[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls for the reporting period [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The unaudited financial statements for Q1 2021 show a significant net income turnaround driven by investment gains and stable total assets [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets slightly decreased to $1.171 billion, while total equity increased to $915.7 million as of March 31, 2021 Key Balance Sheet Items (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $279,725 | $39,509 | | Investments in U.S. Treasury Bills | $75,000 | $344,453 | | Total assets | $1,171,266 | $1,174,545 | | **Liabilities & Equity** | | | | Total liabilities | $60,450 | $66,328 | | Total equity | $915,746 | $901,389 | | Total liabilities and equity | $1,171,266 | $1,174,545 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reported a net income of $18.6 million for Q1 2021, a significant improvement driven by investment gains Income Statement Summary (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total revenues | $2,325 | $2,962 | | Total expenses | $8,690 | $3,602 | | Operating loss | $(6,365) | $(640) | | Net gain/(loss) from investments | $31,321 | $(102,089) | | Net income/(loss) attributable to ACG | $18,555 | $(73,355) | | Diluted EPS | $0.83 | $(3.27) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly increased to $243.6 million, ending Q1 2021 with $279.7 million in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $243,568 | $27,535 | | Net cash provided by/(used in) investing activities | $710 | $(10,607) | | Net cash (used in) financing activities | $(4,062) | $(6,004) | | **Net increase in cash** | **$240,216** | **$10,006** | | Cash at end of period | $279,725 | $352,007 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, significant disclosures including SPAC consolidation, revenue breakdown, and subsequent events - The company sponsored the **$175 million IPO** of its SPAC, PMV Consumer Acquisition Corp. (NYSE:PMVC), in September 2020[33](index=33&type=chunk)[34](index=34&type=chunk) - AC consolidates PMV as it is the primary beneficiary of the Sponsor VIE, resulting in the consolidation of **$177.4 million of assets** and **$154.5 million of redeemable noncontrolling interests** as of March 31, 2021[35](index=35&type=chunk) - The spin-off of Morgan Group Holding Co. was completed on August 5, 2020, with its historical financial results presented as discontinued operations through March 31, 2020[39](index=39&type=chunk)[40](index=40&type=chunk)[96](index=96&type=chunk) Revenue Breakdown (in thousands) | Revenue Source | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Asset-based advisory fees | $1,183 | $1,820 | | Performance-based advisory fees | $9 | $0 | | Sub-advisory fees | $1,033 | $880 | | **Total Inv. advisory & incentive fees** | **$2,225** | **$2,700** | - For the three months ended March 31, 2021, the company repurchased **0.1 million shares** at an average price of **$35.24 per share** for a total of **$4.2 million**[89](index=89&type=chunk)[90](index=90&type=chunk) - As of March 31, 2021, **774,015 shares** remained available for repurchase under the program[90](index=90&type=chunk) - Subsequent to the quarter's end, on May 5, 2021, the board declared a semi-annual dividend of **$0.10 per share**[101](index=101&type=chunk) - Between April 1 and May 6, 2021, the company repurchased another **40,229 shares**[101](index=101&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Q1 2021 financial performance, highlighting net income growth from investment gains and AUM increase [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Operating loss widened to $6.4 million due to increased expenses, but overall profitability was driven by significant investment gains - The primary reason for the shift from a net loss of **$73.4 million** in Q1 2020 to a net income of **$18.6 million** in Q1 2021 was the mark-to-market changes in the investment portfolio, resulting in a gain of **$30.7 million** in 'Other income' versus a loss of **$100.1 million** in the prior year[125](index=125&type=chunk) - Compensation expense rose to **$3.9 million** from **$2.2 million** year-over-year, largely due to an increase in stock-based compensation from **$(0.8) million** to **$0.4 million**, reflecting the recovery of AC's stock price[127](index=127&type=chunk) - A management fee expense of **$2.7 million** was recorded in Q1 2021, payable to the Executive Chairman based on 10% of aggregate pre-tax profits, with no such fee recorded in Q1 2020 due to a pre-tax loss[128](index=128&type=chunk) [Assets Under Management](index=28&type=section&id=Assets%20Under%20Management) Assets Under Management reached $1.495 billion, increasing 10.7% from year-end 2020 due to net inflows and market appreciation AUM by Strategy (in millions) | Strategy | March 31, 2021 | Dec 31, 2020 | March 31, 2020 | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,253 | $1,126 | $1,312 | | Event-Driven Value | $196 | $180 | $112 | | Other | $46 | $45 | $49 | | **Total AUM** | **$1,495** | **$1,351** | **$1,473** | AUM Flow for Q1 2021 (in millions) | Metric | Amount | | :--- | :--- | | AUM at Dec 31, 2020 | $1,351 | | Market appreciation | $33 | | Net cash flows | $111 | | **AUM at March 31, 2021** | **$1,495** | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $279.7 million in cash and significant operating cash flow - The company ended Q1 2021 with cash and cash equivalents of **$279.7 million**, Investments in U.S. Treasury Bills of **$75.0 million**, and **$566.7 million** of investments net of securities sold short[136](index=136&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exempt from providing quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company - The company is exempt from providing quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[141](index=141&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to a material weakness in internal control over financial reporting, with remediation ongoing - Management concluded that disclosure controls and procedures were not effective as of March 31, 2021, due to a material weakness in internal control over financial reporting[142](index=142&type=chunk) - The material weakness, identified in 2019, was caused by insufficient personnel with technical accounting skills, leading to a lack of segregation of duties between financial statement preparation and senior management review[147](index=147&type=chunk) - Remediation steps include hiring additional qualified personnel, assigning distinct preparation and review responsibilities, and documenting these processes[150](index=150&type=chunk) - The material weakness will not be considered fully remediated until the new controls have operated effectively for a sufficient period[150](index=150&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details legal proceedings, unregistered sales of equity securities, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2021, the company is not subject to any legal proceedings expected to materially impact its financial condition or operations - As of March 31, 2021, the company is not subject to any legal proceedings where a claim for damages exceeds **10% of its consolidated assets**[153](index=153&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2021, the company repurchased 119,087 shares of its Class A Stock at an average price of $35.24 per share Class A Stock Repurchases for Q1 2021 | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2021 | 28,026 | $34.84 | | Feb 2021 | 33,792 | $35.35 | | Mar 2021 | 57,269 | $35.39 | | **Total** | **119,087** | **$35.24** | [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL data files

Part I [Business](index=5&type=section&id=Item%201.%20Business) Associated Capital Group, Inc. (AC) provides alternative investment management services and operates a direct investment business through its subsidiary, Gabelli & Company Investment Advisers, Inc - The company provides alternative investment management services and operates a direct investment business, investing in new and existing businesses[16](index=16&type=chunk) - Investment management activities are conducted through its wholly-owned subsidiary Gabelli & Company Investment Advisers, Inc. (GCIA), which serves as a general partner or investment manager to various investment funds[17](index=17&type=chunk) - The company's direct investment business is structured around three pillars: Gabelli Private Equity Partners, LLC (GPEP), the SPAC business, and Gabelli Principal Strategies Group, LLC (GPS)[22](index=22&type=chunk) [Assets Under Management](index=6&type=section&id=Item%201.%20Business%20-%20Assets%20Under%20Management) As of December 31, 2020, Associated Capital Group managed approximately **$1,351 million** in assets, a decrease from **$1,716 million** at the end of 2019, primarily in Event Merger Arbitrage strategy Assets Under Management (in millions) | Strategy | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Event Merger Arbitrage | $1,126 | $1,525 | | Event-Driven Value | $180 | $132 | | Other | $45 | $59 | | **Total** | **$1,351** | **$1,716** | - Total AUM includes **$235 million** of proprietary capital as of December 31, 2020, compared to **$259 million** in the prior year[21](index=21&type=chunk) [Morgan Group Holding Co. Spin-Off](index=7&type=section&id=Item%201.%20Business%20-%20Morgan%20Group%20Holding%20Co.%20Spin-Off) The company completed the spin-off of its 83.3% stake in Morgan Group Holding Co., including its institutional research services business, on August 5, 2020 - The spin-off of Morgan Group Holding Co., which included the institutional research services business, was completed on August 5, 2020[25](index=25&type=chunk) - AC shareholders received approximately **0.022356 shares** of Morgan Group common stock for each share of AC common stock held[25](index=25&type=chunk) - The historical financial results of Morgan Group are reported as discontinued operations for all periods presented through August 5, 2020[26](index=26&type=chunk) [Business Strategy](index=7&type=section&id=Item%201.%20Business%20-%20Business%20Strategy) The company's strategy focuses on global growth through its "Private Market Value (PMV) with a Catalyst™" approach, expanding advisory business, direct investments, and international partnerships - Continuing the "Private Market Value (PMV) with a Catalyst™" investing approach, based on Graham & Dodd principles[28](index=28&type=chunk) - Growing the Investment Partnerships advisory business by introducing new products and expanding internationally[28](index=28&type=chunk) - Leveraging research capabilities to pursue acquisitions, alliances, and direct investments, such as the **$175 million** IPO of its SPAC, PMV Consumer Acquisition Corp[29](index=29&type=chunk) - Pursuing partnerships and joint ventures, particularly with firms that have Asian/European distribution capabilities[30](index=30&type=chunk) [Regulation](index=9&type=section&id=Item%201.%20Business%20-%20Regulation) The company's operations are subject to extensive U.S. and European regulations, including SEC, ERISA, FATCA, CRS, AIFMD, UCITS, and MiFID II, with Brexit adding regulatory uncertainty - The company and its U.S. subsidiaries are primarily regulated at the federal level by the SEC and the Department of Labor[36](index=36&type=chunk) - European activities are impacted by the EU's Alternative Investment Fund Managers Directive (AIFMD), which regulates managers of alternative investment funds and restricts marketing within the EEA[45](index=45&type=chunk) - The EU's revised Markets in Financial Instruments Directive (MiFID II) created new rules regarding the use of "soft dollars" to pay for research, requiring firms to pay for it from their own resources or a separate client research payment account[49](index=49&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Associated Capital Group, Inc. is not required to provide the information for this item - Smaller reporting companies are not required to provide the information required by this item[59](index=59&type=chunk) [Properties](index=12&type=section&id=Item%202.%20Properties) The company owns its main offices in Greenwich, CT, and acquired a London property in 2020, which is fully leased to its affiliate, GAMCO - The company owns its offices at 191 Mason Street, Greenwich, CT through a wholly owned subsidiary[60](index=60&type=chunk) - On March 3, 2020, AC acquired a property in London, UK, which is fully leased to GAMCO[60](index=60&type=chunk) [Legal Proceedings](index=13&type=section&id=Item%203.%20Legal%20Proceedings) The company is not subject to material legal proceedings, and management believes potential losses from current matters are not material to its financial condition as of December 31, 2020 - The company is not currently subject to any legal proceedings with claims exceeding **10%** of its consolidated assets[62](index=62&type=chunk) - Management believes that potential losses from any current legal or regulatory matters are not material to the company's financial condition as of December 31, 2020[62](index=62&type=chunk) Part II [Market For The Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities](index=13&type=section&id=Item%205.