion in the current quarter from prior year quarter. Incentive fees are not recognized until the uncertainty surrounding the amount of variable consideration ends and the fee is crystalized, typically annually on December 31.  If the uncertainty surrounding the amount of variable consideration had ended on September 30, we would have recognized $2.2$1.1 million and $0.7$2.2 million of incentive fees for the quartersquarter ended September 30, 20192020 and 2018,2019, respectively.
Institutional research services revenues in the current year’s third quarter increased to $2.4 million, from the prior year’s period of $1.9 million due to an increase in sales manager fees related to secondary offerings.

Expenses

Compensation, which includes variable compensation, salaries, bonuses and benefits, was $4.8$3.0 million for the quarter ended September 30, 2019, compared to $5.6 million for the quarter ended September 30, 2018. Fixed compensation, which includes salaries and benefits, remained unchanged at $2.9 million each quarter was unchanged. Discretionary bonus accruals were $0.6 million and $1.0 million in the third quarter of 2019 and 2018, respectively. The remainder of compensation expense represents variable compensation that fluctuates with management and incentive fee revenues as well as the investment results of certain proprietary accounts. Variable payouts are also impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs. For 2019, these variable payouts were $1.3 million, down $0.4 million from $1.7 million in 2018.
For the three months ended September 30, 2019 and 2018, stock-based compensation was $0.3 million in both periods.
Management fee expense is incentive-based and entirely variable compensation equal to 10% of the aggregate adjusted pre-tax profits, which is paid to the Executive Chairman or his designees pursuant to his employment agreement with AC. In 2019, AC recorded a management fee of $0.8 million. There was no management fee expense in the third quarter of 2018 due to the year-to-date pre-tax loss.
Other operating expenses were $2.2 million during the third quarter of 20192020, compared to $2.3 million in the prior year quarter.
Other
Net gain/(loss) from investments is primarily related to the performance of our securities portfolio and investments in partnerships. Investment gains were $7.6 million in the 2019 quarter versus a loss of $(8.0) million in the comparable 2018 quarter reflecting mark-to-market changes in the value of our investments.
Interest and dividend income decreased to $2.6 million in the 2019 quarter from $3.5 million in the 2018 quarter.
Nine Months Ended September 30, 2019 Compared To Nine Months Ended September 30, 2018
Overview
Our operating loss for the year-to-date period was $14.0 million compared to $11.2$3.1 million for the comparable period of 2018.  Revenues were higher by $0.4 million over the prior year amount.  Investment income increased to $51.9 million in the 2019 period from a loss of $9.7 million in the prior year’s period primarily due to mark-to-market gains on our investment portfolio. Stock-based compensation increased by $0.6 million period-over-period. The Company recorded an income tax expense of $7.5 million in the current year compared to a benefit of $4.2 million in the year ago period. Consequently, our 2019 period net income increased to $28.2 million, or $1.25 per diluted share, from $(17.8) million, or $(0.77) per diluted share, in the prior year’s comparable period.
Revenues
Total revenues were $14.6 million and $14.2 million for the nine month periods ended September 30, 2019 and 2018, respectively.
Investment advisory and incentive fees were $8.2 million for the 2019 nine months compared to $8.0 million for the prior year nine months, an increase of $0.2 million. This increase is due to the increase in AUM over the period. Incentive fees are generally not recognized until the measurement period ends, typically annually on December 31. If the measurement period had instead ended on September 30, we would have recognized $5.3 million and $3.0 million for each of the ninethree months ended September 30, 2019 and 2018, respectively.
Institutional research services revenues in the current year’s first nine months increased to $6.3 million, from the prior year’s period of $6.2 million.
Expenses 
Compensation, which include variable compensation, salaries, bonuses and benefits, was $16.3 million for the nine months ended September 30, 2019, compared to $17.8 million for the nine months ended September 30, 2018.2019.  Fixed compensation, which include salaries and benefits, declinedincreased to $9.0$1.7 million for the 20192020 period from $10.0$1.3 million in the prior year. Discretionary bonus accruals were $2.4$0.5 million and $3.1$0.6 million in the 20192020 and 20182019 periods, respectively. The remainder of the compensation expense represents variable compensation that fluctuates with management fee and incentive allocation revenues and gains on investment portfolios. Variable payouts as a percent of revenues are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs. For 2020, these variable payouts were $0.8 million, down $0.1 million from $0.9 million in 2019.

