Horizon Kinetics LLC and Subsidiaries (A Limited Liability Company)

Unaudited Condensed Consolidated Financial Statements

As of June 30, 2024

and for the three and six months ended June 30, 2024 and 2023

TABLE OF CONTENTS

Horizon Kinetics LLC and Subsidiaries

Condensed Consolidated Statements of Financial Condition

(in thousands)

See accompanying notes to these Condensed Consolidated Financial Statements

Horizon Kinetics LLC and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands)

See accompanying notes to these Condensed Consolidated Financial Statements

Horizon Kinetics LLC and Subsidiaries

Condensed Consolidated Statements of Changes in Members' Equity (Unaudited)

(in thousands)

See accompanying notes to these Condensed Consolidated Financial Statements

Horizon Kinetics LLC and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

See accompanying notes to these Condensed Consolidated Financial Statements

Horizon Kinetics LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Information as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023 is unaudited)

(in thousands)

Note 1. General

The accompanying unaudited interim Condensed Consolidated Financial Statements of Horizon Kinetics LLC, a Delaware Limited Liability Company (along with its wholly-owned subsidiaries, collectively referred to as the “Company”, “HK LLC” or in the first-person notations of “we”, “us” and “our”) were prepared in accordance with accounting principles generally accepted in the United States of America and the interim financial statement rules and regulations of the SEC. In the opinion of management, these statements include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Condensed Consolidated Financial Statements. The interim operating results are not necessarily indicative of the results for a full year or for any interim period. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. The accompanying Consolidated Balance Sheet as of December 31, 2023 has been derived from the Company's annual financial statements for the year ended December 31, 2023. The Condensed Consolidated Financial Statements included herein should be read in conjunction with the Company’s annual 2023 Consolidated Financial Statements and Notes included elsewhere in this current report.

The Condensed Consolidated Financial Statements include the accounts of HK LLC and all of its wholly-owned subsidiaries (Horizon Kinetics Asset Management, Kinetics Funds Distributor LLC, and KBD Securities LLC) (collectively the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

Note 2. Summary of Significant Accounting Policies

Consolidation

In addition to its wholly-owned subsidiaries, generally accepted accounting principles in the United States of America (“GAAP”) requires that the assets, liabilities and results of operations of a variable interest entity (“VIE”) be consolidated into the financial statements of the enterprise that has a controlling interest in the VIE. The determination as to whether an entity qualifies as a VIE depends on the facts and circumstances surrounding each entity, and therefore certain of the investment vehicles managed by the Company may qualify as VIEs under the variable interest model, whereas others may qualify as voting interest entities

(“VOEs”) under the voting interest model. The granting of substantive kick-out rights is a key consideration in determining whether a limited partnership or similar entity is a VIE and whether or not that entity should be consolidated. The Company first evaluates whether it holds a variable interest in an entity. Fees that are customary and commensurate with the level of services provided, and where the Company does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, would not be considered a variable interest. The Company factors in all economic interests including proportionate interests through related parties, to determine if such interests are considered a variable interest. As the Company’s interests in many of these entities are solely associated with market rate fees and/or insignificant indirect interests through related parties, the Company is not considered to have a variable interest in many of these entities. For entities where the Company has determined that it does hold a variable interest, the Company performs an assessment to determine whether each of those entities qualify as a VIE.

The Company holds equity investments in certain of its affiliated investment funds. While the Company and other related-party owners own a significant portion of the entities in some instances, the Company has determined that it is not the ultimate primary beneficiary. The Company’s maximum exposure to loss is the potential loss of its investment, it can redeem its investment at any time (in accordance with the redemption provisions of the specific funds) and does not have in place any liquidity arrangements or other commitments with third parties on behalf of the funds. Accordingly, the underlying assets and liabilities related to these entities are not consolidated with the Company’s condensed consolidated financial statements.

Use of estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Liquidity

The Company believes that its cash and cash equivalents will be sufficient to fund operations past one year from the issuance of these condensed consolidated financial statements.

Digital assets

Through December 31, 2023, the Company accounted for digital assets in accordance with the AICPA’s practice aid “Accounting for and auditing of digital assets.” In accordance with this practice aid, digital assets are accounted for as an indefinite-lived intangible asset and are initially valued based on the current price of the digital asset at the time the digital asset was received. During 2023, the Company evaluated digital assets for impairment on a daily basis or when events or changes indicate the carrying value may not be recoverable by using the daily low price. The Company has evaluated its digital assets for impairment and did not record any impairments for the three and six months ended June 30, 2023.

Effective January 1, 2024, the Company measures digital assets at fair value with changes recognized in earnings in each reporting period. The Company tracks its cost basis of digital assets in accordance with first-in-first-out method of accounting.

The Company’s digital assets are all Level 1 within the fair value hierarchy, except for certain other assets with a fair value of $8 that are Level 2

The following tables present additional information about the Company’s digital assets as of June 30, 2024 and December 31, 2023, respectively:

Investments, at fair value

The Company invests in securities which are valued at fair value with unrealized gains and losses included in the condensed consolidated statement of operations. Realized gains and losses are determined on the basis of specific identification.

Investments in proprietary funds

For investments in entities over which the Company exercises significant influence, but which do not meet the requirements for consolidation and for which the Company has not elected the fair value option, the Company uses the equity method of accounting, whereby the Company records its share of the underlying income or loss of such entities. The Company’s share of the underlying net income or loss of such entities is recorded in equity in earnings of affiliated investments on the condensed consolidated statement of operations. As the underlying entities that the Company manages and invests in are, for U.S. GAAP purposes, primarily investment companies accounted for under Accounting Standards Codification (“ASC”) Topic 946 which reflect their investments at fair value, the carrying value of the Company’s equity method investments in such entities approximates fair value.