%20Market%20For%20The%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20And%20Issuer%20Purchases%20Of%20Equity%20Securities) The company's Class A Stock trades on the NYSE under 'AC', and it has an active, expanded stock repurchase program, with **58,769 shares** repurchased in Q4 2020 - The company's Class A Stock is traded on the NYSE under the symbol AC[63](index=63&type=chunk) Class A Stock Repurchases (Q4 2020) | Period | Total Shares Repurchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | Oct 2020 | 27,668 | $33.93 | | Nov 2020 | 5,064 | $35.25 | | Dec 2020 | 26,037 | $35.69 | | **Total Q4** | **58,769** | **$34.82** | - As of December 31, 2020, **893,102 shares** remained available for repurchase under the publicly announced program[65](index=65&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%207.%20Management%27s%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) In 2020, the company's AUM decreased to **$1,351 million**, total revenues fell **14.5%** to **$19.0 million**, and net income decreased to **$18.8 million**, while maintaining strong liquidity - The COVID-19 pandemic and resulting economic dislocations did not have a significant adverse impact on the company's AUM or operations, with most employees working remotely without material disruption[69](index=69&type=chunk)[70](index=70&type=chunk) Financial Highlights (Year Ended Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | AUM (end of period, in millions) | $1,351 | $1,716 | | Average AUM (in millions) | $1,399 | $1,621 | | Net income per share – diluted ($) | $0.84 | $1.74 | | Book Value Per Share ($) | $40.36 | $39.89 | - The company ended 2020 with approximately **$911 million** in cash and investments, providing flexibility for strategic objectives[76](index=76&type=chunk) [Assets Under Management Highlights](index=16&type=section&id=Item%207.%20MD%26A%20-%20Assets%20Under%20Management%20Highlights) Total AUM decreased by **21.3%** to **$1,351 million** in 2020, primarily due to **$450 million** net outflows from a single institutional client redemption in the Event Merger Arbitrage strategy AUM by Strategy (in millions) | Strategy | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,126 | $1,525 | (26.2)% | | Event-Driven Value | $180 | $132 | 36.4% | | Other | $45 | $59 | (23.7)% | | **Total** | **$1,351** | **$1,716** | **(21.3)%** | Changes in AUM during 2020 (in millions) | Strategy | Beginning AUM | Inflows | Outflows | Investment Return | Ending AUM | | :--- | :--- | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,525 | $212 | $(690) | $79 | $1,126 | | Event-Driven Value | $132 | $64 | $(19) | $3 | $180 | | Other | $59 | $1 | $(18) | $3 | $45 | | **Total AUM** | **$1,716** | **$277** | **$(727)** | **$85** | **$1,351** | - The decline in AUM was primarily due to a **$450 million** net outflow, largely from a redemption by one institutional client following its merger[81](index=81&type=chunk) [Operating Results (2020 vs. 2019)](index=16&type=section&id=Item%207.%20MD%26A%20-%20Operating%20Results%20(2020%20vs.%202019)) Net income decreased to **$18.8 million** in 2020 from **$39.2 million** in 2019, driven by lower net gains from investments and a **14.5%** decrease in total revenues Revenue Breakdown (in thousands) | Revenue Type | 2020 | 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Investment advisory and incentive fees | $18,288 | $22,148 | $(3,860) | (17.4)% | | Other revenues | $695 | $57 | $638 | 1,119.3% | | **Total revenues** | **$18,983** | **$22,205** | **$(3,222)** | **(14.5)%** | - Compensation expense decreased by **$4.4 million** to **$19.4 million** in 2020, primarily due to lower variable payouts tied to performance fees[88](index=88&type=chunk) - Net gains from investments decreased to **$36.9 million** in 2020 from **$60.8 million** in 2019, mainly due to mark-to-market changes in the proprietary portfolio[89](index=89&type=chunk) - The effective tax rate for 2020 was **31.4%**, higher than the statutory **21%** rate, primarily due to state income taxes, a valuation allowance on charitable contributions, and foreign investments[90](index=90&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Item%207.%20MD%26A%20-%20Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with **$39.5 million** in cash and equivalents, with net cash used in operating activities at **$279.5 million** and net cash provided by financing activities at **$150.9 million** in 2020 Summary Cash Flow Data (in thousands) | Activity | Year Ended 2020 | Year Ended 2019 | | :--- | :--- | :--- | | Operating activities (continuing) | $(279,483) | $(41,964) | | Investing activities (continuing) | $(174,072) | $(5,058) | | Financing activities (continuing) | $150,949 | $(11,584) | | **Net decrease in cash** | **$(302,492)** | **$(60,976)** | - At December 31, 2020, the company had **$39.5 million** in cash and cash equivalents, **$344.4 million** in U.S. Treasury Bills, and **$527.0 million** in other investments (net)[95](index=95&type=chunk) [Critical Accounting Policies](index=19&type=section&id=Item%207.%20MD%26A%20-%20Critical%20Accounting%20Policies) Key accounting policies involve significant judgment in revenue recognition, investment valuation, entity consolidation, and income tax accounting, with incentive fees recognized at the end of annual measurement periods - Revenue is primarily derived from investment advisory and incentive fees. Incentive fees are generally recognized at the end of an annual measurement period[102](index=102&type=chunk)[103](index=103&type=chunk) - Investments in securities are recorded at fair value, with gains and losses recorded on a trade date basis[105](index=105&type=chunk) - The company consolidates entities where it is determined to be the primary beneficiary, defined as having both the power to direct significant activities and the obligation/right to absorb significant losses/benefits[110](index=110&type=chunk) - The provision for income taxes is computed using the asset and liability method, requiring recognition of deferred tax assets and liabilities. A valuation allowance is recorded if it is more likely than not that deferred tax assets will not be realized[115](index=115&type=chunk) [Financial Statements and Supplementary Data](index=22&type=section&id=Item%208.%20Financial%20Statements%20And%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2020 and 2019, including income, comprehensive income, financial condition, equity, and cash flow statements, along with detailed notes [Consolidated Statements of Income](index=24&type=section&id=Item%208.%20Financial%20Statements%20-%20Consolidated%20Statements%20of%20Income) For 2020, total revenues were **$19.0 million** and net income was **$18.8 million** (**$0.84** per diluted share), a decrease from 2019 due to lower net investment gains and advisory fees Consolidated Income Statement Highlights (in thousands) | Line Item | 2020 | 2019 | | :--- | :--- | :--- | | Total revenues | $18,983 | $22,205 | | Total expenses | $31,452 | $35,465 | | Operating loss | $(12,469) | $(13,260) | | Total other income, net | $42,352 | $70,483 | | Income before income taxes | $29,883 | $57,223 | | **Net income attributable to AC shareholders** | **$18,816** | **$39,188** | Earnings Per Share (Diluted) ($) | Category | 2020 | 2019 | | :--- | :--- | :--- | | Continuing operations | $0.87 | $1.82 | | Discontinued operations | $(0.03) | $(0.08) | | **Total** | **$0.84** | **$1.74** | [Consolidated Statements of Financial Condition](index=26&type=section&id=Item%208.%20Financial%20Statements%20-%20Consolidated%20Statements%20of%20Financial%20Condition) As of December 31, 2020, total assets increased to **$1,174.5 million** from **$1,010.9 million** in 2019, driven by investments in U.S. Treasury Bills, with total equity at **$898.9 million** Consolidated Balance Sheet Highlights (in thousands) | Line Item | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $39,509 | $342,001 | | Investments in U.S. Treasury Bills | $344,453 | $29,037 | | Investments in U.S. Treasury Bills held in trust | $175,040 | $0 | | **Total assets** | **$1,174,545** | **$1,010,906** | | **Total liabilities** | **$66,328** | **$63,086** | | **Total AC Group, Inc. equity** | **$898,938** | **$896,432** | [Notes to Consolidated Financial Statements](index=31&type=section&id=Item%208.%20Financial%20Statements%20-%20Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed information on the company's organization, accounting policies, investments, fair value measurements, income taxes, related party transactions, equity, and discontinued operations - On September 22, 2020, the company's SPAC, PMV Consumer Acquisition Corp., completed a **$175 million** IPO. AC has a controlling financial interest and consolidates PMV in its financial statements (Note A)[154](index=154&type=chunk)[155](index=155&type=chunk) - The company's revenue is primarily from asset-based advisory fees, recognized over time, and performance-based fees, which are generally recognized at the end of a measurement period when uncertainty is resolved (Note C)[210](index=210&type=chunk)[211](index=211&type=chunk) - The company holds a significant investment in its affiliate, GAMCO (GBL), valued at **$48.9 million** as of December 31, 2020 (Note I)[269](index=269&type=chunk) - The spin-off of Morgan Group was completed on August 5, 2020, and its historical results are presented as discontinued operations (Note N)[289](index=289&type=chunk) [Controls and Procedures](index=57&type=section&id=Item%209A.%20Controls%20And%20Procedures) Management concluded that disclosure controls were ineffective as of December 31, 2020, due to a material weakness from insufficient technical accounting personnel and lack of segregation of duties, with a remediation plan in place - Management concluded that disclosure controls and procedures were not effective as of December 31, 2020[295](index=295&type=chunk) - A material weakness in internal control over financial reporting was identified, caused by insufficient personnel with technical accounting skills and a resulting lack of segregation of duties[300](index=300&type=chunk) - A remediation plan is in place, which includes hiring additional qualified personnel and reassigning financial reporting responsibilities to enhance segregation of duties[303](index=303&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Security Ownership](index=58&type=section&id=Items%2010-14) Information for Items 10 through 14, covering directors, executive officers, corporate governance, compensation, and security ownership, is incorporated by reference from the company's 2021 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees (Item 14) is incorporated by reference from the Company's 2021 Proxy Statement[305](index=305&type=chunk)[308](index=308&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=59&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K report, including consolidated financial statements and a detailed list of exhibits, with financial statement schedules omitted as not required - This section provides a list of all documents filed as part of the report, including financial statements and exhibits[311](index=311&type=chunk) - Financial statement schedules are omitted as they are not required or applicable[311](index=311&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The unaudited condensed consolidated financial statements present the financial position, results of operations, comprehensive income, changes in equity, and cash flows for Associated Capital Group, Inc. as of and for the three and nine months ended September 30, 2020, reflecting the consolidation of PMV Consumer Acquisition Corp. SPAC and the spin-off of Morgan Group Holding Co. as discontinued operations [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) - Total assets increased to **$1.10 billion** as of September 30, 2020, from **$1.01 billion** at December 31, 2019, largely driven by the consolidation of a Special Purpose Acquisition Corporation (SPAC), which added **$175 million** in 'Investments in government securities held in trust'[4](index=4&type=chunk) Condensed Consolidated Balance Sheet (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $47,331 | $342,001 | | Investments in government securities | $330,942 | $29,037 | | Investments in equity securities | $213,586 | $271,320 | | Investments in government securities held in trust | $175,002 | $0 | | **Total Assets** | **$1,100,611** | **$1,010,906** | | **Liabilities & Equity** | | | | Total liabilities | $42,280 | $63,086 | | Redeemable noncontrolling interests | $204,164 | $50,385 | | Total Associated Capital Group, Inc. equity | $852,095 | $896,432 | | **Total Liabilities and Equity** | **$1,100,611** | **$1,010,906** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) - For the nine months ended September 