For the three months ended September 30, 2020 and 2019, stock-based compensation was $0.1 million and $0.3 million, respectively.

Management fee expense, recorded in other operating expense, represents incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is payable to Mario J. Gabelli pursuant to his employment agreement.  No management fee expense was recorded for the three-month period ended September 30, 2020 due to the year to date pre-tax loss.  A management fee expense of $0.8 million was recorded for the three-month period ended September 30, 2019.

Other operating expenses prior to management fees were $2.5 million during the third quarter of 2020 compared to $1.4 million in the third quarter of 2019.  The increase was due primarily to higher legal and accounting fees of $0.6 million related to the Morgan Group spin-off.

Other

Net gain/(loss) from investments is primarily related to the performance of our securities portfolio and investments in partnerships. Investment gains were $15.6 million in the 2020 quarter versus a gain of $7.6 million in the comparable 2019 quarter reflecting mark-to-market recoveries in the value of our investments.

Interest and dividend income decreased to $1.2 million in the 2020 quarter from $2.5 million in the 2019 quarter primarily due to lower interest rates on our cash balances and US Treasuries and decreased dividends from the prior year’s quarter.

Nine Months Ended September 30, 2020 Compared To Nine Months Ended September 30, 2019

Overview

Our operating loss for the year-to-date period was $7.9 million compared to $11.1 million for the comparable period of 2019.  Revenues declined by $1.2 million from $8.2 million in the prior year-to-date period.  Other  income decreased to a loss $33.2 million in the 2020 period from a gain of $51.8 million in the prior year’s period primarily due to mark-to-market gains on our investment portfolio. Stock-based compensation fell by $1.3 million year-over-year. The Company recorded an income tax benefit of $9.0 million in the current year compared to an expense of $8.1 million in the year ago period. Consequently, our 2020 period net loss from continuing operations increased to $31.7 million, or $(1.41) per diluted share, from net income from continuing operations of $30.3 million, or $1.34 per diluted share, in the prior year’s comparable period.

Revenues

Total revenues were $7.0 million and $8.2 million for the nine month periods ended September 30, 2020 and 2019, respectively.

Advisory fees, including incentive fees, were $6.4 million for the 2020 nine months compared to $8.2 million for the prior year nine months, a decrease of $1.8 million. This decrease is due to the decrease in average AUM over the period.

Other revenues were $0.6 million for the nine month period ended September 30, 2020 primarily due to rental income on properties acquired in the U.S. and the UK during 2019 and 2020, respectively.

Compensation, which includes variable compensation, salaries, bonuses and benefits, was $8.4 million for the nine months ended September 30, 2020, compared to $10.3 million for the nine months ended September 30, 2019.  Fixed compensation, which include salaries and benefits, declined to $4.6 million for the 2020 period from $4.1 million in the prior year. Discretionary bonus accruals were $1.6 million and $1.7 million in the 2020 and 2019 periods, respectively. The remainder of the compensation expense represents variable compensation that fluctuates with management fee and incentive allocation revenues and gains on investment portfolios. Variable payouts as a percent of revenues are impacted by the mix of products upon which performance fees are earned and the extent to which they may exceed their allocated costs.  For 2020, these variable payouts were $2.5 million, down $1.0 million from $3.5 million in 2019.

For the nine months ended September 30, 20192020 and 2018,2019, stock-based compensation was $(0.3) million and $1.0 million, respectively.  The decrease was due to the cancellation of Phantom RSAs related to headcount reductions at G.research and $0.4 million, respectively.volatility in AC stock price.

Management fee expense, recorded in other operating expense, represents incentive-based and entirely variable compensation in the amount of 10% of the aggregate pre-tax profits which is payable to Mario J. Gabelli pursuant to his employment agreement. AC recorded management fee expense of $4.0 million for the nine month period ended September 30, 2019.  No management fee expense was recorded for the nine month period ended September 30, 20182020 due to the year to date pre-tax loss.

Other operating expenses were $7.4$6.4 million during the first nine months of 20192020 compared to $7.2$5.1 million in the prior year.  The increase was due primarily to higher legal and accounting fees of $1.0 million related to the Morgan Group spin-off.
Other

Investment gainslosses were $42.4$34.8 million in the 20192020 nine month period compared to a loss of $(18.9)$42.4 million lossgain in the comparable 20182019 period reflecting mark-to-market changes in the value of our investments.

