Table of Contents
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM
10-Q

☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2017

2021
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period Fromtransition period from
to

Commission
File Number
001-36423

HENNESSY ADVISORS, INC.

(Exact name of registrant as specified in its charter)

California
 
68-0176227

(State or other jurisdiction of


incorporation or organization)

 

(IRS Employer


Identification No.)

7250 Redwood Blvd.Boulevard
,
Suite 200

Novato, California

 
94945
(Address of principal executive office)
 
(Zip Code)code)

(415)
899-1555

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
symbol
Name
of
each exchange
on which registered
Common stock, no par value
HNNA
The Nasdaq Stock Market LLC
4.875% Notes due 2026
HNNAZ
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.

Large accelerated filer ☐  Accelerated filer ☒☐
Non-accelerated
filer		 ☐  (Do not check if a smaller reporting company)☒  Smaller reporting company ☐☒
 
  Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act   ☐

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

As of January 25, 2018,February 7, 2022, there were 7,805,6987,478,103 shares of common stock issued and outstanding.

Table of Contents
HENNESSY ADVISORS, INC.

TABLE OF CONTENTS

PART I
 
Financial Information
  
Item 1
 
Unaudited Condensed Financial Statements
  31
 
Balance Sheets
  31
 
Statements of Income
  42
 
StatementStatements of Changes in Stockholders’ Equity
  53
 
Statements of Cash Flows
  64
 
Notes to Unaudited Condensed Financial Statements
  75
Item 2
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  1714
Item 34
 
QuantitativeControls and Qualitative Disclosures About Market RiskProcedures
  2723
Item 4
PART II
 
Controls and ProceduresOther Information
  27
PART IIOther Information
Item 2
 
Unregistered Sales of Equity Securities and Use of Proceeds
  2824
Item 6
 
Exhibits
  2925
 
Signatures
  26

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i

Table of Contents
PART I: FINANCIAL INFORMATION

Item 1:
Unaudited Condensed Financial Statements

Hennessy Advisors, Inc.

Balance Sheets

(In thousands, except share and per share amounts)

   December 31,   September 30, 
   2017   2017 
   (Unaudited)     

Assets

    

Current assets:

    

Cash and cash equivalents

  $15,198   $15,700 

Investments in marketable securities, at fair value

   9    8 

Investment fee income receivable

   4,767    4,325 

Prepaid expenses

   362    1,614 

Other accounts receivable

   500    584 
  

 

 

   

 

 

 

Total current assets

   20,836    22,231 
  

 

 

   

 

 

 

Property and equipment, net of accumulated depreciation of $968 and $922, respectively

   265    254 

Management contracts

   75,686    74,628 

Other assets

   152    145 
  

 

 

   

 

 

 

Total assets

  $96,939   $97,258 
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities:

    

Accrued liabilities and accounts payable

  $3,132   $7,353 

Income taxes payable

   1,360    676 

Deferred rent

   195    202 

Current portion of long-term debt, net of discount and debt issuance costs

   4,228    4,228 
  

 

 

   

 

 

 

Total current liabilities

   8,915    12,459 
  

 

 

   

 

 

 

Long-term debt, net of discount and debt issuance costs and current portion

   20,671    21,728 

Deferred income tax liability, net of deferred tax asset

   7,731    11,541 
  

 

 

   

 

 

 

Total liabilities

   37,317    45,728 
  

 

 

   

 

 

 

Commitments and Contingencies (Note 8)

    

Stockholders’ equity:

    

Common stock, no par value, 22,500,000 shares authorized:
7,803,530 shares issued and outstanding at December 31, 2017, and 7,776,563 at September 30, 2017

   15,485    14,943 

Retained earnings

   44,137    36,587 
  

 

 

   

 

 

 

Total stockholders’ equity

   59,622    51,530 
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

  $96,939   $97,258 
  

 

 

   

 

 

 

   
December 31,
2021
 
September 30,
2021
 
   
(Unaudited)
 
  
Assets
        
Current assets        
Cash and cash equivalents  $54,502 $15,836 
Investments in marketable securities, at fair value
   10  10 
Investment fee income receivable
   2,826  2,795 
Prepaid expenses
   563  788 
Other accounts receivable
   388  277 
   
 
 
 
 
 
 
Total current assets
   58,289  19,706 
   
 
 
 
 
 
 
Property and equipment, net of accumulated depreciation of $1,903 and $1,850, respectively
   315  311 
Operating lease
right-of-use
asset
   920  1,010 
Management contracts
   80,643  80,643 
Other assets
   246  235 
   
 
 
 
 
 
 
Total assets
  $140,413 $101,905 
   
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
        
Current liabilities
        
Accrued liabilities and accounts payable
  $2,464 $4,151 
Operating lease liability
   361  359 
Income taxes payable
   848  1,050 
   
 
 
 
 
 
 
Total current liabilities
   3,673  5,560 
   
 
 
 
 
 
 
Notes payable, net of issuance costs
   38,662  —   
Long-term operating lease liability
   554  646 
Net deferred income tax liability
   13,007  12,437 
   
 
 
 
 
 
 
Total liabilities
   55,896  18,643 
   
 
 
 
 
 
 
Commitments and contingencies (Note
9
)
   0   0  
Stockholders’ equity
        
Common stock, 0 par value, 22,500,000 shares authorized; 7,478,048 shares issued and outstanding as of December 31, 2021, and 7,469,584 as of September 30, 2021
   20,339  19,964 
Retained earnings
   64,178  63,298 
   
 
 
 
 
 
 
Total stockholders’ equity
   84,517  83,262 
   
 
 
 
 
 
 
Total liabilities and stockholders’ equity  $140,413 $101,905 
   
 
 
 
 
 
 
See accompanying notesNotes to unaudited condensed financial statements

- 3 -

Unaudited Condensed Financial Statements

1

Table of ContentsHennessy Advisors, Inc.