30, 2020, the company reported a net loss of **$32.3 million**, a significant reversal from a net income of **$28.2 million** in the same period of 2019, primarily driven by a net loss from investments of **$34.8 million** in 2020 compared to a net gain of **$42.4 million** in 2019[7](index=7&type=chunk) Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,945 | $2,754 | $6,974 | $8,211 | | Operating Loss | ($3,552) | ($2,593) | ($7,853) | ($11,148) | | Net Gain/(Loss) from Investments | $15,603 | $7,613 | ($34,770) | $42,358 | | Net Income/(Loss) Attributable to ACG | $5,815 | $5,951 | ($32,303) | $28,166 | | Diluted EPS - Total | $0.26 | $0.26 | ($1.44) | $1.25 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) - Cash and cash equivalents decreased by **$294.7 million** during the first nine months of 2020, ending the period at **$47.3 million**, primarily due to significant cash used in operating activities (**$272.2 million**) from investments in trading securities and investing activities (**$176.8 million**) related to the funding of a SPAC trust account[13](index=13&type=chunk)[15](index=15&type=chunk) Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($272,203) | ($42,321) | | Net cash used in investing activities | ($176,792) | ($3,591) | | Net cash provided by (used in) financing activities | $154,211 | ($10,211) | | **Net decrease in cash and cash equivalents** | **($294,670)** | **($58,630)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - On September 22, 2020, the company's SPAC, PMV Consumer Acquisition Corp., completed a **$175 million IPO**, leading AC to consolidate PMV, which significantly impacts the balance sheet by adding assets held in trust and redeemable noncontrolling interests[20](index=20&type=chunk)[22](index=22&type=chunk)[52](index=52&type=chunk) - On August 5, 2020, the company completed the spin-off of Morgan Group Holding Co. to its shareholders, with its historical financial results now presented as discontinued operations[26](index=26&type=chunk)[27](index=27&type=chunk)[87](index=87&type=chunk) Revenue Breakdown - Nine Months Ended Sep 30 (in thousands) | Revenue Type | 2020 | 2019 | | :--- | :--- | :--- | | Asset-based advisory fees | $4,284 | $5,208 | | Performance-based advisory fees | $8 | $61 | | Sub-advisory fees | $2,132 | $2,930 | | **Total Investment advisory and incentive fees** | **$6,424** | **$8,199** | - The company declared dividends of $0.10 per share for the nine months ended September 30, 2020 and repurchased approximately **143,000 shares for $5.4 million** during the same period[76](index=76&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, highlighting a year-to-date operating loss of **$7.9 million**, an improvement from an **$11.1 million** loss in the prior year, despite lower revenues, with the overall net loss driven by mark-to-market losses on the investment portfolio, and key strategic developments including the spin-off of Morgan Group Holding Co. and the successful **$175 million IPO** of the PMV Consumer Acquisition Corp. SPAC, while Assets Under Management (AUM) declined to **$1.25 billion** due to market depreciation and redemptions [Results of Operations](index=33&type=section&id=Results%20of%20Operations) - **Q3 2020 vs Q3 2019:** The operating loss widened to **$3.6 million** from **$2.6 million**, driven by lower revenues and higher operating expenses, however, higher net investment gains of **$15.6 million** (vs. **$7.6 million** in Q3 2019) resulted in income from continuing operations of **$6.0 million**, comparable to the prior year[123](index=123&type=chunk)[130](index=130&type=chunk) - **Nine Months 2020 vs 2019:** The operating loss narrowed to **$7.9 million** from **$11.1 million** due to lower compensation and the absence of a management fee expense, however, a significant swing in investment performance from a **$42.4 million gain** in 2019 to a **$34.8 million loss** in 2020 led to a net loss from continuing operations of **$31.7 million**[132](index=132&type=chunk)[138](index=138&type=chunk) Key Performance Indicators (in thousands) | Metric | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | | Total Revenues | $6,974 | $8,211 | | Total Expenses | $14,827 | $19,359 | | Operating Loss | ($7,853) | ($11,148) | | Net (Loss)/Gain from Investments | ($34,770) | $42,358 | | Net (Loss)/Income from Continuing Operations | ($31,671) | $30,307 | [Assets Under Management](index=36&type=section&id=Assets%20Under%20Management) - Total Assets Under Management (AUM) decreased to **$1.25 billion** as of September 30, 2020, a **27.1% decline** from year-end 2019, attributed to market depreciation and investor redemptions[142](index=142&type=chunk) AUM by Strategy (in millions) | Strategy | Sep 30, 2020 | Dec 31, 2019 | % Change | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,091 | $1,525 | (28.5)% | | Event-Driven Value | $105 | $132 | (20.5)% | | Other | $55 | $59 | (6.8)% | | **Total AUM** | **$1,251** | **$1,716** | **(27.1)%** | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - The company's cash and cash equivalents decreased significantly to **$47.3 million** from **$342.0 million** at the start of the year, mainly due to cash used in operations for purchasing trading securities (**$283.1 million**) and cash used in investing for funding the PMV SPAC trust account (**$175 million**)[147](index=147&type=chunk)[148](index=148&type=chunk) - Financing activities provided **$154.2 million** in cash, primarily from **$162.6 million** in contributions from redeemable non-controlling interests related to the SPAC IPO, which offset cash used for dividends (**$4.5 million**) and stock buybacks (**$5.4 million**)[148](index=148&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company, as a smaller reporting company, is not required to provide this information - As a smaller reporting company, this information is not required to be provided[152](index=152&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of September 30, 2020, the company's disclosure controls and procedures were **not effective**, based on a material weakness in internal control over financial reporting identified in 2019, relating to insufficient personnel with technical accounting skills and a lack of segregation of duties, with a remediation plan in progress - Management identified a material weakness in internal control over financial reporting, concluding that controls were **not effective** as of September 30, 2020[153](index=153&type=chunk)[158](index=158&type=chunk) - The material weakness stems from not having sufficient personnel with technical accounting skills, leading to a lack of segregation of duties between financial statement preparation and senior management review[159](index=159&type=chunk) - Remediation steps include appointing additional qualified personnel, assigning distinct preparation and review responsibilities, and searching for more finance staff, though the weakness is not yet considered fully remediated[162](index=162&type=chunk)[163](index=163&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal actions and regulatory examinations from time to time, but management believes any potential losses are not material to the company's financial condition or results of operations as of September 30, 2020 - Management does not believe that any current legal proceedings or regulatory matters will have a material impact on the company's financial condition, results of operations, or cash flows[165](index=165&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the third quarter of 2020, the company repurchased a total of **29,737 shares** of its Class A Common Stock at an average price of **$37.03 per share** under its publicly announced repurchase program Share Repurchases for Q3 2020 | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jul 2020 | 804 | $35.94 | | Aug 2020 | 8,607 | $38.11 | | Sep 2020 | 20,326 | $36.62 | | **Total** | **29,737** | **$37.03** | [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CAO certifications and XBRL data files - The filing includes required certifications from the CEO and CAO pursuant to Sarbanes-Oxley Act rules, as well as XBRL interactive data files[168](index=168&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents Associated Capital Group, Inc.'s unaudited interim financial statements as of June 30, 2020, including key financial statements and detailed accounting policy notes [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) As of June 30, 2020, total assets decreased to **$926.6 million** from **$1.01 billion**, primarily due to reduced cash, while total equity also declined to **$852.7 million** Condensed Consolidated Statements of Financial Condition (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$926,624** | **$1,010,906** | | Cash and cash equivalents | $74,405 | $348,588 | | Investments in debt securities | $319,376 | $29,037 | | Investments in equity securities | $198,325 | $271,320 | | **Total Liabilities** | **$26,759** | **$63,086** | | **Total Equity** | **$852,687** | **$897,435** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the six months ended June 30, 2020, the company reported a **net loss of $38.1 million**, a reversal from prior-year net income, primarily driven by a **$50.4 million net loss from investments** Key Income Statement Data (in thousands, except per share data) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Total Revenues | $7,506 | $9,473 | | Operating Loss | $(5,238) | $(11,027) | | Net (Loss)/Gain from Investments | $(50,376) | $34,745 | | Net (Loss)/Income Attributable to ACG | **$(38,118)** | **$22,215** | | Diluted EPS | **$(1.70)** | **$0.98** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2020, net cash used in operating activities significantly increased to **$255.0 million**, leading to a **$274.2 million net decrease in cash** and cash equivalents Summary of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(254,967) | $(36,080) | | Net cash used in investing activities | $(10,016) | $(3,856) | | Net cash used in financing activities | $(9,200) | $(8,126) | | **Net decrease in cash** | **$(274,183)** | **$(48,062)** | | Cash at end of period | $74,405 | $361,564 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, business segments including alternative investment management and institutional research, the Morgan Group spin-off, revenue recognition, investment details, and stockholders' equity - The company's business includes alternative investment management through GCIA, institutional research and underwriting through G.research, and proprietary trading[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - The company announced the spin-off of Morgan Group Holding Co. to its shareholders, with a distribution date of August 5, 2020[20](index=20&type=chunk)[21](index=21&type=chunk) Total Revenues by Type (Six Months Ended June 30, in thousands) | Revenue Type | 2020 | 2019 | | :--- | :--- | :--- | | Investment advisory and incentive fees | $4,559 | $5,446 | | Institutional research services | $2,478 | $3,989 | | Other | $469 | $38 | | **Total** | **$7,506** | **$9,473** | - During Q2 2020, the company declared a dividend of **$0.10 per share** and repurchased approximately **31,000 shares for $1.1 million**[81](index=81&type=chunk)[82](index=82&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, including revenue and net loss drivers, the impact of COVID-19, and the Morgan Group spin-off, noting a substantial decrease in AUM - The company's alternative investment strategies focus on event-driven special situations and merger arbitrage, achieving a gross return of **6.7% for Q2 2020**[101](index=101&type=chunk) - The spin-off of Morgan Group to AC shareholders was approved, with a record date of July 30, 2020, and a distribution date of August 5, 2020[105](index=105&type=chunk) - The COVID-19 pandemic led to significant market volatility, adversely affecting AUM and revenues, though remote work arrangements have not materially impacted operations[109](index=109&type=chunk)[110](index=110&type=chunk) Assets Under Management (in millions) | Strategy | June 30, 2020 | Dec 31, 2019 | % Change | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,147 | $1,525 | (24.8)% | | Event-Driven Value | $104 | $132 | (21.2)% | | Other | $54 | $59 | (8.5)% | | **Total AUM** | **$1,305** | **$1,716** | **(24.0)%** | [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is omitted as the company, a smaller reporting entity, is not required to provide market risk disclosures - As a smaller reporting company, Associated Capital Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk[150](index=150&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of June 30, 2020, due to a material weakness in internal control over financial reporting, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2020, due to a material weakness in internal control over financial reporting[151](index=151&type=chunk) - The material weakness stemmed from insufficient personnel with technical accounting skills, leading to a lack of segregation of duties between financial statement preparation and senior management review[157](index=157&type=chunk) - Remediation steps include appointing additional qualified personnel, assigning new preparation and review responsibilities, and searching for more finance staff[160](index=160&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company may be involved in various legal actions and regulatory examinations from time to time, but management believes any potential losses are not material to its financial condition or results of operations - Management believes that any probable or reasonably possible losses from legal proceedings are **not material** to the company's financial condition as of June 30, 2020[163](index=163&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchase of its Class A Common Stock during the second quarter of 2020, totaling 30,957 shares at an average price of $34.51 per share Share Repurchases for Q2 2020 | Period | Total Shares Repurchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | April 2020 | 6,049 | $34.77 | | May 2020 | 16,622 | $34.33 | | June 2020 | 8,286 | $34.66 | | **Total** | **30,957** | **$34.51** | [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CAO certifications pursuant to the Sarbanes-Oxley Act and Inline XBRL documents - The report includes required certifications from the CEO and CAO under Rules 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as XBRL data files[166](index=166&type=chunk)