Interest and dividend income increaseddecreased to $9.7$4.7 million in the 20192020 period from $9.3$9.5 million in 2018.2019 primarily due to lower interest rates on our cash balances and lower dividend income of $4.5 million.

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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 $1.7$1.25 billion as of September 30, 2019, an increase2020, a decrease of 8.6%27.1% and increase of 2.0%24.2% over the December 31, 20182019 and September 30, 20182019 periods, respectively. The changes were attributable to market appreciation/(depreciation) and additional investor contributions, net of redemptions.
 
Assets Under Management (in millions)


          % Change From           % Change From 
 
September 30,
2019
  
December 31,
2018
  
September 30,
2018
  
December 31,
2018
  
September 30,
2018
  
September 30,
2020
  
December 31,
2019
  
September 30,
2019
  
December 31,
2019
  
September 30,
2019
 
                              
Event Merger Arbitrage $1,466  $1,342  $1,466  9.2  -  $1,091  $1,525  $1,466   (28.5)  (25.6)
Event-Driven Value 128  118  89  8.5  43.8   105   132   128   (20.5)  (18.0)
Other  57   60   64  (5.0) (10.9)  55   59   57   (6.8)  (3.5)
Total AUM $1,651  $1,520  $1,619  8.6  2.0  $1,251  $1,716  $1,651   (27.1)  (24.2)


Fund flows for the three months ended September 30, 20192020 (in millions):


 
June 30,
2019
  
Market
appreciation/
(depreciation)
  
Net cash
flows
  
September 30,
2019
  
June 30,
2020
  
Market
appreciation/
(depreciation)
  
Net cash
flows
  
September 30,
2020
 
                        
Event Merger Arbitrage $1,422  $(9) $53  $1,466  $1,147  $46  $(102) $1,091 
Event-Driven Value 127  (2) 3  128   104   2   (1)  105 
Other  58   (1)  -   57   54   2   (1)  55 
Total AUM $1,607  $(12) $56  $1,651  $1,305  $50  $(104) $1,251 


Fund flows for the nine months ended September 30, 2019 (in millions):

 
 
 
 
December 31,
2018
  
Market
appreciation/
(depreciation)
  
Net cash
flows
  
September 30,
2019
 
             
Event Merger Arbitrage $1,342  $30  $94  $1,466 
Event-Driven Value  118   5   5   128 
Other  60   5   (8)  57 
Total AUM $1,520  $40  $91  $1,651 

OPEN LIQUIDITY AND CAPITAL RESOURCES
 
Our principal assets are highly liquid in nature and consist of cash and cash equivalents, short-term investments, marketable securities and investments in funds and investment partnerships. Cash and cash equivalents are comprised primarily of U.S. Treasury money market funds. Although investments in partnerships and offshore funds are subject to restrictions as to the timing of redemptions, the underlying investments of such partnerships or funds are, for the most part, liquid, and the valuations of these products reflect that underlying liquidity.

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

 Nine months ended September 30,  Nine months ended September 30, 
 2019  2018  2020  2019 
Cash flows provided by (used in):   
Cash flows provided by (used in) from continuing operations:   
Operating activities $(44,828) $4,617  $(272,203) $(42,321)
Investing activities (3,591) 15,000   (176,792)  (3,591)
Financing activities  (10,211)  36,111   154,211   (10,211)
Net increase (decrease) (58,630) 55,728 
Net decrease from continuing operations  (294,784)  (56,123)
Cash flows provided by (used in) discontinued operations        
Operating activities  114   (2,507)
Net decrese in cash and cash equivalents  (294,670)  (58,630)
Cash and cash equivalents at beginning of period 409,564  293,112   342,001   398,363 
Increase in cash from consolidation  -   47 
Cash and cash equivalents at end of period $350,934  $348,887  $47,331  $339,733 


We require relatively low levels of capital expenditures and have a highly variable cost structure which fluctuates based on the level of revenues we receive. We anticipate that our available liquid assets should be more than sufficient to meet our cash requirements. At September 30, 2019,2020, we had total cash and cash equivalents of $351$47 million and $575$678 million in net investments. Of these amounts, $7$11.3 million and $37$24.4 million, respectively, were held by consolidated investment funds and may not be readily available for the Company to access.