Statements of Income

(In thousands, except share and per share amounts)

(Unaudited)

   Three Months Ended December 31, 
   2017  2016 

Revenue:

   

Investment advisory fees

  $12,672  $12,109 

Shareholder service fees

   1,141   1,185 
  

 

 

  

 

 

 

Total revenue

   13,813   13,294 
  

 

 

  

 

 

 

Operating expenses:

   

Compensation and benefits

   3,166   3,214 

General and administrative

   1,515   1,395 

Mutual fund distribution

   120   61 

Sub-advisor fees

   2,532   2,289 

Amortization and depreciation

   83   93 
  

 

 

  

 

 

 

Total operating expenses

   7,416   7,052 
  

 

 

  

 

 

 

Net operating income

   6,397   6,242 

Interest expense

   263   266 

Other income

   (13)   —   
  

 

 

  

 

 

 

Income before income tax expense

   6,147   5,976 

Income tax (benefit) expense

   (2,040)   1,980 
  

 

 

  

 

 

 

Net income

  $8,187  $3,996 
  

 

 

  

 

 

 

Earnings per share:

   

Basic

  $1.05  $0.52 
  

 

 

  

 

 

 

Diluted

  $1.04  $0.52 
  

 

 

  

 

 

 

Weighted average shares outstanding
(prior periods restated for stock split, see Note 6):

   

Basic

   7,800,409   7,685,676 
  

 

 

  

 

 

 

Diluted

   7,842,707   7,756,053 
  

 

 

  

 

 

 

   
Three Months Ended December 31,
 
   
2021
  
2020
 
Revenue
         
Investment advisory fees
  $7,938  $7,208 
Shareholder service fees
   596   581 
   
 
 
  
 
 
 
Total revenue
   8,534   7,789 
   
 
 
  
 
 
 
Operating expenses
         
Compensation and benefits
   2,262   2,104 
General and administrative
   1,400   1,308 
Mutual fund distribution
   155   121 
Sub-advisory
fees
   1,877   1,785 
Depreciation
   53   62 
   
 
 
  
 
 
 
Total operating expenses
   5,747   5,380 
   
 
 
  
 
 
 
Net operating income
   2,787   2,409 
Interest expense
   508   —   
Other income
   (2)   (1) 
   
 
 
  
 
 
 
Income before income tax expense
   2,281   2,410 
Income tax expense
   368   637 
   
 
 
  
 
 
 
Net income
  $1,913  $1,773 
   
 
 
  
 
 
 
Earnings per share
         
Basic
  $0.26  $0.24 
   
 
 
  
 
 
 
Diluted
  $0.25  $0.24 
   
 
 
  
 
 
 
Weighted average shares outstanding
         
Basic
   7,472,680   7,357,883 
   
 
 
  
 
 
 
Diluted
   7,522,686   7,367,128 
   
 
 
  
 
 
 
Cash dividends declared per share
  $0.14  $0.14 
   
 
 
  
 
 
 
See accompanying notesNotes to unaudited condensed financial statements

- 4 -

Unaudited Condensed Financial Statements

2

Table of ContentsHennessy Advisors, Inc.

Statement

Statements of Changes in Stockholders’ Equity

Three Months Ended December 31, 2017

(In thousands, except share data)

(Unaudited)

            Total 
   Common Stock  Retained  Stockholders’ 
   Shares  Amount  Earnings  Equity 

Balance at September 30, 2017

   7,776,563  $14,943  $36,587  $51,530 

Net income

   —     —     8,187   8,187 

Dividends paid

   —     —     (585)   (585) 

Employee and director restricted stock vested

   33,750   —     —     —   

Repurchase of vested employee restricted stock for tax withholding

   (7,329)   (65)   (52)   (117) 

Shares issued for auto-investments pursuant to the 2015 Dividend Reinvestment and Stock Purchase Plan

   16   —     —     —   

Shares issued for dividend reinvestment pursuant to the 2015 Dividend Reinvestment and Stock Purchase Plan

   530   9   —     9 

Stock-based compensation

   —     598   —     598 
  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2017

   7,803,530  $15,485  $44,137  $59,622 
  

 

 

  

 

 

  

 

 

  

 

 

 

   
Three Months Ended December 31, 2021
 
            
Total
 
   
Common Stock
  
Retained
  
Stockholders’
 
   
Shares
  
Amount
  
Earnings
  
Equity
 
Balance at September 30, 2021
   7,469,584  $    19,964  $    63,298  $    83,262 
Net income
   —     —     1,913   1,913 
Dividends paid
           (1,027)   (1,027) 
Employee restricted stock vested
   10,000   —     0     0   
Repurchase of vested employee restricted stock for tax withholding
   (3,458)   (31)   (6)   (37) 
Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan
   193   2   —     2 
Shares
 
issued
 
for
 
dividend
 
reinvestment
 
pursuant
 
to
 
the
 
2021
 
D
ividend
 
Reinvestment
 
and
 
Stock
Purchase Plan
   1,729   19   —     19 
Stock-based compensation
   —     388   —     388 
Employee restricted stock forfeiture
   —     (3)       (3) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balance at December 31, 2021
   7,478,048  $20,339  $64,178  $84,517 
   