PART I [Item 1. Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Unaudited condensed consolidated financial statements for Associated Capital Group, Inc. as of March 31, 2020, are presented [Condensed Consolidated Statements of Financial Condition](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets decreased to **$904.1 million** from **$1.01 billion**, primarily due to investment declines Condensed Consolidated Statements of Financial Condition (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$904,090** | **$1,010,906** | | Cash and cash equivalents | $358,594 | $348,588 | | Investments in securities | $222,807 | $300,357 | | Investments in affiliated registered investment companies | $121,734 | $159,311 | | **Total Liabilities** | **$37,378** | **$63,086** | | Compensation payable | $5,665 | $20,246 | | **Total Equity** | **$820,803** | **$897,435** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reported a **net loss of $77.4 million** in Q1 2020, driven by a **$102.1 million investment loss** Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total Revenues | $4,369 | $4,652 | | Total Expenses | $5,464 | $12,528 | | Operating Loss | $(1,095) | $(7,876) | | Net gain/(loss) from investments | $(102,090) | $34,979 | | **Net Income/(Loss)** | **$(77,352)** | **$24,654** | | Net Income/(Loss) Attributable to ACG Shareholders | $(73,355) | $23,147 | | **Diluted EPS** | **$(3.27)** | **$1.02** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities was **$26.6 million** in Q1 2020, leading to a **$10.0 million increase in cash** Summary of Cash Flows (in thousands) | Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $26,617 | $(12,705) | | Net cash (used in) provided by investing activities | $(10,607) | $2,337 | | Net cash used in financing activities | $(6,004) | $(3,176) | | **Net increase (decrease) in cash** | **$10,006** | **$(13,544)** | | Cash and cash equivalents at end of period | $358,594 | $396,220 | - The primary use of cash in investing activities during Q1 2020 was an **$11.1 million** purchase of a building[14](index=14&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes explain accounting policies, business structure, revenue recognition, investment composition, and stockholders' equity - The company's business includes alternative investment management (GCIA), institutional research and underwriting (G.research), and direct investments, including SPACs[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - On March 16, 2020, the Board of Directors approved the spin-off of Morgan Group Holding Co. to AC's shareholders[22](index=22&type=chunk) Total Revenues by Type (in thousands) | Revenue Source | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Investment advisory and incentive fees | $2,700 | $2,733 | | Institutional research services | $1,374 | $1,913 | | Other | $295 | $6 | | **Total** | **$4,369** | **$4,652** | - In Q1 2020, the company repurchased approximately **82,000 shares** for **$3.2 million**; subsequently, an additional **16,749 shares** were repurchased for an average price of **$35.08 per share** from April 1 to May 11, 2020[69](index=69&type=chunk)[82](index=82&type=chunk) - On May 5, 2020, the company declared a semi-annual dividend of **$0.10 per share**, payable on June 30, 2020[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2020 financial performance, highlighting a **net loss of $73.4 million** due to investment losses - The operating loss for Q1 2020 decreased to **$1.1 million** from **$7.9 million** in Q1 2019, driven by lower compensation, the absence of a management fee, and reduced operating expenses[110](index=110&type=chunk) - The company reported a **net loss of $73.4 million** (**$3.27 per share**) in Q1 2020, compared to net income of **$23.1 million** (**$1.02 per share**) in Q1 2019, mainly due to a **$102.1 million investment loss**[110](index=110&type=chunk)[119](index=119&type=chunk) - The COVID-19 pandemic led to significant market volatility, causing the worst first quarter for stocks since 1937 and adversely impacting the company's investments and AUM[96](index=96&type=chunk)[97](index=97&type=chunk) - As of March 31, 2020, the company had approximately **$823 million** in cash and investments, providing flexibility for strategic objectives[106](index=106&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Total revenues slightly decreased to **$4.4 million**, while total expenses significantly reduced to **$5.5 million** - Institutional research services revenues decreased by **$0.5 million** due to the termination of research agreements with GAMCO Assets and Gabelli Funds, Inc. and lower commissions[114](index=114&type=chunk) - Compensation expense decreased to **$4.2 million** from **$5.9 million**, driven by lower fixed compensation and variable payouts[115](index=115&type=chunk) - No management fee expense was recorded for Q1 2020 due to a pre-tax loss, compared to a **$3.3 million** expense in Q1 2019[117](index=117&type=chunk) [Assets Under Management (AUM)](index=30&type=section&id=Assets%20Under%20Management) Total Assets Under Management (AUM) decreased to **$1.473 billion** due to market depreciation and net cash outflows AUM by Strategy (in millions) | Strategy | March 31, 2020 | Dec 31, 2019 | March 31, 2019 | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,312 | $1,525 | $1,401 | | Event-Driven Value | $112 | $132 | $127 | | Other | $49 | $59 | $63 | | **Total AUM** | **$1,473** | **$1,716** | **$1,591** | Q1 2020 AUM Fund Flow (in millions) | Metric | Amount | | :--- | :--- | | AUM at Dec 31, 2019 | $1,716 | | Market depreciation | $(154) | | Net cash flows | $(89) | | **AUM at March 31, 2020** | **$1,473** | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a highly liquid balance sheet with **$359 million** in cash and **$464 million** in net investments - The company's principal assets are highly liquid, consisting of cash, cash equivalents, and marketable securities[126](index=126&type=chunk) - G.research, a registered broker-dealer subsidiary, had net capital of **$4.3 million**, which was **$4.1 million** in excess of its required minimum of **$250,000**[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is omitted as the company qualifies as a smaller reporting company - As a smaller reporting company, this information is not required to be provided[133](index=133&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of March 31, 2020[133](index=133&type=chunk) - A material weakness in internal control over financial reporting was identified, caused by insufficient personnel with technical accounting skills and a lack of segregation of duties[139](index=139&type=chunk) - A remediation plan is underway, which includes appointing additional qualified personnel, assigning new review responsibilities, and searching for more finance staff[141](index=141&type=chunk) PART II [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Management believes potential losses from legal proceedings are not material to the company's financial condition - Management believes that any potential losses from legal proceedings are not material to the company's financial condition as of March 31, 2020[145](index=145&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchase of **81,791 Class A Common Stock shares** during Q1 2020 Share Repurchases for Q1 2020 | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2020 | 17,929 | $46.46 | | Feb 2020 | 33,452 | $41.51 | | Mar 2020 | 30,410 | $33.01 | | **Total** | **81,791** | **$39.43** | [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO and CAO certifications and XBRL data files - The exhibits include CEO and CAO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, along with XBRL instance and taxonomy documents[147](index=147&type=chunk)

Part I [Item 1: Business](index=4&type=section&id=Item%201%3A%20Business) AC provides alternative investment management, institutional research, and manages a proprietary investment portfolio, operating under extensive U.S. and European regulation [Business Overview](index=4&type=section&id=Business%20Overview) AC operates in three core areas: managing proprietary capital, providing alternative investment management, and offering institutional research, with $1.7 billion in AUM as of 2019 - The company's business is structured around three pillars: **Proprietary Capital** for direct investments (including SPACs), **Alternative Investment Management**, and **Institutional Research** services via its subsidiary G.research[13](index=13&type=chunk) Assets Under Management (AUM) as of Dec 31 (in millions) | Strategy | 2019 | 2018 | | :--- | :--- | :--- | | Event Merger Arbitrage | $1,525 | $1,342 | | Event-Driven Value | $132 | $118 | | Other | $59 | $60 | | **Total** | **$1,716** | **$1,520** | - On October 31, 2019, Morgan Group Holding Co. acquired G.research, resulting in AC holding an **83.3% ownership interest** and consolidating the entity[19](index=19&type=chunk) - G.research's institutional research services revenues were **$8.9 million in 2019** and **$8.3 million in 2018**, with a significant portion from GAMCO and its affiliates[22](index=22&type=chunk)[23](index=23&type=chunk)[25](index=25&type=chunk) [Business Strategy](index=7&type=section&id=Business%20Strategy) The company's strategy focuses on global growth by leveraging core competencies in asset management, pursuing acquisitions, and expanding distribution through international partnerships - The core investment philosophy is the **'Private Market Value (PMV) with a Catalyst™'** approach, based on principles from Graham & Dodd[28](index=28&type=chunk) - Strategic pillars include growing the **Investment Partnerships business**, pursuing acquisitions and direct investments like SPACs, and forming partnerships to expand distribution, particularly in Asia and Europe[29](index=29&type=chunk)[30](index=30&type=chunk)[32](index=32&type=chunk) [Regulation](index=8&type=section&id=Regulation) AC's business is extensively regulated in the U.S. by the SEC and FINRA, and in Europe by directives like AIFMD, UCITS, and MiFID II, with Brexit's impact still evolving - In the U.S., the company and its subsidiaries are primarily regulated by the **SEC** and **FINRA** under the Advisers Act and the Exchange Act, with G.research subject to minimum net capital requirements[39](index=39&type=chunk)[40](index=40&type=chunk) - The company is subject to **ERISA** as a fiduciary for certain clients and must comply with anti-money laundering laws like the **USA Patriot Act** and tax regulations such as **FATCA** and **CRS**[42](index=42&type=chunk)[43](index=43&type=chunk)[46](index=46&type=chunk) - European activities are regulated by the EU's **AIFMD**, **UCITS**, and **MiFID II** directives, which impose rules on marketing, remuneration, capital requirements, and the use of 'soft dollars' for research[50](index=50&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) - Following the UK's exit from the EU on January 31, 2020, the company's UK entity (GSIL UK) will continue to comply with MiFID II during a transition period ending December 31, 2020, after which the regulatory landscape may change[55](index=55&type=chunk)[56](index=56&type=chunk) [Item 1A: Risk Factors](index=13&type=section&id=Item%201A%3A%20Risk%20Factors) As a smaller reporting company, Associated Capital Group, Inc. is not required to provide the information for this item - The company is not required to provide Risk Factors as it qualifies as a **smaller reporting company**[64](index=64&type=chunk) [Item 2: Properties](index=13&type=section&id=Item%202%3A%20Properties) The company acquired its headquarters building at 191 Mason Street, Greenwich, CT on May 31, 2019 - AC acquired its headquarters building at **191 Mason Street, Greenwich, CT** on May 31, 2019[65](index=65&type=chunk) [Item 3: Legal Proceedings](index=13&type=section&id=Item%203%3A%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings where the claim for damages exceeds 10% of its consolidated assets - The company is not subject to any legal proceedings with claims exceeding **10% of its consolidated assets**[66](index=66&type=chunk) Part II [Item 5: Market For The Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities](index=13&type=section&id=Item%205%3A%20Market%20For%20The%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20And%20Issuer%20Purchases%20Of%20Equity%20Securities) The company's Class A Stock trades on the NYSE under 'AC', with an active stock repurchase program and shares available for future equity compensation issuance Class A Stock Repurchases (Q4 2019) | Period | Shares Repurchased | Avg. Price Paid | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | Oct 2019 | 7,110 | $36.39 | 1,108,220 | | Nov 2019 | 4,365 | $36.01 | 1,103,855 | | Dec 2019 | 9,499 | $37.50 | 1,094,356 | | **Total** | **20,974** | **$36.80** | **1,094,356** | - The company has the **2015 Stock Award and Incentive Plan**, under which **1,289,100 shares** remain available for future issuance as of year-end 2019[72](index=72&type=chunk)[73](index=73&type=chunk) [Item 7: Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=14&type=section&id=Item%207%3A%20Management%27s%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) AC's 2019 financial performance saw a significant turnaround to $39.2 million net income from a prior year loss, driven by strong investment gains and AUM growth to $1.72 billion, while maintaining robust liquidity [Assets Under Management Highlights](index=16&type=section&id=Assets%20Under%20Management%20Highlights) Total AUM increased by 13.4% to $1.72 billion in 2019, driven by $102 million in net inflows and $94 million in positive investment returns, primarily in Event Merger Arbitrage AUM by Strategy (in millions) | Strategy | Dec 31, 2019 | Dec 31, 2018 | % Change | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,525 | $1,342 | 14.2% | | Event-Driven Value | $132 | $118 | 11.6% | | Other | $59 | $60 | (1.7)% | | **Total** | **$1,716** | **$1,520** | **13.4%** | Change in AUM during 2019 (in millions) | Strategy | Beginning AUM | Inflows | Outflows | Investment Return | Ending AUM | | :--- | :--- | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,342 | $368 | $(262) | $77 | $1,525 | | Event-Driven Value | $118 | $8 | $(4) | $10 | $132 | | Other | $60 | $0 | $(8) | $7 | $59 | | **Total** | **$1,520** | **$376** | **$(274)** | **$94** | **$1,716** | [Operating Results (2019 vs 2018)](index=16&type=section&id=Operating%20Results%20%282019%20vs%202018%29) The company reported a net income of $39.2 million in 2019, a significant improvement from a net loss of $58.1 million in 2018, primarily due to a $60.8 million net gain from investments Revenues by Type (in thousands) | Revenue Type | 2019 | 2018 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Investment advisory and incentive fees | $22,148 | $14,409 | $7,739 | 53.7% | | Institutional research services | $8,947 | $8,284 | $663 | 8.0% | | Other revenues | $170 | $86 | $84 | 97.7% | | **Total revenues** | **$31,265** | **$22,779** | **$8,486** | **37.3%** | - Incentive fees increased by **$7.0 million** to **$11.2 million** in 2019 due to higher investment performance[93](index=93&type=chunk) - Compensation expense rose by **$5.6 million** to **$32.2 million**, primarily from a **$7.5 million increase** in variable payouts tied to investment performance[96](index=96&type=chunk) - A management fee of **$5.7 million** was recorded in 2019, based on 10% of adjusted pre-tax profits, which was not incurred in 2018 due to pre-tax losses[98](index=98&type=chunk) - Net gain from investments was **$60.8 million in 2019**, a stark contrast to the net loss of **$65.2 million in 2018**, mainly due to mark-to-market changes in the value of GAMCO stock and other investments[100](index=100&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position with $348.6 million in cash and $588.6 million in net investments, despite net cash used in operating activities of $44.3 million in 2019 - As of December 31, 2019, the company had cash and cash equivalents of **$348.6 million** and net investments of **$588.6 million**[107](index=107&type=chunk)[108](index=108&type=chunk) Summary Cash Flow Data (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Cash from Operating Activities | $(44,334) | $76,980 | | Cash from Investing Activities | $(5,058) | $4,736 | | Cash from Financing Activities | $(11,584) | $34,689 | | **Net Change in Cash** | **$(60,976)** | **$116,405** | - The broker-dealer subsidiary, G.research, had net capital of **$4.6 million** as of December 31, 2019, exceeding its minimum requirement of **$250,000** by **$4.3 million**[112](index=112&type=chunk) [Critical Accounting Policies](index=19&type=section&id=Critical%20Accounting%20Policies) Key accounting policies involve significant judgment in revenue recognition for advisory and incentive fees, fair value valuation of investments, and consolidation of Variable Interest Entities - Revenue from investment advisory fees is recognized over time, while incentive fees are generally recognized at the end of an annual measurement period when uncertainty is resolved[116](index=116&type=chunk)[117](index=117&type=chunk) - Investments in securities are recorded at **fair value**, with gains and losses recorded on a trade date basis and included in net gain/(loss) from investments[121](index=121&type=chunk) - The company consolidates **Variable Interest Entities (VIEs)** where it is deemed the primary beneficiary, meaning it has both the power to direct significant activities and significant exposure to the VIE's economics[127](index=127&type=chunk) - For investments in partnerships and affiliates where control is not present, the company uses the **equity method of accounting**, with its share of the investee's net income recorded as net gain/(loss) from investments[132](index=132&type=chunk) [Item 8: Financial Statements And Supplementary Data](index=22&type=section&id=Item%208%3A%20Financial%20Statements%20And%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2019 and 2018, reflecting a net income of $39.2 million for 2019 and total assets of $1.01 billion [Consolidated Financial Statements](index=24&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total revenues of $31.3 million and a net income of $39.2 million for 2019, a significant improvement from the prior year's net loss Consolidated Statements of Income Highlights (in thousands) | Line Item | 2019 | 2018 | | :--- | :--- | :--- | | Total Revenues | $31,265 | $22,779 | | Total Expenses | $47,023 | $36,259 | | Net Gain/(Loss) from Investments | $60,757 | $(65,203) | | **Net Income/(Loss) Attributable to AC** | **$39,188** | **$(58,099)** | Consolidated Statements of Financial Condition Highlights (in thousands) | Line Item | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $348,588 | $409,564 | | Total Investments | $605,040 | $490,824 | | **Total Assets** | **$1,010,906** | **$954,433** | | Total Liabilities | $63,086 | $38,385 | | **Total Equity** | **$897,435** | **$866,248** | [Notes to Consolidated Financial Statements](index=32&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, the G.research merger, investment composition, related party transactions, and the subsequent spin-off of Morgan Group - Note A: On October 31, 2019, Morgan Group Holding Co. acquired G.research, with AC now holding an **83.3% interest** and consolidating the entity, accounted for as a common control transaction[171](index=171&type=chunk) - Note C: Total revenues were **$31.3 million in 2019**, up from **$22.8 million in 2018**, driven by performance-based advisory fees and sub-advisory fees, which rose to **$7.5 million** and **$7.6 million**, respectively[236](index=236&type=chunk) - Note D: Total investments in securities, including affiliated funds, were valued at **$459.7 million** at year-end 2019, up from **$372.1 million** in 2018[237](index=237&type=chunk)[239](index=239&type=chunk) - Note I: The company has significant related party transactions, including earning **$4.9 million** in commission revenue from Gabelli Funds and GAMCO Asset in 2019 and paying a **$5.7 million management fee** to the Executive Chairman[278](index=278&type=chunk)[280](index=280&type=chunk) - Note O: Subsequent to year-end, on March 14, 2020, the Board approved the **spin-off of Morgan Group** to AC shareholders[304](index=304&type=chunk) [Item 9A: Controls And Procedures](index=55&type=section&id=Item%209A%3A%20Controls%20And%20Procedures) Management concluded that disclosure controls were ineffective as of December 31, 2019, due to a material weakness from insufficient technical accounting personnel and lack of segregation of duties, with a remediation plan underway - Management identified a **material weakness** in internal control over financial reporting as of December 31, 2019[304](index=304&type=chunk) - The material weakness was caused by **insufficient personnel with technical accounting skills**, resulting in a lack of segregation of duties between financial statement preparation and senior management review[310](index=310&type=chunk) - A remediation plan is underway, which includes appointing additional qualified personnel, assigning new review responsibilities, and engaging an accounting consultant[312](index=312&type=chunk) Part III [Items 10-14](index=57&type=section&id=Items%2010-14) Information for Items 10 through 14 is incorporated by reference from the company's definitive proxy statement for the 2020 Annual Meeting of Stockholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the Company's Proxy Statement for the 2020 Annual Meeting of Stockholders[315](index=315&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) Part IV [Item 15: Exhibits, Financial Statement Schedules](index=57&type=section&id=Item%2015%3A%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and all exhibits filed with the Form 10-K, including key agreements and certifications - This item lists the consolidated financial statements and all exhibits filed with the Form 10-K, such as the **Separation and Distribution Agreement**, **Employment Agreement with the Executive Chairman**, and various certifications[319](index=319&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The company's unaudited financial statements for the nine months ended September 30, 2019, show a significant turnaround to net income driven by investment gains [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets and stockholders' equity increased as of September 30, 2019, primarily due to a rise in investments in securities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$993,125** | **$954,433** | | Cash and cash equivalents | $350,934 | $409,564 | | Investments in securities | $245,063 | $179,011 | | **Total Liabilities** | **$54,629** | **$38,385** | | Securities sold, not yet purchased | $25,475 | $9,574 | | **Total Stockholders' Equity** | **$888,797** | **$866,248** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reversed a prior-year net loss to achieve net income in Q3 and the first nine months of 2019, driven by substantial net gains from investments Q3 2019 vs Q3 2018 Financial Performance (in thousands, except EPS) | Metric | Q3 2019 | Q3 2018 | | :--- | :--- | :--- | | Total Revenues | $5,118 | $4,666 | | Operating Loss | $(3,009) | $(3,499) | | Net gain/(loss) from investments | $7,606 | $(7,977) | | **Net Income/(Loss) to Shareholders** | **$5,951** | **$(7,379)** | | **Diluted EPS** | **$0.26** | **$(0.32)** | Nine Months 2019 vs 2018 Financial Performance (in thousands, except EPS) | Metric | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | | Total Revenues | $14,591 | $14,165 | | Operating Loss | $(14,036) | $(11,195) | | Net gain/(loss) from investments | $42,351 | $(18,936) | | **Net Income/(Loss) to Shareholders** | **$28,166** | **$(17,784)** | | **Diluted EPS** | **$1.25** | **$(0.77)** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased significantly in the first nine months of 2019, leading to an overall decrease in cash and cash equivalents Nine-Month Cash Flow Summary (in thousands) | Activity | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | | Net cash from Operating Activities | $(44,828) | $4,617 | | Net cash from Investing Activities | $(3,591) | $15,000 | | Net cash from Financing Activities | $(10,211) | $36,111 | | **Net (Decrease)/Increase in Cash** | **$(58,630)** | **$55,728** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, segment information, investment valuations, equity activities, and a significant subsequent corporate restructuring - The company's business