Other investments

We account for other investments that are not accounted for under the equity method that do not have a readily determinable fair value under the fair value measurement alternative. Under the fair value measurement alternative, these investments are based on our original cost less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar interests of the same issuer. Under this method, our share of the income or losses of such companies is not included in our Consolidated Statements of Operations, however, the result of observable price changes, if any, are reflected in Other income (loss), net. We include the carrying value of these investments in Investments in proprietary funds on the Condensed Consolidated Balance sheets.

Fair value measurements:

The Company values certain of its financial assets and liabilities based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting guidance emphasizes that fair value is a market-based measurement that should be determined based on the assumptions market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, accounting guidance establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). Valuation techniques used to measure fair value shall maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows:

Level 1 Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments are not applied to Level 1 investments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these investments does not entail a significant degree of judgment.

Level 2 Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The fair value hierarchy guidance gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.

Revenue Recognition

The Company recognizes revenue under Financial Accounting Standards Board's (FASB) Accounting Standards Update (ASU) 2014-09, Revenue From Contracts With Customers (Topic 606). The Company recognizes revenue when the performance obligation is satisfied, which is the point at which control of the promised goods or services are transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.

Management fees, which are generally calculated as a percentage of assets or equity under management, are recognized when earned and collection is probable. Certain contracts for management services also provide for performance-based fees (“Incentive Fees”), which are generally earned when a predefined minimum investment return (“Return Threshold”) for the managed funds are earned. When applicable, Incentive Fees are recognized in the statements of operations based on the contractual conditions set forth in the agreements governing the managed funds as if the managed funds were terminated and liquidated at the reporting date and the managed funds’ investments were realized at the then estimated fair values.

Incentive Fee revenue is recorded when earned by the Fund Managers of those managed funds to the extent that Return Thresholds have been met and it is probable that a significant reversal of revenue will not occur. Management and advisory fees are comprised of base management fees, advisory and other fees and are accounted for as contracts with customers. The Company earns base management fees from its customers at a fixed percentage of a calculation base which is typically invested capital or net asset

value. The Company identifies its customers on a fund-by-fund basis in accordance with the terms and circumstances of the individual fund. Generally, the customer is identified as the investor in its managed funds and investment vehicles, but for certain widely held funds or vehicles, the fund or vehicle itself may be identified as the customer. These customer contracts require the Company to provide investment management services over a period of time, which represents a performance obligation that the Company satisfies over time. Management fees are a form of variable consideration because the fees that the Company is entitled to vary based on fluctuations in the basis for the management fee. The amount recorded as revenue is generally determined at the end of the period because these management fees are payable on a regular basis (typically monthly) and are not subject to claw back once paid. Transaction, advisory and other fees are principally fees charged to the investors of funds indirectly through the managed funds. These fees are based on a fixed percentage of enterprise value or equity value of pooled capital raised and are earned which generally coincides with when the capital is called. These fees are not tied to performance or ongoing investment management services, are not subject to claw back and are recorded in the period in which the related transaction closes. Accrued but unpaid management and advisory fees as of the reporting date are included in fees receivable.

The following table disaggregates our revenue by type:

The following table presents balances of management fees receivable by type:

Other revenue

The Company also produces investment research reports for individual and institutional research clients. In addition, the Company retains a third-party marketing firm to market and distribute its research reports. Clients subscribe at a monthly, annual or multi-annual level. Income is accrued monthly based on current subscription base.

Third party distribution

The Company has agreements in place with several third-party distribution firms and individual marketers (“Marketers”). Generally, each party to the agreement may terminate the agreement in a short notice period. Third party distribution expenses are earned by the Marketers based on revenue earned from some of the Company’s investment products generated by the respective Marketers. Accrued third party distribution expenses represent expenses that have been accrued but not paid. In the event that related fees receivable are deemed uncollectible, both related fees receivable and accrued third party distribution expenses will be written off.

Income taxes

The Company is not subject to federal or state income taxes as its income and losses are includable in the tax returns of its members. The Company may be required to file returns and pay tax in various state and local jurisdictions as a result of its operations or residency. Accordingly, the Company is subject to New York City unincorporated business income tax (“UBT”) and annual limited liability company fees in New York and Delaware. For the six months ended June 30, 2024 and 2023, respectively, the provision

(benefit) for income taxes was $1,478 and $(840). Deferred tax liabilities consist primarily of unrealized gains on investments in marketable securities and proprietary funds, and unrealized gains on digital assets.

Recently adopted accounting pronouncement

In December 2023, the FASB issued ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60). ASU No. 2023-08 requires that an entity measure crypto assets at fair value with changes recognized in net income at each reporting period and present crypto assets separately from other intangible assets in the balance sheet and changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. ASU No. 2023-08 is effective for annual periods beginning after December 15, 2024 and interim periods within annual periods beginning after December 15, 2024. The Company adopted ASU 2023-08 as of January 1, 2024 resulting in certain expanded disclosures about digital assets and recorded an increase to our digital assets and members’ equity of approximately $4.4 million.

Note 3. Investments, at fair value

As of June 30, 2024 the Company owned investments in marketable securities with a fair value of $51,513 and a cost of $21,226.

The following summarizes the Company’s investments accounted for at fair value at June 30, 2024 using the fair value hierarchy:

The following summarizes the Company’s investments accounted for at fair value at December 31, 2023 using the fair value hierarchy:

As of June 30, 2024 and December 31, 2023, there are no investments categorized within Level 3.

Note 4. Investments in proprietary funds

At June 30, 2024 and December 31, 2023, investments in proprietary funds, which are recorded using the equity method of accounting, consist of the following:

The tables below present summarized financial information of the Company’s equity method investments at June 30, 2024: