HKHC 10-K & 10-Q changes, risk factors and insider trading

Horizon Kinetics’ business is materially affected by conditions in the global financial markets and economic and political conditions throughout the world that are outside our control, such as interest rates, availability and cost of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation and asset managers), trade barriers, commodity prices, currency exchange rates and controls, national and international political circumstances (including wars, terrorist acts or security operations), natural disasters and/or pandemics. These factors are outside Horizon Kinetics’ control and may affect the level and volatility of asset prices or securities prices and the liquidity and the value of investments held by its funds, and it may not be able to or may choose not to manage its or its funds’ exposure to these conditions. In the event of a market downturn, including from the impact of the COVID-19 pandemic, the hostilities between Russia and Ukrainegeopolitical or between Hamas and Israel, and recent andevents, potential future disruptions in access to bank deposits or lending commitments due to bank failures, each of Horizon Kinetics’ businesses and funds will be affected in different ways.

A number of Horizon Kinetics’ funds and separately-managed accounts (“SMAs”), hold significant investments in Texas Pacific Land Corporation (“TPL”). In many cases, such investments represent a material portion of the fund’s or SMA’s total assets. If TPL’s operating or market performance deteriorates for any reason, then Horizon Kinetics’ resulting investment management advisory fees and reputation could be negatively impacted.

Furthermore, as a director of TPL, and Chairman, CEO and Chief Investment Strategist of Horizon Kinetics, Murray Stahl may face conflicts of interest. Mr. Stahl has fiduciary and other obligations to both TPL and Horizon Kinetics and/or their clients, and may come into possession of information (including confidential or material non-public information regarding TPL), that could give rise to a potentially conflicting division of loyalties and/or responsibilities, which could have an adverse effect on the funds and accounts managed by Horizon Kinetics and could benefit Mr. Stahl, Horizon Kinetics and/or TPL. In addition, Mr. Stahl has substantial personal investments in TPL stock – either directly through personal investment accounts or indirectly through products and accounts managed by Horizon Kinetics. Furthermore, Horizon Kinetics’ personnel in addition to Mr. Stahl, including personnel who are or may be involved in the management of advisory accounts managed by Horizon Kinetics, have personal investments in TPL stock, and these personal investments present potential or actual conflicts of interest. For example, directors in a public company are usually expected not to exit their investment position in the public company during their time of service on the board, which could restrict Mr. Stahl’s ability to sell a significant number of TPL shares when doing so would be advantageous to Horizon Kinetics or its accounts or funds.

Horizon Kinetics has exposure to cryptocurrencies, such as Bitcoin, through direct investments (approximately $13$12.5 million as of December 31, 20242025 ), and indirectly through investment funds, including the Grayscale Bitcoin Trust ETF and similar exchange-traded funds that offer exposure to bitcoin. In addition, the funds and SMAs managed have exposure to other cryptocurrencies, with approximately [15%]14% and 10%15% of AUM as of December 31, 20242025 and 2023,2024, respectively, consisting of total cryptocurrency investments, which can significantly affect adviser fees and assets under management.

Horizon Kinetics depends on the efforts, skill, reputations and business contacts of its senior executives, including its founders, Murray Stahl, Steven Bregman and Peter Doyle, and other key executive officers. Accordingly, its success will depend on the continued service of these individuals, who are not party to employment agreements and are not obligated to remain employed with the combined company after the Mergermerger (asin definedthe herein).prior year with Scott’s Liquid Gold-Inc, a consumer products division. The loss of the services of any of these senior executives could have a material adverse effect on Horizon Kinetics’ revenues, net income and cash flows and could harm its ability to maintain or grow assets under management or raise additional funds in the future.

Horizon Kinetics earns investment management and advisory fees based on a percentage of the value of its assets, and in certain instances, based on a percentage of the appreciation of the account, if any. When its funds or separately-managed accounts perform poorly, whether as a result of changes in equity market prices, interest rates, cryptocurrency prices, or other assets, or in response to geopolitical conditions, including wars and actions taken by central banks, both domestic and foreign, Horizon Kinetics’ revenue, net income and cash flow declines because the value of its assets under management decreases, which results in a reduction in management and incentive fees, if any.

some of Horizon Kinetics’ competitors may have higher risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider a wider variety of investments and to bid more aggressively for investments that Horizon Kinetics wants to make on behalf of its funds or through proprietaryprivate accounts;

The capital markets are currentlysusceptible into a periodperiods of disruption and economic uncertainty. Such market conditions havecan materially and adversely affected debt and equity capital markets, which have had, and may continue to have, a negative impact on Horizon Kinetics’ business and operations.