includes alternative investment management, institutional research and underwriting services, and direct investments in operating businesses[14](index=14&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) Revenue Breakdown (in thousands) | Revenue Source | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Investment advisory & incentive fees | $2,753 | $2,805 | $8,199 | $7,949 | | Institutional research services | $2,354 | $1,855 | $6,343 | $6,179 | | Other | $11 | $6 | $49 | $37 | | **Total** | **$5,118** | **$4,666** | **$14,591** | **$14,165** | - During the nine months ended September 30, 2019, the company declared dividends of **$0.10 per share** and repurchased approximately **89,000 shares for $3.4 million**[76](index=76&type=chunk)[77](index=77&type=chunk) - Subsequent to the quarter end, the company's subsidiary G.research was acquired by Morgan Group Holding Co, with AC now holding an **83.3% ownership interest** in the combined entity[92](index=92&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the significant improvement in net income to positive investment portfolio performance, which offset operating losses and supported AUM growth [Business Overview](index=25&type=section&id=Business%20Overview) The company operates across Event-Driven Asset Management, Institutional Research Services, and a Direct Investing Business - The core event-driven asset management strategy returned an unleveraged **+3.51% net of fees** for the first nine months of 2019, benefiting from global M&A activity[100](index=100&type=chunk) - The direct investment business is being developed through three pillars: Gabelli Private Equity Partners, LLC (GPEP), special purpose acquisition vehicles (SPACs), and Gabelli Principal Strategies Group, LLC (GPS)[107](index=107&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) The shift to net income in 2019 was driven by substantial investment gains that contrasted sharply with investment losses from the prior year - Q3 2019 net income was **$5.9 million**, or **$0.26 per share**, compared to a net loss of **$7.4 million**, or **$0.32 per share**, in Q3 2018, driven by mark-to-market changes in the investment portfolio[118](index=118&type=chunk) - Nine-month 2019 net income was **$28.2 million**, or **$1.25 per share**, compared to a net loss of **$17.8 million**, or **$0.77 per share**, in the prior year period, also due to investment portfolio gains[126](index=126&type=chunk) - Compensation expense decreased in both the three-month and nine-month periods of 2019 compared to 2018, primarily due to lower discretionary bonus accruals and variable compensation[123](index=123&type=chunk)[131](index=131&type=chunk) [Assets Under Management (AUM)](index=31&type=section&id=Assets%20Under%20Management) Total AUM grew 8.6% to $1.651 billion in the first nine months of 2019, driven by market appreciation and net inflows AUM by Strategy (in millions) | Strategy | Sep 30, 2019 | Dec 31, 2018 | % Change | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,466 | $1,342 | 9.2% | | Event-Driven Value | $128 | $118 | 8.5% | | Other | $57 | $60 | (5.0)% | | **Total AUM** | **$1,651** | **$1,520** | **8.6%** | Nine-Month Fund Flows (in millions) | Metric | Amount | | :--- | :--- | | AUM at Dec 31, 2018 | $1,520 | | Market appreciation | $40 | | Net cash flows | $91 | | **AUM at Sep 30, 2019** | **$1,651** | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position, although net cash was used in operations, while its broker-dealer subsidiary remained well-capitalized - The company's broker-dealer subsidiary, G.research, had net capital of **$3.9 million**, significantly exceeding its minimum requirement of **$250,000**[146](index=146&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is omitted as the company qualifies as a smaller reporting company - As a smaller reporting company, this information is not required to be provided[149](index=149&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management identified and is remediating a material weakness in internal control over financial reporting related to insufficient segregation of duties - A **material weakness** in internal control over financial reporting was identified due to personnel turnover, resulting in insufficient segregation of duties[150](index=150&type=chunk)[151](index=151&type=chunk) - Remediation steps taken include appointing additional qualified personnel and assigning distinct preparation and review responsibilities[154](index=154&type=chunk) - As of September 30, 2019, the material weakness has **not been fully remediated**, and thus internal control over financial reporting was not considered effective[155](index=155&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Management does not believe potential losses from any current legal proceedings would materially impact the company's financial condition - Management believes that potential losses from legal proceedings are **not material** to the Company's financial condition, results of operations, or cash flows at September 30, 2019[160](index=160&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased over 36,000 shares of its Class A Common Stock during the third quarter of 2019 Q3 2019 Share Repurchases | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2019 | 17,392 | $37.90 | | August 2019 | 8,574 | $35.82 | | September 2019 | 10,528 | $35.61 | | **Total Q3** | **36,494** | **$36.75** | [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the required Sarbanes-Oxley certifications and interactive data files filed with the report - Exhibits filed include CEO and CAO certifications pursuant to the Sarbanes-Oxley Act, as well as XBRL instance and taxonomy documents[163](index=163&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited interim financial statements for Associated Capital Group, Inc. as of June 30, 2019 [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets increased to **$1.004 billion** from **$954.4 million**, driven by investments, while liabilities rose to **$70.3 million** Condensed Consolidated Statements of Financial Condition (in thousands) | Account | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$1,004,160** | **$954,433** | | Cash and cash equivalents | $361,564 | $409,564 | | Investments in securities | $260,608 | $179,011 | | **Total Liabilities** | **$70,304** | **$38,385** | | Securities sold, not yet purchased | $46,010 | $9,574 | | **Total Stockholders' Equity** | **$884,188** | **$866,248** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2019 saw a **net loss of $0.9 million** due to investment performance, but H1 2019 reported **net income of $22.2 million** from strong gains Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Q2 2019 (in thousands) | Q2 2018 (in thousands) | Six Months 2019 (in thousands) | Six Months 2018 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $4,821 | $4,796 | $9,473 | $9,499 | | Operating Loss | $(3,151) | $(3,446) | $(11,027) | $(7,696) | | Net gain/(loss) from investments | $(234) | $16,571 | $34,745 | $(10,959) | | Net income/(loss) attributable to ACG | $(932) | $11,824 | $22,215 | $(10,405) | | Diluted EPS | $(0.04) | $0.51 | $0.98 | $(0.45) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$36.1 million** for H1 2019, contributing to a **$48.1 million** overall decrease in cash and equivalents Summary of Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2019 (in thousands) | 2018 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(36,080) | $(51,568) | | Net cash provided by (used in) investing activities | $(3,856) | $15,000 | | Net cash provided by (used in) financing activities | $(8,126) | $17,179 | | **Net (decrease) in cash and cash equivalents** | **$(48,062)** | **$(19,389)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, revenue recognition, investments, and equity transactions, providing context for financial results - The company's primary business activities are alternative investment management through Gabelli & Company Investment Advisers, Inc. (GCIA) and institutional research and underwriting services through G.research, LLC[13](index=13&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk) Total Revenues by Type (Six Months Ended June 30, in thousands) | Revenue Source | 2019 (in thousands) | 2018 (in thousands) | | :--- | :--- | :--- | | Investment advisory and incentive fees | $5,446 | $5,144 | | Institutional research services | $3,989 | $4,324 | | Other | $38 | $31 | | **Total** | **$9,473** | **$9,499** | - The company declared dividends of **$0.10 per share** to both class A and class B shareholders during Q2 2019, consistent with the prior year[77](index=77&type=chunk) - In Q2 2019, the company repurchased approximately **43,000 shares** for **$1.6 million**. This is a decrease from Q2 2018 when **141,000 shares** were repurchased for **$5.4 million**[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operations, covering business segments, operating results, AUM, and liquidity [Overview](index=26&type=section&id=Overview) The company provides alternative investment management, institutional research, and proprietary investment income, with a proposed merger for G.research - The event-driven asset management business, focusing on merger arbitrage, returned **+2.2% net of fees** for the first half of 2019, benefiting from global M&A activity[100](index=100&type=chunk) - A proposed merger transaction was approved by the board on June 17, 2019, where Morgan Group Holding, Co. would acquire G.research. The transaction is pending definitive agreements and regulatory approvals[102](index=102&type=chunk) - The direct investment business is developing through three pillars: Gabelli Private Equity Partners, LLC (GPEP), special purpose acquisition vehicles (SPACs), and Gabelli Principal Strategies Group, LLC (GPS)[109](index=109&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Q2 2019 net loss of **$0.9 million** contrasts with H1 2019 net income of **$22.2 million**, driven by investment performance fluctuations - **Q2 2019 vs Q2 2018:** The decrease in profitability was primarily driven by a **net investment loss of $(0.2) million** compared to a **gain of $16.6 million** in the prior-year quarter, reflecting mark-to-market changes[122](index=122&type=chunk)[129](index=129&type=chunk) - **Six Months 2019 vs 2018:** The significant increase in net income was mainly due to **investment gains of $34.7 million** in H1 2019 versus an **$11.0 million loss** in H1 2018[131](index=131&type=chunk)[140](index=140&type=chunk) - Other operating expenses for the first six months of 2019 increased by **$3.4 million** to **$8.3 million**, primarily due to expenses from a consolidated fund launched in a prior year[139](index=139&type=chunk) [Assets Under Management](index=31&type=section&id=Assets%20Under%20Management) AUM increased to **$1.607 billion** as of June 30, 2019, reflecting market appreciation and net inflows in the first half of the year AUM by Strategy (in millions) | Strategy | June 30, 2019 (in millions) | Dec 31, 2018 (in millions) | June 30, 2018 (in millions) | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,422 | $1,342 | $1,480 | | Event-Driven Value | $127 | $118 | $87 | | Other | $58 | $60 | $66 | | **Total AUM** | **$1,607** | **$1,520** | **$1,633** | Fund Flows for Six Months Ended June 30, 2019 (in millions) | Metric | Amount (in millions) | | :--- | :--- | | AUM at Dec 31, 2018 | $1,520 | | Market appreciation | $52 | | Net flows | $35 | | **AUM at June 30, 2019** | **$1,607** | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquid position with **$362 million** in cash, despite a **$48.1 million** net cash outflow in H1 2019 - The company's registered broker-dealer subsidiary, G.research, had net capital of **$4.3 million**, exceeding its minimum requirement of **$250,000** by **$4.1 million** as of June 30, 2019[151](index=151&type=chunk) - Net cash used in operating activities was **$36.1 million** for H1 2019. Investing activities used **$3.9 million**, mainly for the purchase of a building. Financing activities used **$8.1 million**, largely for dividends and stock buybacks[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is omitted as the company qualifies as a smaller reporting company - As a smaller reporting company, this information is not required to be provided[154](index=154&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) A material weakness in internal control over financial reporting was identified due to personnel turnover, impacting separation of duties - A **material weakness** in internal control over financial reporting was identified as of June 30, 2019[155](index=155&type=chunk) - The weakness resulted from turnover in the accounting department, which prevented sufficient separation between the preparation and senior management review of interim financial statements[156](index=156&type=chunk) - As a result of the material weakness, management concluded that internal controls over financial reporting were **not effective** as of the period end[158](index=158&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) Management believes current legal and regulatory matters will not materially impact the company's financial condition or results of operations - Management does not believe that any current legal proceedings or regulatory matters will have a **material impact** on the company's financial condition, results of operations, or cash flows[162](index=162&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **42,613 shares** of Class A Common Stock at an average price of **$38.15** per share during Q2 2019 Share Repurchases (Q2 2019) | Period | Total Shares Repurchased (in shares) | Average Price Paid Per Share (in dollars) | | :--- | :--- | :--- | | April 2019 | 21,428 | $39.57 | | May 2019 | 5,693 | $38.86 | | June 2019 | 15,492 | $36.11 | | **Total** | **42,613** | **$38.15** | [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CAO certifications and XBRL data files