Net cash used in operating activities from continuing operations was $44.8$272.2 million for the nine months ended September 30, 2020 due to $283.1 million of increases in trading securities, our net loss of $32.3 million, and net receivables/payables of $6.1 million partially offset by net distributions from investment partnerships of $20.6 million and $28.7 million of adjustments for noncash items, primarily losses on investments securities and partnership investments and deferred taxes. Net cash used in investing activities from continuing operations was $176.8 million due to the investment of cash in a trust account by the PMV SPAC of $175 million, the purchase of a building for $11.1 million and purchases of securities of $0.4 million partially offset by proceeds from sales of securities of $8.4 million and return of capital on securities of $1.3 million. Net cash provided by financing activities from continuing operations was $154.2 million resulting from contributions from redeemable non-controlling interests of $162.6 million and nonredeemable non-controlling interests of $2.1 million reduced by dividends paid of $4.5 million and stock buyback payments of $5.4 million.  Cash provided by discontinued operations from the spin-off of MGHL were $0.1 million.
Net cash used in operating activities from continuing operations was $42.3 million for the nine months ended September 30, 2019 primarily due to $74.3our net income adjusted for non-cash items of $34.1 million and $38.6 million of net increaseslosses on sale of trading securities and net contributions to investment partnerships, partially offset by our$54.3 million of increases in trading securities and net incomedecreases of $30.4 million.$16.5 million to receivables and accrued expenses.  Net cash used inby investing activities from continuing operations was $3.6 million due to net proceeds from sales of available for sale securities and return of capital distributions of $2.7 million offset by the purchase of a building for $6.3 million and purchases of securities of $1.4 million partially offset by proceeds from sales of securities of $2.7 million and return of capital on securities of $1.3 million. Net cash used in financing activities from continuing operations was $10.2 million largely resulting from dividends paid of $4.5 million,and stock buyback payments of $3.4$7.9 million and redemptions from consolidated funds of $2.3 million.
Net cash provided byused in operating activities was $4.6 million for the nine months ended September 30, 2018 primarily due to a $19.7 million reduction in payable to brokers, and a $3.4 million reduction in investments in securities and net distributions from partnerships partially reduced by a net loss of $16.7 million.  Net cash provided by investing activities was $15.0 million due to proceeds received from a note.  Net cash provided by financing activities was $36.1 million, largely resultingdiscontinued operations from the $50 million prepaymentspin-off of the GAMCO Note offset by dividends paid of $4.7 million, stock buyback payments of $6.6 million, and redemptions of redeemable noncontrolling interests of $2.7MGHL were $2.5 million.
G.research is a registered broker-dealer, and is subject to the SEC Uniform Net Capital Rule 15c3-1 (the “Rule”), which specifies, among other requirements, minimum net capital requirements for registered broker-dealers. G.research computes its net capital under the alternative method as permitted by the Rule, which requires that minimum net capital be the greater of $250,000 or 2% of the aggregate debit items in the reserve formula for those broker-dealers subject to Rule 15c3-3. G.research had net capital, as defined, of $3.9 million, exceeding the required amount of $250,000 by $3.6 million at September 30, 2019. G.research’s net capital requirements may increase to the extent it engages in other business activities in accordance with applicable rules and regulations.

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 A and the Company’s Critical Accounting Policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in AC’s 20182019 Annual Report on Form 10-K filed with the SEC on March 8, 201916, 2020 for details on Critical Accounting Policies.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 3.  Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company this information is not required to be provided.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

InOur current management, including our CEO and CAO, has evaluated the second quartereffectiveness of 2019,our disclosure controls and procedures as previously reporteddefined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2020. Based on this evaluation of our Quarterly Report on form 10-Q for the quarter ending Junedisclosure controls and procedures management has concluded that our disclosure controls and procedures were not effective as of September 30, 2019, we identified2020 because of a material weakness in our internal control over financial reporting, as further described below:below.

Management conducted an assessment of the effectiveness ofNotwithstanding that our disclosure controls and procedures as of JuneSeptember 30, 2019,2020 were not effective, and the material weakness in our internal control over financial reporting as described below, management believes that the consolidated financial statements and related financial information included in this Quarterly Report on Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act Rule 13a-15(e)and based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”)). As a result of this assessment, management identified a material weakness inOur internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with GAAP.

An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility exists that a material misstatement of our annual or interim financial statements willwould not be prevented or detected on a timely basis.

Under the supervision and with the participation of our management we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the COSO framework. Based on evaluation under these criteria, management determined, based upon the existence of the material weakness described below, that we did not maintain effective internal control over financial reporting as of September 30, 2020.

The material weakness forin internal control over financial reporting was identified in 2019 and caused by the period ended June 30, 2019Company not having sufficient personnel with technical accounting and reporting skills, which resulted from turnover in the role that oversees the day-to-day accounting and financial reporting functions for the Company.  Particularly, there was not sufficient accounting personnellack of segregation of duties to separate interim financial statement preparation from senior management review and misstatements during 2019 related to nonroutine transactions that were corrected before issuance of those statements.our Form 10Qs and 10K for periods in 2019.  This material weakness resulted in an increased risk of a material misstatement in the financial statements forstatements.

Changes in Internal Control Over Financial Reporting

There were no changes during the period presented.quarter ended September 30, 2020 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation Plan and Status

In light of the material weakness in our internal controls we performed additional procedures to ensure that our consolidated financial statements included in this Form 10-Q were prepared in accordance with US GAAP. Following such procedures, our management, including our principal executive officer and principal financial officer, have concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of our operations and our cash flows for the periods presented in this Form 10-Q, in conformity with GAAP.
However, as a result of the material weakness in internal control over financial reporting, described above, management previously concluded that, as of June 30, 2019, our internal control over financial reporting was not effective in accordance with the Exchange Act Rule 13a-15(e).
Management has taken steps to enhance and improve the design and operating effectiveness of our internal controls over financial reporting, which we believe mitigated risk. To address such weakness, we implementedincluding the following steps during our fiscal quarter ending September 30, 2019:implemented steps: (i) appointed additional qualified personnel to address inadequate segregation of duties and ineffective risk management;duties; (ii) assigned preparation and review responsibilities to additional personnel for the financial reporting process; (iii) documented the completion and review of assigned responsibilities through checklists and commenced a search to add additional finance staff to augment accounting personnel.

The noted material weakness identified has not been remediated, and therefore, our internal control over financial reporting is not effective in accordance with the Exchange Act Rule as of September 30, 2019.  We are working to remediate the material weakness as quickly and efficiently as possible. However, we did identify misstatements during the period ended September 30, 2020 related to nonroutine transactions that were corrected before the issuance of our Form 10Q.  The material weakness will not be considered remediated until the remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Notwithstanding the material weakness described above, our management has concluded that the financial statements included elsewhere in this quarterly report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows in conformity with generally accepted accounting principles.
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
Part II:Other Information
 
Item 1.  Legal Proceedings
Item 1.Legal Proceedings
 
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. The Company is 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 that the Company believes are probable and estimable. Furthermore, the Company evaluates whether there exist losses which may be reasonably possible and will, if material, make the necessary disclosures. However, management believes such amounts, both those that would be probable and those that would be reasonably possible, are not material to the Company’s financial condition, results of operations or cash flows at September 30, 2019.2020.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to the repurchase of Class A Common Stock of AC during the three months ended September 30, 2019:2020:

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
 
7/01/19 - 7/31/19  17,392  $37.90   17,392   1,134,432 
8/01/19 - 8/31/19  8,574   35.82   8,574   1,125,858 
9/01/19 - 9/30/19  10,528   35.61   10,528   1,115,330 
Totals  36,494  $36.75   36,494     
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
 
07/01/20 - 07/31/20  804  $35.94    804   980,804 
08/01/20 - 08/31/20  8,607   38.11    8,607   972,197 
09/01/20 - 09/30/20  20,326   36.62 (a)  20,326   951,871 
Totals  29,737  $37.03    29,737     


(a) Post Spin-off of MGHL

Item 6.
(a) Exhibits

Certification of CEO pursuant to Rule 13a-14(a).
  
Certification of CAO pursuant to Rule 13a-14(a).
  
Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  
Certification of CAO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
  
101.INS
XBRL Instance Document
  
101.SCH
XBRL Taxonomy Extension Schema Document
  
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
  
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
  
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
  
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document


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/ Kenneth D. Masiello
Name: Kenneth D. Masiello
Title:   Chief Accounting Officer


Date: November 12, 201910, 2020




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