Additionally, the recent disruption in economic activity caused by the COVID-19 pandemic, Russia’s military invasion of Ukraine, conflict in the Middle East and recent disruptions in access to bank deposits or lending commitments due to bank failures has had, and may continue to have, a negative effect on the potential for liquidity events involving Horizon Kinetics or the investments of its funds or SMAs. An inability to raise incremental capital could have a material adverse effect on Horizon Kinetics’ business, results of operations and financial condition.

Further, current market conditions may make it difficult to raise equity capital, extend the maturity of or refinance its existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on Horizon Kinetics’ business. The debt capital available to Horizon Kinetics in the future, if available at all, may bear a higher interest rate and may be available only on terms and conditions less favorable than those of its existing debt and such debt may need to be incurred in a rising interest rate environment. Any inability to extend the maturity of or refinance existing debt, or to obtain new debt, could have a material adverse effect on Horizon Kinetics’ business, financial condition or results of operations.

We have previously identified material weaknesses in our internal control over financial reporting.

Based on management’s assessment, we have previously identified material weaknesses in our controls related to (a) producing timely account reconciliations and valuations of certain significant accounts, including certain intercompany and related party accounts and related elimination entries, (b) a lack of segregation of duties in certain areas of the financial reporting process, including a lack of adequate supervisory review of technical accounting implementations, lack of IT general controls over certain third-party systems, conclusions over critical accounting estimates, and review of the consolidated financial statements, and (c) insufficient supervisory review and approval of key controls over disbursements and accounts payable.

As of December 31, 2024, these material weaknesses had not been remediated. If our remedial measures are insufficient, or if additional material weaknessweaknesses or significant deficiencies in our internal control over financial reporting or in our disclosure controls occur in the future, our future consolidated financial statements or other information filed with the SEC may contain material misstatements and could require a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information, leading to a decline in the market value of our securities.

HKHC also manages a portfolio of investment securities for its own benefit, which has historically impacted and is expected to impact future results of operations, often significantly so. As of December 31, 2024,2025, we held investment securities (at fair value) of $91.4$76.5 million. In addition, we have devoted capital to a variety of the proprietaryprivate alternative investment funds it manages. As of December 31, 2024,2025, the fair value of HKHC shareholders’ investment in these proprietaryprivate funds is $228.9$220.1 million, however, since the proprietaryprivate funds are consolidated within these consolidated financial statements this value is not separately presented.

Along with investing on behalf of clients, HKHC also uses its own capital to invest along with its clients in many of its proprietaryprivate productsfunds and makes direct investments in public and private instruments including digital assets. Certain employees do, from time to time, serve as management or as a member of the board of directors of the companies in which we invest.

The Company also earns management fees in its mutual funds, ETFs, closed-end funds and proprietaryprivate partnerships as compensation for internal fund management and advisory services. The management fees for the proprietaryprivate funds vary by fund and investment strategy and are typically approximately between 0.25% and 2.00% of the net asset value of the funds’ underlying investments.

The Company is also entitled to receive incentive fees on proprietaryprivate partnerships if certain performance returns have been achieved as stipulated in the governing documents of the applicable fund. Incentive fees are generated when certain returns exceed a previously established high water mark. The incentive fees are calculated as a percentage of the gains experienced, typically 20%, based on the agreement with each partner in the respective fund. Incentive fees are not subject to claw back as a result of performance declines in subsequent periods to the most recent measurement date. Incentive fees, if earned, are recognized upon completion of the contractually determined measurement period, which are generally annually, or when a client redeems their interest. Incentive fees are subject to the uncertainty of market volatility, and as a result, the entire amount of the variable consideration related to incentive fees is constrained until the end of each measurement period when the uncertainty has been resolved. The Company earned incentive fees of $0.7 million and $51.7 million for the years ended December 31, 2025 and 2024, respectively. Management and incentive fees earned from consolidated investment products are eliminated from revenue upon consolidation, however the economic benefit to the HKHC shareholders’ is retained through lower amounts attributable to the redeemable noncontrolling interests. Unearned incentive fees resulting from the performance of the Company’s proprietaryprivate funds for the year ended December 31, 20242025 were approximately $1.9$24.9 million. These unearned incentive fees are subject to change based on market prices and are generally expected to be resolved once it is probable that a significant reversal of revenue will not occur. Certain funds with aggregate unearned incentive fees of $22.6 million are not expected to be resolved until the first quarter of 2026.