 
 
  
 
 
  
 
 
  
 
 
 
Statements of Changes in Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
   
Three Months Ended December 31, 2020
 
              
Total
 
   
Common Stock
   
Retained
  
Stockholders’
 
   
Shares
   
Amount
   
Earnings
  
Equity
 
Balance at September 30, 2020
   7,356,822   $    18,705   $    59,473  $    78,178 
Net income
   —      —      1,773   1,773 
Dividends paid
   —      —      (1,011)   (1,011) 
Shares issued for auto-investments pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan
   652    6    —     6 
Shares
 
issued
 
for
 
dividend
 
reinvestment
 
pursuant
 
to
 
the
 
2018
 
Dividend
 
Reinvestment
 
and
 
Stock
Purchase Plan
   2,165    19    —     19 
Stock-based compensation
   —      352    —     352 
   
 
 
   
 
 
   
 
 
  
 
 
 
Balance at December 31, 2020
   7,359,639   $19,082   $60,235  $79,317 
   
 
 
   
 
 
   
 
 
  
 
 
 
See accompanying notesNotes to unaudited condensed financial statements

- 5 -

Unaudited Condensed Financial Statements

3

Table of ContentsHennessy Advisors, Inc.

Statements of Cash Flows

(In thousands)

(Unaudited)

   Three Months Ended December 31, 
   2017  2016 

Cash flows from operating activities:

   

Net income

  $8,187  $3,996 

Adjustments to reconcile net income to net cash provided by operating activities:

   

Amortization and depreciation

   83   93 

Deferred income taxes

   (3,810)   1,170 

Stock-based compensation

   598   528 

Unrealized gains on marketable securities

   (1)   —   

Amortization of loan fee payments

   (37)   (37) 

Change in operating assets and liabilities:

   

Investment fee income receivable

   (442)   (313) 

Prepaid expenses

   1,252   640 

Other accounts receivable

   84   69 

Other assets

   (7)   —   

Accrued liabilities and accounts payable

   (4,221)   (3,398) 

Income taxes payable

   684   (383) 

Deferred rent

   (7)   17 
  

 

 

  

 

 

 

Net cash provided by operating activities

   2,363   2,382 
  

 

 

  

 

 

 

Cash flows from investing activities:

   

Purchases of property and equipment

   (57)   (32) 

Payments related to management contracts

   (1,058)   (51) 
  

 

 

  

 

 

 

Net cash used in investing activities

   (1,115)   (83) 
  

 

 

  

 

 

 

Cash flows from financing activities:

   

Principal payments on bank loan

   (1,057)   (1,057) 

Restricted stock units repurchased for employee tax withholding

   (117)   (168) 

Proceeds from shares issued pursuant to the 2015 Dividend Reinvestment and Stock Repurchase Plan

   9   2 

Dividend payments

   (585)   (506) 
  

 

 

  

 

 

 

Net cash used in financing activities

   (1,750)   (1,729) 
  

 

 

  

 

 

 

Net (decrease) increase in cash and cash equivalents

   (502)   570 

Cash and cash equivalents at the beginning of the period

   15,700   3,535 
  

 

 

  

 

 

 

Cash and cash equivalents at the end of the period

  $15,198  $4,105 
  

 

 

  

 

 

 

Supplemental disclosures of cash flow information:

   

Cash paid for:

   

Income taxes

  $19  $684 
  

 

 

  

 

 

 

Interest

  $270  $270 
  

 

 

  

 

 

 

   
Three Months Ended December 31,
 
   
2021
  
2020
 
Cash flows from operating activities
         
Net income
  $1,913  $1,773 
Adjustments to reconcile net income to net cash provided by operating activities
         
Depreciation
   53   62 
Change in
right-of-use
asset and operating lease liability
   —     (17) 
Amortization of note issuance costs
  
55
   
—
 
 
 
Deferred income taxes
   570   313 
Employee restricted stock forfeiture
   (3)   —   
Stock-based compensation
   388   352 
Change in operating assets and liabilities
         
Investment fee income receivable
   (31)   (285) 
Prepaid expenses
   225   210 
Other accounts receivable
   (111)   54 
Other assets
   (11)   (1) 
Accrued liabilities and accounts payable
   (1,687)   (1,733) 
Income taxes payable
   (202)   323 
   
 
 
  
 
 
 
Net cash provided by operating activities
   1,159   1,051 
   
 
 
  
 
 
 
Cash flows from investing activities
         
Purchases of property and equipment
   (57)   (66) 
   
 
 
  
 
 
 
Net cash used in investing activities
   (57)   (66) 
   
 
 
  
 
 
 
Cash flows from financing activities
         
Proceeds from issuance of notes
, net of underwriting discount
   39,042   —   
Payment of issuance costs on notes
   (435)   —   
Repurchase of vested employee restricted stock for tax withholding
   (37)   —   
Proceeds from shares issued pursuant to the 2018 Dividend Reinvestment and Stock Repurchase Plan
   —     6 
Proceeds from shares issued pursuant to the 2021 Dividend Reinvestment and Stock Repurchase Plan
   2   —   
Dividend payments
   (1,008)   (992) 
   