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter of 2019 [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Q1 2019, highlighting a significant turnaround to profitability driven by investment gains and providing detailed notes on accounting policies and financial items [Condensed Consolidated Statements of Financial Condition](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) As of March 31, 2019, total assets increased to **$994.7 million** from **$954.4 million**, primarily due to higher investment values, with total liabilities and equity also rising Condensed Consolidated Statement of Financial Condition (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $396,020 | $409,564 | | Investments in securities | $219,104 | $179,011 | | **Total Assets** | **$994,696** | **$954,433** | | **Liabilities & Equity** | | | | Total liabilities | $54,911 | $38,385 | | Total Associated Capital Group, Inc. stockholders' equity | $889,004 | $866,248 | | **Total Liabilities and Equity** | **$994,696** | **$954,433** | [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reported **$24.7 million** net income in Q1 2019, a significant reversal from a **$22.4 million** net loss in Q1 2018, primarily driven by a **$35.0 million** net gain from investments Condensed Consolidated Statement of Income (in thousands, except per share data) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Total revenues | $4,652 | $4,703 | | Total expenses | $12,528 | $8,953 | | Operating loss | $(7,876) | $(4,250) | | Net gain/(loss) from investments | $34,979 | $(27,530) | | Net income/(loss) attributable to ACG shareholders | $23,147 | $(22,229) | | Diluted EPS | $1.02 | $(0.95) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **$12.7 million** for Q1 2019, resulting in a **$13.5 million** net decrease in cash and equivalents, ending the quarter with **$396.2 million** Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(12,705) | $(29,388) | | Net cash provided by investing activities | $2,337 | $15,000 | | Net cash (used in) provided by financing activities | $(3,176) | $5,201 | | **Net decrease in cash and cash equivalents** | **$(13,544)** | **$(9,187)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's business structure, accounting policies, revenue sources, investment portfolio, and significant events including stock repurchases and subsequent board actions - The company's business includes alternative investment management (equity event-driven value strategies), institutional research, and underwriting services through its subsidiaries GCIA and G.research[16](index=16&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) Revenue Breakdown (in thousands) | Revenue Source | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Investment advisory and incentive fees | $2,733 | $2,529 | | Institutional research services | $1,913 | $2,152 | | Other | $6 | $22 | | **Total** | **$4,652** | **$4,703** | - During Q1 2019, the company repurchased approximately **10,000 shares** for **$0.4 million**. In Q1 2018, it repurchased **13,000 shares** for **$0.5 million**[68](index=68&type=chunk) - Subsequent to the quarter's end, the Board approved a semi-annual dividend of **$0.10 per share**, issued a **$2.1 million** promissory note to the Executive Chairman, and approved the purchase of a building for its corporate offices[81](index=81&type=chunk)[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's Q1 2019 performance, highlighting a shift to **$23.1 million** net income driven by investment gains, AUM growth, and a strong liquidity position [Overview](index=24&type=section&id=MD%26A%20Overview) This overview details the company's alternative investment management, institutional research, and direct investing segments, noting strong fund performance and strategic considerations for the research business - The company's event-driven 'Associates Funds' (merger arbitrage) returned **+2.04%** net of fees for the first quarter of 2019[89](index=89&type=chunk) - The Board has formed a special committee to negotiate a transaction for its institutional research services business, with a sale or spin-off being considered[91](index=91&type=chunk) - The direct investment business is structured around three pillars: Gabelli Private Equity Partners, LLC (GPEP), the SPAC business, and Gabelli Principal Strategies Group, LLC (GPS)[94](index=94&type=chunk) [Results of Operations](index=27&type=section&id=MD%26A%20Results%20of%20Operations) Operating loss widened to **$7.9 million** in Q1 2019 due to a new management fee, but a **$35.0 million** net investment gain resulted in **$23.1 million** net income Results of Operations Comparison (in thousands) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total revenues | $4,652 | $4,703 | | Operating loss | $(7,876) | $(4,250) | | Net gain/(loss) from investments | $34,979 | $(27,530) | | Net income/(loss) attributable to ACG shareholders | $23,147 | $(22,229) | - The increase in operating loss was primarily driven by a new management fee expense of **$3.3 million** paid to the Executive Chairman, which was not incurred in Q1 2018 due to a pre-tax loss in that period[112](index=112&type=chunk) - Investment advisory fees increased to **$2.7 million** from **$2.5 million** due to higher AUM. If incentive fees had crystallized at quarter-end, an additional **$3.7 million** would have been recognized[108](index=108&type=chunk) [Assets Under Management](index=28&type=section&id=Assets%20Under%20Management) Total Assets Under Management (AUM) grew to **$1.591 billion** by March 31, 2019, driven by market appreciation and net cash inflows AUM by Strategy (in millions) | Strategy | March 31, 2019 | Dec 31, 2018 | March 31, 2018 | | :--- | :--- | :--- | :--- | | Event Merger Arbitrage | $1,401 | $1,342 | $1,407 | | Event-Driven Value | $127 | $118 | $88 | | Other | $63 | $60 | $65 | | **Total AUM** | **$1,591** | **$1,520** | **$1,560** | AUM Roll-Forward for Q1 2019 (in millions) | | AUM at Dec 31, 2018 | Market Appreciation | Net Cash Flows | AUM at March 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Total** | **$1,520** | **$36** | **$35** | **$1,591** | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with **$396 million** in cash and equivalents, and its broker-dealer subsidiary remains well-capitalized - The company's principal assets are highly liquid, consisting of cash and cash equivalents, marketable securities, and investments in funds and partnerships[120](index=120&type=chunk) Cash Flow Summary for Q1 2019 (in thousands) | Activity | Amount | | :--- | :--- | | Net cash used in operating activities | $(12,705) | | Net cash provided by investing activities | $2,337 | | Net cash used in financing activities | $(3,176) | - The broker-dealer subsidiary, G.research, had net capital of **$8.4 million** at March 31, 2019, which was **$8.1 million** in excess of its required minimum[125](index=125&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that as a smaller reporting company, it is not required to provide information for this item - As a smaller reporting company, this information is **not required to be provided**[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting - The CEO and CAO concluded that the company's disclosure controls and procedures were **effective as of March 31, 2019**[128](index=128&type=chunk) - **No changes occurred** during the most recent fiscal quarter that have **materially affected, or are reasonably likely to materially affect**, the company's internal control over financial reporting[129](index=129&type=chunk) PART II. OTHER INFORMATION This section covers other information including legal proceedings, equity security sales, and exhibits filed with the report [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) Management assesses that potential losses from legal proceedings and regulatory examinations are not material to the company's financial condition or results of operations - Management believes that potential losses from any current legal proceedings or regulatory matters are **not material to the company's financial condition** as of March 31, 2019[132](index=132&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase activity, noting **9,776** Class A Common Stock shares repurchased in March 2019 at **$40.03** per share Share Repurchases in Q1 2019 | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2019 | - | - | | Feb 2019 | - | - | | Mar 2019 | 9,776 | $40.03 | | **Total** | **9,776** | **$40.03** | [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CAO certifications and XBRL data files for financial reporting - The filing includes CEO and CAO certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350 (Sarbanes-Oxley Act of 2002)[134](index=134&type=chunk) - XBRL data files, including the Instance Document and various taxonomy extension documents, are included as exhibits[134](index=134&type=chunk)

Part I [Item 1: Business](index=4&type=section&id=Item%201%20Business) Associated Capital Group, Inc. (AC) operates primarily in alternative investment management and institutional research services, following its 2015 spin-off from GAMCO Investors, Inc. (GBL) - The company operates two main business segments: Alternative Investment Management through GCIA and Institutional Research Services through G.research[14](index=14&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - AC was spun-off from GAMCO Investors, Inc. (GBL) on November 30, 2015, with a **$250 million note from GAMCO** fully repaid by year-end 2018[15](index=15&type=chunk)[18](index=18&type=chunk) Assets Under Management (AUM) as of December 31 (in millions) | Strategy | 2018 | 2017 | | :--- | :--- | :--- | | Event Merger Arbitrage | $1,342 | $1,384 | | Event-Driven Value | $118 | $91 | | Other | $60 | $66 | | **Total** | **$1,520** | **$1,541** | - The institutional research services business, G.research, derives a significant portion of its revenue from GAMCO and its affiliates, with the Board exploring strategic options for this unit in 2018[32](index=32&type=chunk)[33](index=33&type=chunk) - The company's business strategy includes leveraging its proprietary investment portfolio for seed capital, geographic expansion, and strategic acquisitions, such as the creation of a Special Purpose Acquisition Vehicle (SPAC) in Italy[34](index=34&type=chunk)[38](index=38&type=chunk) - The company is subject to extensive regulation by various bodies including the SEC and FINRA in the U.S., and is impacted by European directives such as AIFMD and MiFID II[46](index=46&type=chunk)[47](index=47&type=chunk)[60](index=60&type=chunk) [Item 1A: Risk Factors](index=13&type=section&id=Item%201A%20Risk%20Factors) As a smaller reporting company, Associated Capital Group, Inc. is not required to provide the information for this item - Smaller reporting companies are not required to provide the information required by this item[74](index=74&type=chunk) [Item 1B: Unresolved Staff Comments](index=13&type=section&id=Item%201B%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - The company has no unresolved staff comments[74](index=74&type=chunk) [Item 2: Properties](index=13&type=section&id=Item%202%20Properties) The company does not own any properties and subleases office space from its former parent company, GAMCO, in Rye, NY - AC owns no properties and pays rent to GAMCO for office space based on a sublease agreement[75](index=75&type=chunk) [Item 3: Legal Proceedings](index=13&type=section&id=Item%203%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings that would exceed 10% of its consolidated assets - The company is not currently subject to any legal proceedings where the claim for damages exceeds **10% of its consolidated assets**[76](index=76&type=chunk) [Item 4: Mine Safety Disclosures](index=13&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[77](index=77&type=chunk) Part II [Item 5: Market For The Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities](index=13&type=section&id=Item%205%20Market%20For%20The%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20And%20Issuer%20Purchases%20Of%20Equity%20Securities) The company's Class