A small number of clients with certain separately managed accounts may pay incentive fees in addition to or in lieu of management fees, if their portfolio achieves positive investment returns, in certain cases, in excess of an agreed benchmark or hurdle rate. Typically, such fees are paid annually upon crystallization or when a client closes their investment and are not accrued prior to being earned. These unearned performance fees are subject to change based on market prices and generally expected to be resolved during the fourth quarter of 2024 once it is probable that a significant reversal of revenue will not occur.

AUM for the year ended December 31, 20242025 increaseddecreased by approximately $3.3$0.2 billion, or 51%,2%, to $9.8$9.6 billion,billion. The decline included the impact due primarily to market value changes ofas there were declines in certain key holdings across the Company’s mutual funds, ETFs and separately managed accounts (“SMAs”). The market value of Texas Pacific Land Corporation (“TPL”), which is widely held across HKHC’s proprietaryprivate funds and SMAs, increaseddecreased 111%22.1% during the year resulting in broad increases in AUM.year. In addition, there were increasesdecreases in the market value of Grayscale Bitcoin Trust (“GBTC”), which is also widely held across HKHC’s proprietaryprivate funds and SMAs, of 114%7.6% during the year.

HKHC maintains a portfolio for investment purposes and has also invested substantial capital in its proprietaryprivate funds alongside client investors. For the year ended December 31, 20242025 there was ana increasedecrease of $53.8$15.6 million, or 143%,million in the fair value of this portfolio primarily due to the 111%22.1% increasedecrease in the TPL securities held directly by HKHC. The increasechange in the fair value of HKHC’s investments is reported in unrealized gain (loss) on investments, net in the accompanying consolidated statement of operations.

TheSeveral of the Company’s consolidated investment products experienced favorablenegative performance in 2024.2025. Specifically, the Polestar Funds, Horizon Kinetics Equity Opportunities Fund and Horizon Multi-Strategy Fund were the largest contributors collectively representing approximately $739$77 million of net incomeloss for the year ended December 31, 2024. The Polestar Fund (US) and Polestar Offshore Fund returned 87.4% and 81.2% for the year ended December 31, 2024. The Horizon Multi-Strategy fund returned 85.9% for the year ended December 31, 2024. Horizon Kinetics Equity Opportunities Fund’s investment returns varied across the fund classes but similarly were positive on an overall basis for the year ended December 31, 2024.2025.

The Company’s total management and advisory fees increased approximately $8.6$16.9 million, or 18%,30%, for the year ended December 31, 20242025 compared to the prior year. The increase is due to higher management fees in mutual funds of $5.0$10.8 million, or 24%,42%, and separately managed accountsETFs of $3.2$4.0 million, or 18%,56%, due to higher average AUM throughout the year. These increases were partially offset by a decline of $2.1 million during 2024 related to the INFL ETF.

Compensation,Compensation and related employee benefits, and cost of goods soldbenefits

The Company’s operating expenses include employee compensation for investment professionals and other management personnel as well as cost of goods sold for consumer products acquired in the merger with SLGD.personnel. HKHC’s compensation costs for the year ended December 31, 20242025 increaseddecreased by approximately $11.7$5.5 million, or 44%,15%, compared to the prior year, due to higherlower internal commissions and higherlower bonus pool values in 2025 resulting from the Company’s significantly lower incentive fee results.results Thein increase2025 alsoas reflectscompared theto result2024. ofThese decreases were partially offset by compensation increases that reflected additional personnel in certain departments and $1.0 million for cost of products sold by SLGD for the five months post-acquisition period.departments.