 
 
  
 
 
 
Net cash provided by (used in) financing activities
   37,564   (986) 
   
 
 
  
 
 
 
Net increase (decrease) in cash and cash equivalents
   38,666   (1) 
Cash and cash equivalents at the beginning of the period
   15,836   9,955 
   
 
 
  
 
 
 
Cash and cash equivalents at the end of the period
  $54,502  $9,954 
   
 
 
  
 
 
 
Supplemental disclosures of cash flow information
         
Cash paid for interest
  $387  $0   
Dividend reinvestment issued in shares
 
$
19
  
$
19
 
See accompanying notesNotes to unaudited condensed financial statements

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Unaudited Condensed Financial Statements

4

Table of Contents
HENNESSY ADVISORS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(1)
Basis of Financial Statement Presentation

The accompanying condensed balance sheet as of September 30, 2017,2021, which has been derived from audited financial statements, and the unaudited interim condensed financial statements as of and for the three months ended December 31, 2017,2021, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and include the accounts of Hennessy Advisors, Inc. (the “Company,” “we,” “us,” or “our”). Certain information and footnote disclosures in these unaudited interim condensed financial statements, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission for Quarterly Reports on Form
10-Q.
In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments necessary for a fair presentationstatement of the Company’s financial position at December 31, 2017,2021, the Company’s operating results for the three months ended December 31, 20172021 and 2016,2020, and the Company’s cash flows for the three months ended December 31, 20172021 and 2016.2020. These unaudited interim condensed financial statements and notes should be read in conjunction with the Company’s audited financial statements and notes thereto for thefiscal year ended September 30, 2017,2021, which are included in the Company’s Annual Report on
Form 10-K
for the fiscal year ended September 30, 2017.

2021.

The preparation of financial statements requires management to make estimates and assumptions. Making estimates requires management to exercise significant judgment. Accordingly, the actual results could differ substantially from those estimates.

The Company’s operating activities consist primarily of providing investment advisory services to 1416
open-end
mutual funds branded as the Hennessy Funds. The Company serves as the investment advisor to all classes of the Hennessy Cornerstone Growth Fund, the Hennessy Focus Fund, the Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy Cornerstone Large Growth Fund, the Hennessy Cornerstone Value Fund, the Hennessy Total Return Fund, the Hennessy Equity and Income Fund, the Hennessy Balanced Fund, the Hennessy Energy Transition Fund, the Hennessy Midstream Fund, the Hennessy Gas Utility Fund, the Hennessy Japan Fund, the Hennessy Japan Small Cap Financial Fund, the Hennessy Large Cap Financial Fund, the Hennessy Technology Fund, the Hennessy JapanSmall Cap Financial Fund, and the Hennessy Japan Small CapTechnology Fund. The Company also provides shareholder services to the entire familyshareholders of the Hennessy Funds.

The Company’s operating revenues consist of contractual investment advisory and shareholder service fees paid to it by the Hennessy Funds. The Company earns investment advisory fees from each Hennessy Fund by, among other things:

acting as portfolio manager for the fund or overseeing the
sub-advisor
acting as portfolio manager for the fund, which includes managing the composition of the fund’s portfolio (including the purchase, retention, and disposition of portfolio securities in accordance with the fund’s investment objectives, policies, and restrictions), seeking best execution for the fund’s portfolio, managing the use of soft dollars for the fund, and managing proxy voting for the fund;

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5
Table of Contents
performing a daily reconciliation of portfolio positions and cash for the fund;

monitoring the liquidity of the fund;
monitoring the fund’s compliance with its investment objectives and restrictions and federal securities laws;

performing activities such as
maintaining a compliance program (including a code of ethics), conducting ongoing reviews of the compliance programs of the fund’s service providers (including itssub-advisor,any
sub-advisor),
including their codes of ethics, as applicable),appropriate, conductingon-site onsite visits to the fund’s service providers (including itssub-advisor,any
sub-advisor)
as applicable),feasible, monitoring incidents of abusive trading practices, reviewing fund expense accruals, payments, and fixed expense ratios, evaluating insurance providers for fidelity bond, D&O/E&O,directors and officers and errors and omissions insurance, and cybersecurity insurance coverage, managing regulatory examination compliance and responses, conducting employee compliance training, reviewing reports provided by service providers, and maintaining books and records, and preparing an annual compliance report to the Board of Trustees of Hennessy Funds Trust (the “Funds’ Board of Trustees”);records;

if applicable, overseeing the selection and continued employment of the fund’s
sub-advisor, if applicable,
reviewing the fund’s investment performance, and monitoring suchthe
sub-advisor’s
adherence to the fund’s investment objectives, policies, and restrictions, and reviewing the fund’s investment performance;restrictions;

overseeing service providers that provide accounting, administration, distribution, transfer agency, custodial, sales, and marketing, public relations, audit, information technology, and legal services to the fund;

maintaining
in-house
marketing and distribution departments on behalf of the fund;

being actively involved with
preparing or directing the preparation of all regulatory filings for the fund, including writing and annually updating the fund’s prospectus and related documents;

for each annual report of the fund, preparing or reviewing a written summary of the fund’s performance forduring the most recent
12-month
period for each annual report of the fund;;

monitoring and overseeing the accessibility of the fund on third party
third-party
platforms;

paying the incentive compensation of the fund’s compliance officers and employing other staff such as legal, marketing, national accounts, and distribution, sales, administrative, and trading oversight personnel, as well as management executives;

providing a quarterly compliance certification to the Board of Trustees of Hennessy Funds Trust;Trust (the “Funds’ Board of Trustees”); and

- 8 -

preparing or reviewing materials for the Funds’ Board of Trustees, presenting to or leading discussions to or with the Funds’ Board of Trustees, preparing or reviewing all meeting minutes, and arranging for training and education of the Funds’ Board of Trustees.