A Stock trades on the NYSE under the symbol 'AC' and has an active stock repurchase program - The company's Class A Stock is traded on the New York Stock Exchange under the symbol AC[77](index=77&type=chunk) - The Board of Directors has authorized a stock repurchase program, with **1,204,213 shares** remaining available for repurchase as of December 31, 2018[79](index=79&type=chunk)[81](index=81&type=chunk) - In 2018, the company completed two exchange offers, repurchasing **867,535 Class A shares** in exchange for **1,376,554 shares of GBL**[81](index=81&type=chunk) - Under the 2015 Equity Compensation Plan, the company awarded **172,800 Phantom Restricted Stock Awards (RSAs)** in 2018, with **1,289,100 shares** remaining available for future issuance[82](index=82&type=chunk)[83](index=83&type=chunk) [Item 6: Selected Financial Data](index=14&type=section&id=Item%206%20Selected%20Financial%20Data) As a smaller reporting company, Associated Capital Group, Inc. is not required to provide the information for this item - Smaller reporting companies are not required to provide the information required by this item[84](index=84&type=chunk) [Item 7: Management's Discussion And Analysis Of Financial Condition And Results Of Operations](index=14&type=section&id=Item%207%20Management%27s%20Discussion%20And%20Analysis%20Of%20Financial%20Condition%20And%20Results%20Of%20Operations) For fiscal year 2018, Associated Capital Group reported a net loss of **$58.1 million**, primarily driven by a **$65.2 million** net loss from investments, with total revenues decreasing by **15.4%** to **$22.8 million** [Operating Results (2018 vs. 2017)](index=16&type=section&id=Operating%20Results%20for%20the%20Year%20Ended%20December%2031%2C%202018%20as%20Compared%20to%20the%20Year%20Ended%20December%2031%2C%202017) In 2018, total revenues fell to **$22.8 million** from **$26.9 million** in 2017, a **15.4%** decrease, primarily due to a **32.1%** drop in institutional research services revenue Revenues by Type (in thousands) | Revenue Type | 2018 | 2017 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Investment advisory and incentive fees | $14,409 | $14,551 | $(142) | (1.0)% | | Institutional research services | $8,284 | $12,199 | $(3,915) | (32.1)% | | Other revenues | $86 | $165 | $(79) | (47.9)% | | **Total revenues** | **$22,779** | **$26,915** | **$(4,136)** | **(15.4)%** | - Compensation expense decreased by **$4.7 million** to **$25.9 million** in 2018, primarily due to lower fixed compensation and a **$5.2 million** decrease in stock-based compensation expense[106](index=106&type=chunk)[107](index=107&type=chunk) - The company reported a net loss from investments of **$65.2 million** in 2018, a stark contrast to the **$20.6 million** net gain in 2017, mainly due to mark-to-market changes in the value of GAMCO stock and other investments[110](index=110&type=chunk) - Net loss for 2018 was **$58.1 million**, compared to a net income of **$8.8 million** in 2017, with the change primarily driven by mark-to-market losses on the investment portfolio[115](index=115&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended 2018 with a strong liquidity position, holding **$409.6 million** in cash and cash equivalents and **$481.3 million** in net investments, with net cash provided by operations at **$77.0 million** Summary Cash Flow Data (in thousands) | Activity | 2018 | 2017 | | :--- | :--- | :--- | | Operating activities | $76,980 | $(67,620) | | Investing activities | $4,736 | $(18,734) | | Financing activities | $34,689 | $65,373 | | **Net increase (decrease) in cash** | **$116,405** | **$(20,981)** | - At year-end 2018, the company had cash and cash equivalents of **$409.6 million** and net investments of **$481.3 million**[117](index=117&type=chunk) - Net cash from financing activities in 2018 was driven by the final **$50.0 million** principal payment on the GAMCO Note, partially offset by **$7.0 million** in treasury stock purchases and **$4.7 million** in dividend payments[123](index=123&type=chunk) - The broker-dealer subsidiary, G.research, had net capital of **$9.1 million** as of December 31, 2018, exceeding the minimum regulatory requirement of **$250,000**[124](index=124&type=chunk) [Critical Accounting Policies](index=19&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies involve significant management judgment and estimates, covering revenue recognition, investments, VIE consolidation, income taxes, and stock-based compensation - Investment advisory fees are based on AUM, while incentive fees (typically **20% of profits**) are recognized at the end of an annual measurement period or upon investor redemption[128](index=128&type=chunk)[130](index=130&type=chunk) - Beginning in 2018, due to new accounting standards, all realized and unrealized gains or losses on equity securities are reported in current period earnings[133](index=133&type=chunk) - The company consolidates Variable Interest Entities (VIEs) where it is determined to be the primary beneficiary, meaning it has both the power to direct significant activities and significant exposure to the VIE's economics[140](index=140&type=chunk) - In 2018, the company began issuing Phantom Restricted Stock Awards (Phantom RSAs), which are cash-settled and accounted for as a liability, with the fair value remeasured at each reporting date[151](index=151&type=chunk)[152](index=152&type=chunk) [Item 7A: Quantitative And Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%207A%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Associated Capital Group, Inc. is not required to provide the information for this item - Smaller reporting companies are not required to provide the information required by this item[157](index=157&type=chunk) [Item 8: Financial Statements And Supplementary Data](index=23&type=section&id=Item%208%20Financial%20Statements%20And%20Supplementary%20Data) This section contains the company's consolidated financial statements for the years ended December 31, 2018 and 2017, audited by Deloitte & Touche LLP, including key figures for revenues, net loss, and total assets [Consolidated Statements of Income](index=25&type=section&id=Consolidated%20Statements%20of%20Income) For the year ended December 31, 2018, the company reported a total net loss of **$57.4 million**, with a net loss attributable to shareholders of **$58.1 million**, or **($2.52)** per share Consolidated Statements of Income Highlights (in thousands) | Line Item | 2018 | 2017 | | :--- | :--- | :--- | | Total revenues | $22,779 | $26,915 | | Total expenses | $36,259 | $47,301 | | Operating loss | $(13,480) | $(20,386) | | Net gain/(loss) from investments | $(65,203) | $20,598 | | Income/(loss) before income taxes | $(68,861) | $6,264 | | Net income/(loss) | $(57,383) | $8,684 | | **Net income/(loss) attributable to ACG shareholders** | **$(58,099)** | **$8,837** | Earnings Per Share (EPS) | EPS Type | 2018 | 2017 | | :--- | :--- | :--- | | Basic | $(2.52) | $0.37 | | Diluted | $(2.52) | $0.37 | [Consolidated Statements of Financial Condition](index=27&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) As of December 31, 2018, total assets were **$954.4 million**, a decrease from **$1,006.9 million** in 2017, primarily due to a reduction in the value of investments in securities Consolidated Balance Sheet Highlights (in thousands) | Line Item | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $409,564 | $293,112 | | Investments in securities | $229,960 | $352,637 | | **Total assets** | **$954,433** | **$1,006,915** | | **Liabilities & Equity** | | | | Total liabilities | $38,385 | $42,538 | | Total Associated Capital Group, Inc. equity | $866,248 | $918,147 | | **Total liabilities and equity** | **$954,433** | **$1,006,915** | [Notes to Consolidated Financial Statements](index=32&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial results, including its spin-off, new accounting standards, investment breakdowns, and related-party transactions - **(Note A)** The company was formed via a spin-off from GAMCO Investors, Inc. (GBL) on November 30, 2015, with a **$250 million** promissory note from GAMCO fully repaid in 2018[186](index=186&type=chunk)[189](index=189&type=chunk) - **(Note B)** Effective January 1, 2018, the company adopted new accounting standards (ASU 2014-09 for revenue and ASU 2016-01 for financial instruments), which resulted in changes to disclosures and reclassifications but had no material impact on the financial statements[243](index=243&type=chunk)[244](index=244&type=chunk) - **(Note D)** The company's investment in GAMCO (GBL) common stock had a fair value of **$50.9 million** at year-end 2018, down from **$130.3 million** at year-end 2017[172](index=172&type=chunk) - **(Note I)** The company has significant related-party transactions, including earning institutional research commissions and research service fees from GAMCO affiliates, and subleasing office space from GAMCO[316](index=316&type=chunk)[317](index=317&type=chunk)[322](index=322&type=chunk) - **(Note J)** In 2018, the company completed two exchange offers, exchanging **1,376,554 of its GBL shares** for **867,535 of its own Class A shares**, and also granted **172,800 Phantom RSAs**[328](index=328&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk) [Item 9: Changes In And Disagreements With Accountants On Accounting And Financial Disclosure](index=58&type=section&id=Item%209%20Changes%20In%20And%20Disagreements%20With%20Accountants%20On%20Accounting%20And%20Financial%20Disclosure) The company reports no disagreements with its accountants on accounting and financial disclosure - None[345](index=345&type=chunk) [Item 9A: Controls And Procedures](index=58&type=section&id=Item%209A%20Controls%20And%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2018 - The Company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the period[346](index=346&type=chunk) - Management concluded that as of December 31, 2018, the Company maintained effective internal control over financial reporting based on the COSO framework[347](index=347&type=chunk)[348](index=348&type=chunk) - No material changes were made to the internal control over financial reporting during the fourth quarter of 2018[349](index=349&type=chunk) [Item 9B: Other Information](index=58&type=section&id=Item%209B%20Other%20Information) The company reports no other information for this item - None[349](index=349&type=chunk) Part III [Item 10: Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required for this item, including details on directors, executive officers, and corporate governance, is incorporated by reference from the company's 2019 Proxy Statement - Information regarding Directors and Executive Officers is incorporated by reference from the Company's 2019 Proxy Statement[350](index=350&type=chunk) [Item 11: Executive Compensation](index=59&type=section&id=Item%2011%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's Proxy Statement for the 2019 Annual Meeting of Stockholders - Information required by this item is included in the Proxy Statement and is incorporated by reference[354](index=354&type=chunk) [Item 12: Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters](index=59&type=section&id=Item%2012%20Security%20Ownership%20Of%20Certain%20Beneficial%20Owners%20And%20Management%20And%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's Proxy Statement for the 2019 Annual Meeting of Stockholders - Information required by this item is included in the Proxy Statement and is incorporated by reference[354](index=354&type=chunk) [Item 13: Certain Relationships And Related Transactions, and Director Independence](index=59&type=section&id=Item%2013%20Certain%20Relationships%20And%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's Proxy Statement for the 2019 Annual Meeting of Stockholders - Information required by this item is included in the Proxy Statement and is incorporated by reference[354](index=354&type=chunk) [Item 14: Principal Accountant Fees And Services](index=59&type=section&id=Item%2014%20Principal%20Accountant%20Fees%20And%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's Proxy Statement for the 2019 Annual Meeting of Stockholders - Information required by this item is included in the Proxy Statement and is incorporated by reference[355](index=355&type=chunk) Part IV [Item 15: Exhibits, Financial Statement Schedules](index=59&type=section&id=Item%2015%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K report, including consolidated financial statements and a list of exhibits - This item lists the consolidated financial statements and exhibits filed with the report, with financial statement schedules omitted[355](index=355&type=chunk) - Exhibits include the Separation and Distribution Agreement with GAMCO, governance documents, the 2015 Stock Award Incentive Plan, and various certifications[358](index=358&type=chunk) [Item 16: Form 10-K Summary](index=61&type=section&id=Item%2016%20Form%2010-K%20Summary) The company did not provide a summary for this item - None[360](index=360&type=chunk)