For the year ended December 31, 2024,2025, sales, distribution and marketing expenses increaseddecreased $9.3$3.4 million, or 91%,18%, compared to the prior year, as the result of increasesdecreases of approximately $5.9$5.1 million resulting from the absence of various commissions payable on the higher2024 incentive fees earned by HKHC during the prior year. There was also ana increasedecrease of $1.8$0.5 million due to FRMO pursuant to its revenue sharing agreement with HKHC. The Company also experienced higher platform fees of $1.9 million and $1.1 million of other management fee commissions earned due to generally increasing AUM and management fees during the quarter, and fulfillment costs associated with sales of consumer products. The year ended December 31, 2024 also includes $0.4 million of selling expenses related to the SLGD segment resulting from the August 2024 acquisition.year.

Depreciation and amortization increaseddecreased 5%$0.7 million, or 39% for the year ended December 31, 20242025 as compared to the prior year due to additional amortization expense ofcertain intangible assets frombecoming thefully Merger with SLGD.amortized.

For the year ended December 31, 2024,2025, general and administrative expenses increased by $1.9$0.1 million, or 22%,1%, compared to the prior year. The Company experienced certain higherlower accounting, professional, and legal fees of $0.6 million during the year in preparation for and2025 as a result of theless Mergeractivity associated with SLGD.its 2024 merger and initial listing preparations. The Company also began incurring Director fee costs during the third quarter2024 and includedthe fivefull monthsyear of SLGD’s2025 generalresulting andin administrativean expensesadditional subsequent to the Merger date of $0.3$0.1 million.

Equity earnings, net increaseddecreased by $8.5$10.9 million for the year ended December 31, 20242025 compared to the prior year. The increasedecrease was due primarily to increasesdecreases in the fair value of holdings at Horizon Kinetics Hard Assets, LLC as compared to the prior year that had declines in fair value.year.

Interest and dividend income increased by $0.9$0.7 million for the year ended December 31, 20242025 as compared to the prior year due primarily due to ahigher specialaverage dividendcash receivedbalances duringfrom incentive fees paid in the thirdcurrent quarteryear fromcompared TPL.to prior year.

Unrealized (losses) gains on digital assets, net

Unrealized income(losses) gains on digital assets, net waswere ($0.8) million and $7.0 million for the yearyears ended December 31, 2025 and 2024 primarily due to increaseschanges in the fair value of Bitcoin during 2024the respective years. The Company increased its holdings of approximatelyBitcoin 121%.during the year ended December 31, 2025 by 1 Bitcoin from mining activity to 132 Bitcoin worth $11.5 million. During the year ended December 31, 2023,2024, digital assets unrealized gains on digital assets were not recorded pursuant to the accounting standard in effect at the time.

For the year ended December 31, 2024,2025 , unrealized gains (losses) gains on investments were $41.3($15.6) million as compared to a loss of $15.4$41.3 million in the prior year, ana increasedecrease of by $56.7$56.9 million. The unrealized gainslosses in 20242025 were primarily due to unrealized gainslosses on TPL stock, which increaseddecreased 111%22% during the year as compared to a 37%111% decreaseincrease in the prior year.

The Company recognizes deferred income taxes related to the tax basis differences for certain assets, principally unrealized gains in various investments, digital assets and indefinite lived intangible assets from the Company’s 2011 merger transaction. During periods prior to June 30, 2024, the Company was an LLC and was generally not subject to federal or state income taxes as its income and losses are included in the tax returns of its members. On July 1, 2024, the Company filed to convert from an LLC to a C-Corp for federal and state income taxes. As a result, the Company recognized a deferred income tax expense of $59.7 million related to the tax basis differences for certain assets, principally unrealized gains in various investments, digital assets and indefinite lived intangible assets.differences. Due primarily to additional unrealized gains fromof investment securities and digitalproprietary assetsfunds during the remainderthird toquarter theof 2024 year,2024, the Company recorded an additional $44.3$8.9 million additionalof deferred tax expense.

Consolidated Investment Products represented a significant portion of our AUM as of December 31, 2024 but a larger portion, approximately 98%, of our incentive fees for the year ended December 31, 2024.assets. As of December 31, 2023,2025, we consolidated 1416 private funds. The activity of the consolidated investment products is reflected within the consolidated financial statement line items indicated by reference thereto. The impact of consolidation also typically will decrease management fees and incentive fees reported under GAAP to the extent these amounts are eliminated upon consolidation. The assets and liabilities of our Consolidated Investment Products are held within separate legal entities and, as a result, the liabilities of our consolidated investment products are typically non-recourse to us. Generally, the consolidation of our consolidated investment products has a significant gross-up effect on our assets, liabilities and cash flows but has no net effect on the net income attributable to us or our stockholders’ equity.

For segment reporting purposes, revenues and expenses are presented before giving effect to the results of our consolidated investment products and the results attributable to non-controlling interests that we consolidate. As a result, segment revenues from management fees, incentive fees and investment income are different than those presented on a consolidated basis in accordance with generally accepted accounting principles. Revenues recognized from consolidated investment products are eliminated in consolidation and those attributable to the non-controlling interests of joint ventures have been excluded by us. Furthermore, expenses and the effects of other income (expense) are different than related amounts presented on a consolidated basis in accordance with GAAP due to the exclusion of the results of consolidated investment products and the non-controlling interests.

The Company also had $91.4$76.5 million of investments, at fair value. These investments include $63.8$49.7 million held in a single security, approximately 57,696173,000 shares of TPL. During the year ended December 31, 2024, the fair value of HKHC’s TPL holdings increased due to the capital contribution on July 1 that included shares of TPL and due to the approximately 111% annual increase in the fair value of TPL common shares. The Company may be limited in its ability to sell this security due to the possibility of being deemed an affiliate of TPL.

The Company’s Board of Directors has determined an expected quarterly dividend policy that is based on the Company’s quarterly performance. The Board of Director’sDirectors may consider other relevant factors that are relevant to the final determination of a quarterly dividend, if any. On March 3,11, 2025,2026, the Company's Board of Directors declared a cash dividend of $0.107$0.121 per share, payable on March 28,31, 20252026 to shareholders of record as of the close of business on March 17,23, 2025.2026.

Net cash provided by operating activities decreased by $13.6$54.9 million for the year ended December 31, 20242025 compared to the prior year. The increasedecrease was primarily the result of earnings,decreased earnings and other operating cash adjustments of $833 million and a decrease of net of working capital changes during the period. The net income (loss) for eachperiod of theapproximately annual$87 periodsmillion. wereThis largelydecrease was primarily offset by non-cashapproximately adjustments$865 relatedmillion increase of operating cash flows allocable to deferrednon-controlling income tax expense related to the Company’s conversion from an LLC to a C-Corp, equityinterests in earningsconsolidated (losses) of affiliates, and net unrealized gains (losses) on investments or digital assets.funds.

Net cash provided by investment activities increased by $1.4$23.1 million for the year ended December 31, 20242025 as compared to the prior year. The increase was primarily the result of $2.8approximately $32.3 million cashincreased acquiredproceeds from SLGDsale of investments and partially offset by lower$5 levelsmillion of a deconsolidation of a consolidated investment purchasesproduct and lower$2.8 proceedsmillion of cash provided from the saleprior ofyear certainmerger investments compared towith the priorconsumer year.products division.

Horizon Kinetics derives a substantial portion of its revenue from investment management and advisory fees which are recognized as the services are performed over time because the customer is receiving and consuming the benefits as they are provided by Horizon Kinetics. Fees are primarily based on agreed-upon percentages of AUM and recognized for services provided during the period, which are distinct from services provided in other periods. Such fees are affected by changes in AUM, including market appreciation or depreciation and net inflows or outflows. AUM represents the broad range of financial assets Horizon Kinetics manages for clients on a discretionary basis pursuant to investment management and trust agreements that are expected to continue for at least 12 months.agreements. In general, reported AUM reflects the valuation methodology that corresponds to the basis used for determining revenue (for example, net asset values).

Horizon Kinetics receives investment management and advisory fees, including incentive allocations from certain actively managed investment funds and certain SMAs. These incentive fees are dependent upon exceeding investment return thresholds, which may vary by product or account, and could include varying measurement periods.

For information on recently issued accounting standards, see Note 12 (pv), “Recently Issued Accounting Standards,” to our consolidated financial statements.