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Table of Contents
The Company earns shareholder service fees from Investor Class shares of the Hennessy Funds by, among other things, maintaining a
toll-free
number that the current investors ofin the Hennessy Funds may call to ask questions about the Hennessy Funds or their accounts or the funds or to get help with processing exchange and redemption requests or changing account options. These fee revenues are earned and calculated daily by the Hennessy Funds’ accountants at U.S. BancorpBank Global Fund Services LLC.and are subsequently reviewed by management. The fees are computed and billed monthly, at which time they are recognized in accordance with Accounting StandardStandards Codification 605 “Revenue Recognition.”

Effective February 28, 2017, the606 — Revenue from Contracts with Customers.

The Company waiveswaived a portion of its fees with respect to the Hennessy Cornerstone Large Growth Fund and the Hennessy Energy Transition Fund through the expiration of each fund’s expense limitation agreement on November 30, 2019, and October 25, 2020, respectively. The Company continues to waive a portion of its fees with respect to the Hennessy Midstream Fund and the Hennessy Technology Fund to comply with a contractual expense ratio limitation.limitations. The fee waiver iswaivers are calculated daily by the Hennessy Funds’ accountants at U.S. BancorpBank Global Fund Services, LLCreviewed by management, and isthen charged to expense monthly byas offsets to the Company as an offset to revenue. TheCompany’s revenues. Each waived fee is then deducted from investment advisory fee income and reduces the aggregate amount of advisory fees received by the Company receives from such fund in the subsequent month. To date, the Company has only waived fees based on contractual obligations, but the Company has the ability to waive fees at its discretion. If the Company elects to voluntarily waive fees, theAny decision to waive fees would not apply to previous periods, but would only apply on a going forward
going-forward
basis.

The Company’s contractual agreements for investment advisory and shareholder services provide persuasive evidenceprove that an arrangementa contract exists with fixed and determinable fees, and the services are rendered daily. The collectability is deemed probable asbecause the fees are received from the Hennessy Funds in the month subsequent to the month in which the services are provided.

(2)
Management Contracts Purchased

Throughout its history, up until the end of the quarter ended December 31, 2017, the Company has completed nine10 purchases of the assets related to the management of 2730 different mutual funds, some of which were reorganized into already existing Hennessy Funds. In accordance with guidance issued by the Financial Accounting Standards Board (“FASB”), guidance, the Company periodically reviews the carrying value of its purchased management contracts asset to determine if any impairment has occurred. The fair value of the management contracts areasset was estimated as of September 30, 2021, by applying the income approach and is based on management estimates and assumptions, including third party
third-party
valuations that utilize appropriate valuation techniques. The fair value of the management contractsIt was estimated by applying the income approach. It is the opinion of the Company’s management thatdetermined there was no0 impairment as of such date. As of December 31, 2017, or September 30, 2017.

2021, management performed a qualitative analysis and determined it was more likely than not that there continued to be 0 impairment.

Under the FASB guidance on “IntangiblesAccounting Standards Codification 350 — Intangibles – Goodwill and Other,” intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment. The Company reviews the useful life of the management contracts each reporting period to determine if they continue to have an indefinite useful life. The Company considers the mutual fund management contracts to be intangible assets with an indefinite useful life and are not impaired as
7
Table of December 31, 2017.

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The Company’s most recent asset purchase was completed in two stages. The first stage closed on December 1, 2017, when the Company purchased the assets related to the management of the Rainier Large Cap Equity Fund and the Rainier Mid Cap Equity Fund and reorganized the assets of such funds into the Hennessy Cornerstone Large Growth Fund and the Hennessy Cornerstone Mid Cap 30 Fund, respectively. The purchase was consummated in accordance with the terms and conditions of that certain Transaction Agreement, dated as of May 10, 2017, as amended, between the Company, Manning & Napier Group, LLC, and Rainier Investment Management, LLC. The purchase price of $1.0 million was funded with available cash and was based on the total net assets under management of the Rainier Large Cap Equity Fund and the Rainier Mid Cap Equity Fund as measured at the close of business on November 30, 2017. The amount of the purchased assets as of the closing date were approximately $122 million.

The second stage of the transaction closed on January 12, 2018, which was in the Company’s second fiscal quarter. It consisted of the purchase of assets related to the management of the Rainier Small/Mid Cap Equity Fund (further discussed in the Subsequent Events footnote), and brought the number of asset purchases related to the management of mutual funds that have been completed by the Company to 28.

Contents
(3)
Investment Advisory Agreements

The Company has management contractsinvestment advisory agreements with Hennessy Funds Trust under which it provides investment advisory services to all classes of the 1416 Hennessy Funds.

The management contractsinvestment advisory agreements must be renewed annually (except in limited circumstances) by (i)(a) the Funds’ Board of Trustees or the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (ii)(b) the vote of a majority of the trustees of Hennessy Funds Trust who are not interested persons of the Hennessy Funds. If the management contracts arean investment advisory agreement is not renewed, annually as described above, they will terminateit terminates automatically. There are two additional circumstances in which the management contracts would terminate.an investment advisory agreement terminates. First, the management contracts wouldan investment advisory agreement automatically terminateterminates if the Company assignedassigns them to another advisor (assignment includes “indirect assignment,” which is the transfer of the Company’s common stock in sufficient quantities deemed to constitute a controlling block). Second, each management contractan investment advisory agreement may be terminated prior to its expiration upon 60 days’ written notice by either the Companyapplicable Hennessy Fund or the applicable Hennessy Fund.

Company.

As provided in the management contracts with the 14 Hennessy Funds,each investment advisory agreement, the Company receives investment advisory fees monthly based on a percentage of the respectiveapplicable fund’s average daily net assets.

asset value.

The Company has entered into
sub-advisory
agreements for the Hennessy Focus Fund, the Hennessy Equity and Income Fund, the Hennessy Energy Transition Fund, the Hennessy Midstream Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund. Under each of these
sub-advisory
agreements, the
sub-advisor
is responsible for the investment and reinvestments of the assets of the applicable Hennessy Fund in accordance with the terms of such agreement and the applicable Hennessy Fund’s Prospectus and Statement of Additional Information. The
sub-advisors
are subject to the direction, supervision, and control of the Company and the Funds’ Board of Trustees. The
sub-advisory
agreements must be renewed annually (except in limited circumstances) in the same manner as, and are subject to the same termination provisions as, the management contracts.

investment advisory agreements.

In exchange for the
sub-advisory
services, the Company (not the Hennessy Funds) payssub-advisor
sub-advisory
fees to the
sub-advisors
out of its own assets.Sub-advisor
Sub-advisory
fees are calculated as a percentage of the applicable
sub-advised
fund’s average daily net asset value.

- 10 -

(4)
Bank Loan
Fair Value Measurements

The Company has an outstanding bank loan with U.S. Bank National Association (“U.S. Bank”), as administrative agent and as a lender, and California Bank & Trust, as syndication agent and as a lender, which replaced and refinanced the bank loan previously entered into by the Company and U.S. Bank on October 26, 2012, and amended on November 1, 2013. Immediately prior to September 17, 2015, the Company’s bank loan with U.S. Bank had an outstanding principal balance of $23.0 million. On September 17, 2015, in anticipation of the repurchase of up to 1,500,000 shares of the Company’s common stock at $16.67 per share pursuant to itsself-tender offer, the Company entered into a new term loan agreement to fund in part itsself-tender offer, thereby increasing its total loan balance to $35.0 million (consisting of a $20.0 million promissory note to U.S. Bank and a $15.0 million promissory note to California Bank & Trust). Then, on September 19, 2016, the Company entered into an amendment to its term loan agreement with U.S. Bank and California Bank & Trust to allow it to consummate the purchase of assets related to the management of the Westport Fund and the Westport Select Cap Fund. In addition, the amendment revised one of the financial covenants in the term loan agreement. On November 16, 2017, the Company entered into an amendment to its term loan agreement with U.S. Bank and California Bank & Trust to revise the excess cash flow prepayment requirements. On November 30, 2017, the Company entered into an amendment to its term loan agreement with U.S. Bank and California Bank & Trust to allow it to consummate the purchases of the assets related to the management of the Rainier Large Cap Equity Fund, the Rainier Mid Cap Equity Fund, and the Rainier Small/Mid Cap Equity Fund.

The current term loan agreement requires 48 monthly payments in the amount of $364,583 plus interest based on, at the Company’s option:

(1) LIBOR plus a margin that ranges from 2.75% to 3.25%, depending on the Company’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation and amortization (excluding, among other things, certainnon-cash gains and losses) (“EBITDA”); or

(2) the sum of (a) the highest of the prime rate set by U.S. Bank from time to time, the Federal Funds Rate plus 0.50%, orone-month LIBOR plus 1.00%, and (b) a margin that ranges from 0.25% to 0.75%, depending on the Company’s ratio of consolidated debt to consolidated EBITDA.

Beginning March 1, 2016, the Company elected to use aone-month LIBOR rate contract, which has been renewed each subsequent month. As of December 31, 2017, the effective rate is 4.111%, which is comprised of the LIBOR rate of 1.361% as of December 1, 2017, plus a margin of 2.75% based on the Company’s ratio of consolidated debt to consolidated EBITDA as of September 30, 2017. The Company intends to renew the LIBOR rate contract on a monthly basis provided that theLIBOR-based interest rate remains favorable to the primerate-based interest rate.

All borrowings under the term loan agreement are secured by substantially all of the Company’s assets. The final installment of thethen-outstanding principal plus accrued interest is due September 17, 2019. As of December 31, 2017, the Company had $25.2 million currently outstanding under its term loan ($24.9 million net of debt issuance costs).

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The term loan agreement includes certain reporting requirements and loan covenants requiring the maintenance of certain financial ratios. The Company was in compliance for the periods ended December 31, 2017 and 2016.

In connection with securing the financings discussed above, the Company incurred loan costs in the amount of $0.41 million. These costs were reclassified to offset debt liability per Accounting Standards Update (“ASU”)2015-03 as of March 31, 2017, and the balance is being amortized on a straight-line basis, which approximates the effective interest basis, over 48 months. Amortization expense during thethree-month periods ended December 31, 2017 and 2016, was $0.04 million for each period. The unamortized balance of the loan fees was $0.3 million as of December 31, 2017. The following is a reconciliation of the reclassification:

   Gross Debt at
December 31, 2017		   Debt
Issuance Cost		   Debt, Net of Issuance Cost,
at December 31, 2017		 
   (In thousands) 

Current portion of debt

  $4,375   $(147)   $4,228 

Long-term portion of debt

   20,781    (110)    20,671 
  

 

 

   

 

 

   

 

 

 

Total Debt

  $25,156   $(257)   $24,899 
  

 

 

   

 

 

   

 

 

 
   Gross Debt at
September 30, 2017		   Debt
Issuance Cost		   Debt, Net of Issuance Cost,
at September 30, 2017		 
   (In thousands) 

Current portion of debt

  $4,375   $(147)   $4,228 

Long-term portion of debt

   21,875    (147)    21,728 
  

 

 

   

 

 

   

 

 

 

Total Debt

  $26,250   $(294)   $25,956 
  

 

 

   

 

 

   

 

 

 

(5)Income Taxes

The Company’s effective income tax rates for the three months ended December 31, 2017 and 2016, were-33.2% and 33.1%, respectively.

The effective income tax rate for the three months ended December 31, 2016, was lower than the federal statutory rate of 35% due to the early adoption of ASU2016-09 (see further discussion in footnote 10), with a partial offset due to state taxes.

The effective income tax rate for the three months ended December 31, 2017, was a benefit due to the Tax Cuts and Jobs Act of 2017, with a slight offset due to state taxes. The Company was required to record aone-time,non-cash benefit to income taxes of approximately $4 million for the accountingre-measurement of its deferred tax liability to account for the future impact of a lower federal corporate income tax rate.

- 12 -

We are subject to income tax in the U.S. federal jurisdiction and multiple state jurisdictions. Our U.S. federal tax returns for 2014 and subsequent years remain open to examination. Generally, we are no longer subject to state examinations by tax authorities for years prior to fiscal 2014. For state tax jurisdictions with unfiled tax returns, the statute of limitations will remain open indefinitely.

(6)Earnings per Share and Dividends per Share

Basic earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents.

All common stock equivalents were dilutive and therefore included in the diluted earnings per share calculation for the three months ended December 31, 2017 and 2016.

On January 26, 2017, the Company’s Board of Directors declared a3-for-2 stock split, which was effected on March 6, 2017, for shareholders of record as of February 10, 2017. All disclosures in this report relating to shares of common stock, restricted stock units, and per share data have been adjusted to reflect this stock split.

A quarterly cash dividend of $0.075 per share was paid on December 8, 2017, to shareholders of record as of November 15, 2017.

(7)Equity

Amended and Restated 2013 Omnibus Incentive Plan

On March 26, 2014, the Company adopted, and the Company’s shareholders approved, the Amended and Restated 2013 Omnibus Incentive Plan (the “Omnibus Plan”). Under the Omnibus Plan, participants may be granted restricted stock units (“RSUs”), representing an unfunded, unsecured right to receive a share of the Company’s common stock on the date specified in the recipient’s award. The Company issues new shares of its common stock when it is required to deliver shares to an RSU recipient. The RSUs granted under the Omnibus Plan vest over four years, at a rate of 25% per year. The Company recognizesstock-based compensation expense on a straight-line basis over the four-year vesting term of each award. There were no RSUs granted under the Omnibus Plan during the three months ended December 31, 2017 or 2016.

- 13 -

RSU activity for the three months ended December 31, 2017, was as follows:

   RSU Activity
Three Months Ended December 31, 2017		 
   Number of RSUs   Weighted Avg.
Fair Value
Per Share at
Each Date		 

Non-vested Balance at September 30, 2017

   358,291   $16.48 

Granted

   —      —   

Vested (1)

   (38,060)    15.72 

Forfeited

   —      —   
  

 

 

   

 

 

 

Non-vested Balance at December 31, 2017

   320,231   $16.57 
  

 

 

   

 

 

 

(1)The number of vested RSUs includes partially vested shares. Shares of common stock have not been issued for the partially vested shares, but the related compensation expense has been booked. There were 26,421 net shares of common stock issued for RSUs vested in the three months ended December 31, 2017.

RSU Compensation

Three Months Ended December 31, 2017

 
   (In thousands) 

Total expected compensation expense related to RSUs

  $12,490 

Compensation expense recognized at reporting date

   (7,183) 
  

 

 

 

Unrecognized compensation expense related to RSUs at reporting date

  $5,307 
  

 

 

 

As of December 31, 2017, there was $5.3 million of total RSU compensation expense related tonon-vested awards not yet recognized, which is expected to be recognized over a weighted-average vesting period of 2.7 years.

Dividend Reinvestment and Stock Purchase Plan

In March 2015, the Company established a Dividend Reinvestment and Stock Purchase Plan (the “DRSPP”) to provide shareholders and new investors with a convenient and economical means of purchasing shares of the Company’s common stock and reinvesting cash dividends paid on the Company’s common stock. Under the DRSPP, the Company issued 546 and 404 shares of common stock during the three months ended December 31, 2017 and 2016, respectively.

- 14 -

As discussed in the Subsequent Events footnote, in January 2018, the Company adopted an updated Dividend Reinvestment and Stock Purchase Plan.