HKHC is a research driven, fundamentals-oriented asset manager serving institutions, individuals and financial professionals. It provides investment management services through its wholly-owned subsidiary and registered investment adviser, Horizon Kinetics Asset Management LLC. Through this subsidiary, it manages a number of strategies, most of which are focused on publicly-traded equity securities, but also private investments and digital assets. To accommodate different investing preferences, HKHC’s offerings can be accessed in a variety of ways, including through mutual funds, ETFs, a closed end fund, separately managed accounts that can be customized to the unique investment objectives and risk tolerances of individual clients, and, for qualified investors, via private partnerships typically known as alternative investments. HKHC raises capital for and manages these strategies, and it earns a management fee that varies among products. In certain instances, the fee it earns is tied to the performance of the account. HKHC also produces a number of research reports and compendia that are sold mainly to institutions, as it believes that the discipline required to produce written research encourages thorough qualitative and quantitative analysis. As of MarchJune 31,30, 2026, the Company had regulatory assets under management ("AUM") of $11.4$10.8 billion.

HKHC also manages a portfolio of investment securities for its own benefit, which has historically impacted and is expected to impact future results of operations, often significantly so. As of MarchJune 31,30, 2026, we held investment securities (at fair value) of $113.1$105.4 million, which represented 5.1%5.4% of total assets. In addition, we have devoted capital to a variety of the private alternative investment funds we manage. As of MarchJune 31,30, 2026, HKHC’s investments in these private funds and other private investments are $289.2$263.2 million, however, since some of these private funds are included within these consolidated financial statements, this value is not separately presented.

The Company is also entitled to receive incentive fees on private partnerships if certain performance returns have been achieved as stipulated in the governing documents of the applicable fund. Incentive fees are generated when certain returns exceed a previously established high water mark. The incentive fees are calculated as a percentage of the gains experienced, typically 20%, based on the agreement with each partner in the respective fund. Incentive fees are not subject to claw back as a result of performance declines in subsequent periods to the most recent measurement date. Incentive fees, if earned, are recognized upon completion of the contractually determined measurement period, which are generally annually, or when a client redeems their interest. Incentive fees are subject to the uncertainty of market volatility, and as a result, the entire amount of the variable consideration related to incentive fees is constrained until the end of each measurement period when the uncertainty has been resolved. The Company earned incentive fees of $18.4 million and $0.3$0.0 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Management and incentive fees earned from consolidated investment products (“CIPs”) are eliminated from revenue upon consolidation, however the economic benefit to the HKHC shareholders’ is retained through lower net income amounts attributable to the redeemable noncontrolling interests. Remaining unearned incentive fees resulting from the performance of the Company’s private funds for the three months ended MarchJune 31,30, 2026 are approximately $5.5$8.3 million. These unearned incentive fees are subject to change based on market prices and are generally expected to be resolved during the fourth quarter of 2026 once it is probable that a significant reversal of revenue will not occur. Certain funds with aggregate unearned incentive fees of $6.9 million are not expected to be resolved in the near future due to liquidity restrictions.

Business Highlights in the first quarter of 2026

In addition, theThe Company has earned incentive fees of $18.1 million during the six months ended June 30, 2026 from certain private funds due to expiration of certain restrictions associated with their investments in Miami International Holdings Inc. (“MIAX”). While these incentive fees, and other management fees,fees earned from consolidated private funds are eliminated from consolidated management and advisory fees, the positive economic benefit continues to be reflected in a lower attribution of net income to redeemable noncontrolling interests (and therefore higher net income attributable to Horizon Kinetics Holding Corporation).

AUM forDuring the threesix months ended MarchJune 31,30, 20262026, AUM increased by approximately $1.8$1.2 billion, or 19%,13% to $11.4$10.8 billion,billion compared to December 31, 2025 primarily due primarily to market value changes of key holdings across the Company’s mutual funds, ETFs and separately managed accounts (“SMAs”). The market value of Texas Pacific Land Corporation (“TPL”), which is widely held across HKHC’s private funds and SMAs, increased 65%52% during the quarteryear resulting in increases in AUM across a variety of our financial products. ThoseThe increasesAUM wereincrease was partially offset by declines in Grayscale Bitcoin Trust (“GBTC”), which is also widely held across HKHC’s private funds, of 23%33% during the firstsix quarter.months ended June 30, 2026.

The Company maintains a portfolio for investment purposes and has also invested substantial capital in its private funds alongside client investors. For the quartersix months ended MarchJune 31,30, 2026, there was an increase of $36.2$28.9 million in the fair value of the Company’s investment portfolio compared to the prior year primarily due to the 65%52% increase in the TPL securities held directly. The increase in the fair value of HKHC’s investments is reported in unrealized gain (loss) on investments, net in the accompanying Consolidated Statement of Operations.

The Company’s consolidated investment products experienced favorable performance thus far in 2026. Specifically, the Polestar Funds and Horizon Multi-Strategy Fund were the largest contributors for the threesix months ended MarchJune 31,30, 2026, however they were partially offset by net losses at Horizon Kinetics Equity Opportunity Funds and South LaSalle.

Results of Operations for the three months ended MarchJune 31,30, 2026

The Company’s operating expenses include employee compensation for investment professionals and other management personnel. HKHC’s compensation costs for the three months ended MarchJune 31,30, 2026 increased by approximately $5.1$0.5 million, or 56%,6%, compared to the prior year primarily due to primarilyan increase of $0.3 million related to $5.4 million of incremental commissionsseverance and other costsgeneral associatedcompensation withincreases thecompared firstto quarter’sprior incentive fee associated with our private funds holding MIAX.year.

For the three months ended MarchJune 31,30, 2026, sales, distribution and marketing expenses increaseddecreased $0.8$0.3 million, or 20%,8%, compared to the prior quarter,year, primarily as a result of alower higherplatform expensefees to FRMO pursuant to its revenue sharing agreement with HKHC of $0.8 million that was associated solelycompared to the incentivesecond feequarter associatedof with our private funds holding MIAX.2025.

Depreciation and amortization decreased $0.2$0.1 million for the three months ended MarchJune 31,30, 2026 as compared to the prior year due to certain intangible assets becoming fully amortized during 2025.

For the three months ended MarchJune 31,30, 2026, general and administrative expenses didincreased not$0.3 changemillion, significantlyor at10% $2.5primarily milliondue forto eachtwo period.new office leases that commenced during the second quarter of 2026. The Company’s general and administrative expenses includesinclude rent and occupancy expenses, software, insurance, legal and audit professional fees, Director fees and other costs.

EquityFor earnings,the netthree wasmonths $10.3ended June 30, 2026, equity earnings increased $2.6 million for the three months ended MarchJune 31,30, 2026 compared to $3.1the millionsame forperiod in the prior year. The increase was due primarily to increases in the fair value of holdings at Horizon Kinetics Hard Assets, LLC as compared to the prior year.

Interest and dividend income decreaseddid bynot $0.1change significantly at $0.5 million for both the three months ended MarchJune 31,30, 2026 as compared toand the prior year due to lowersimilar investable cash and cash equivalents balances at the Company.

There was an unrealized loss on digital assets, net of $2.8$1.4 million for the three months ended MarchJune 31,30, 2026 as compared to aan lossunrealized gain of $1.8$3.4 million in the comparable prior year period, primarily due to the change in bitcoin’s value during each respective quarter.

For the three months ended MarchJune 31,30, 2026, the Company recognized an unrealized gains (losses)loss on investments increasedof by$8.0 $22.4 millionmillion, compared to an unrealized loss of $15.4 million during the second quarter of the prior year. This increasechange was due primarily to the $32.4decrease millionin unrealizedthe gainfair onvalue of TPL stock during the three months ended MarchJune 31,30, 2026 resultingof from7.8%, itscompared approximatelyto 65%a increasedecrease in itsthe fair value.value of TPL during the three months ended June 30, 2025 of 20.3%.

The Company recognizes deferred income taxes related to the tax basis differences for certain assets, principally unrealized gains in various investments, digital assets and indefinite lived intangible assets from the Company’s 2011 merger transaction. The Company’s unrealized gainslosses of investment securities and private funds during the quarter resulted in the recording of a deferred taxestax benefit during the quarter ended MarchJune 31,30, 2026.

Net income attributable to redeemable non-controlling interests in Consolidated Investment Products represents the income attributable to ownership interests that third parties hold in entities that are consolidated within our consolidated financial statements. During 20252026, the amounts attributable to noncontrolling interests increased correspondingly to the performance of our private funds. The three months ended MarchJune 31,30, 2026 also include an allocation of $18.1$0.4 million associated with the incentive fees earned by the Company from funds holding MIAX.Company.

Consolidated Investment ProductsCIPs represented a significant portion of our AUM as of MarchJune 31,30, 2026. The activity of the consolidated investment productsCIPs is reflected within the consolidated financial statement line items indicated by reference thereto. The impact of consolidation will typically decrease management fees and incentive fees, if any, reported under GAAP to the extent these amounts are eliminated upon consolidation. The assets and liabilities of our Consolidated Investment ProductsCIPs are held within separate legal entities and, as a result, the liabilities of our consolidated investment productsCIPs are typically non-recourse to us. Generally, the consolidation of our consolidated investment productsCIPs has a significant gross-up effect on our assets, liabilities and cash flows but has no net effect on the net income attributable to us or our stockholders’shareholders’ equity.

At MarchJune 31,30, 2026, the Company had $36.7$34.3 million of cash and cash equivalents. We believe that our cash and cash equivalents at MarchJune 31,30, 2026 will be sufficient to fund operations for at least one year from the publication of this report.

The Company also had $113.1$105.4 million of investments, at fair value. These investments include $82$76 million held in a single security, approximately 173,088 shares of TPL. During the threesix months ended MarchJune 31,30, 2026, the fair value of HKHC’s TPL holdings increased due to the approximately 65.2%52.4% year-to-date increase in the fair value of TPL common shares. The Company may be limited in its ability to sell this security due to our status as an affiliate of TPL.

The Company’s Board of Directors has determined an expected quarterly dividend policy that is based on the Company’s quarterly performance. The Board of Directors may consider other relevant factors that are relevant to the final determination of a quarterly dividend, if any. On MayAugust 14,12, 2026, the Company's Board of Directors declared a cash dividend of $0.127$0.13 per share, payable on JuneSeptember 17,10, 2026 to shareholders of record as of the close of business on MayAugust 27,26, 2026.

Net cash used byin operating activities decreased by $7.7$13.5 million for the threesix months ended MarchJune 31,30, 2026 compared to the prior year. The decreasechange was primarily the result of earnings, net of working capital changes, including certain accrued expenses, during the period. The net income (or loss) for each of the threesix month periods were largely offset by non-cash adjustments related to deferred income tax expenses, equity in earnings (losses) of affiliates, net and unrealized gains (losses) on investments or digital assets.

Net cash resulting from investment activities decreased by $24.5$19.9 million for the threesix months ended MarchJune 31,30, 2026 as compared to the prior year as the result of limited purchases and sales of investments during the period as compared to the prior year. During the six months ended June 30, 2025, the Company sold certain securities that were received as incentive fee payments related to the 2024 performance. During the six months ended June 30, 2026 the Company received $5.0 million of cash proceeds from key-man life insurance.

Net cash provided by financing activities increaseddecreased by $7.3$16.7 million for the threesix months ended MarchJune 31,30, 2026 as compared to the prior year. The increasedecrease was primarily due to $2.3 million higherlower contributions to redeemable noncontrolling interests in consolidatedthe investmentCIPs. productsThis anddecrease $5.2was partially offset by $6.8 million lessof lower redemptions from redeemable noncontrolling interests in consolidatedthe investmentCIPs. products compared toAlso, the priorCompany year. This increase was partially offset by $2.3 million of dividend payments forincreased the quarter, as compared to $2.0 millionlevel of dividend payments during the firstsix quartermonths ofended June 30, 2026 to $4.6 million as compared to $3.0 million for the six months ended June 30, 2025.

During 2025,the second quarter of 2026, the Company entered intocommenced two previously executed non-cancelable operating leasesleases, thatadding havecontractual notlease yetobligations commencedwith forremaining replacementterms andranging additionalfrom office space forapproximately seven to 15 years. The table above excludes $27.3 million of legally binding lease payments for leases signed but not yet commenced. The Company also has an operating lease with annual cash outflows of approximately $0.4$0.3 million through 2030 and a sublease agreement with annual expected cash inflows of approximately $0.3 million through 2027.

Horizon KineticsHKHC recognizes revenues when its obligations related to the services are satisfied and it is probable that a significant reversal of the revenue amount would not occur in future periods. Horizon KineticsHKHC enters into contracts that can include multiple services, which are accounted for separately if they are determined to be distinct. Management’s judgment is required in assessing the probability of significant revenue reversal and in identification of distinct services.