(8)Commitments and Contingencies

The Company’s headquarters is located in leased office space under a singlenon-cancelable operating lease at 7250 Redwood Boulevard, Suite 200, Novato, California 94945. The lease expires June 30, 2021, with onefive-year extension available thereafter.

The Company also has office space under a singlenon-cancelable operating lease at 101 Federal Street, Suite 1900, Boston, Massachusetts 02110. The initial term of the lease expired on November 30, 2015, but automatically renews for successiveone-year periods unless either party terminates the lease by providing at least three months’ notice of termination to the other party prior to the next renewal date.

The Company also has office space under a singlenon-cancelable operating lease at 1340 Environ Way, #305, Chapel Hill, North Carolina 27517. The initial term of the lease expired on November 30, 2014, but automatically renews for successive three-month periods unless either party terminates the lease by providing at least two months’ notice of termination to the other party prior to the next renewal date.

As of December 31, 2017, there were no material changes in the leasing arrangements that would have a significant effect on future minimum lease payments reported in the Company’s Annual Report onForm 10-K for the fiscal year ended September 30, 2017.

(9) Fair Value Measurements

The Company applies the FASB standard “FairAccounting Standards Codification 820 — Fair Value Measurements”Measurement for all financial assets and liabilities, which establishes a framework for measuring fair value and expands disclosures about fair value measurements. The standard defines fair value as “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.” It also establishes a fair value hierarchy consisting of the following three “levels”levels that prioritize the inputs to the valuation techniques used to measure fair value:

Level 1 – Unadjusted, quoted prices in active markets for identical assets or liabilities that an entity has the ability to access at the measurement date.date;

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Level 2 – Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, and
model-derived
valuations in which all significant inputs and significant value drivers are observable in active markets).; and

Level 3 – Significant unobservable inputs (including the entity’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are not available.

- 15 -

Based on the definitions, the following table representstables represent the Company’s assets categorized in the Level 1 to Level 3 hierarchies as of December 31, 2017 and September 30, 2017:

   Fair Value Measurements at December 31, 2017 
   Level 1   Level 2   Level 3   Total 
   (In thousands) 

Money market fund deposits

  $12,845   $—     $—     $12,845 

Mutual fund investments

   9    —      —      9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $12,854   $—     $—     $12,854 
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts included in:

        

Cash and cash equivalents

  $12,845   $—     $—     $12,845 

Investments in marketable securities

   9    —      —      9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $12,854   $—     $—     $12,854 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Fair Value Measurements at September 30, 2017 
   Level 1   Level 2   Level 3   Total 
   (In thousands) 

Money market fund deposits

  $13,832   $—     $—     $13,832 

Mutual fund investments

   8    —      —      8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $13,840   $—     $—     $13,840 
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts included in:

        

Cash and cash equivalents

  $13,832   $—     $—     $13,832 

Investments in marketable securities

   8    —      —      8 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $13,840   $—     $—     $13,840 
  

 

 

   

 

 

   

 

 

   

 

 

 

:
   
December 31, 2021
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
   
(In thousands)
 
Money market fund deposits
  $
 
50,597   $ —     $ —     $
 
50,597 
Mutual fund investments
   10    —      —      10 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total  $50,607   $
 
—  		   $
 
—  		   $50,607 
   
 
 
   
 
 
   
 
 
   
 
 
 
Amounts included in:
                    
Cash and cash equivalents
  $50,597   $
 
—  		   $
 
—  		   $50,597 
Investments in marketable securities
   10    —      —      10 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total  $50,607   $
 
—  		   $
 
—  		   $50,607 
   
 
 
   
 
 
   
 
 
   
 
 
 
   
September 30, 2021
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
   
(In thousands)
 
Money market fund deposits
  $
11,554   $—   $
 
—		   $
11,554 
Mutual fund investments
   10    —    —    10 
Total  $
11,564   $
 
—		   $
 
—		   $
11,564 
                 
Amounts included in:
                    
Cash and cash equivalents
  
$
 

11,554   $
 
—		   $
 
—		   
$
 

11,554 
Investments in marketable securities
   10    —    —    10 
Total  $
11,564   $
 
—		   $
 
—		   $
11,564 
                 
There were no0 transfers between levels during the three months ended December 31, 2017,2021, or the year ended September 30, 2017.

2021.
The fair values of receivables, payables, and accrued liabilities approximate their fair values given the short-term nature of those instruments.
The fair value of the 2026 Notes (see Note 7) was approximately $
41.78
 million as of December 31, 2021, based on the last trading price of the notes on that date (Level 1).
(10)
(5)
New Accounting Standards
Leases

In November 2015,

The Company determines if an arrangement is an operating lease at inception. Operating leases are included in operating lease right-of-use assets and current and long-term operating lease liabilities on the FASB issued Accounting Standards Update No. 2015-17 “Balance Sheet ClassificationsCompany’s balance sheet. There were no other long-term operating leases as of Deferred Taxes.”
December 31, 2021, and September 30, 2021. During the quarter ended March 31, 2021, the Company renewed the lease for its office in Novato, California for an additional
three years. The standard simplifiesrenewed lease expires on July 31, 2024. The lease renewal created a long-term operating lease as of March 31, 2021, and the presentationCompany recorded a right of deferred income taxes under U.S. GAAP by requiring that all deferred tax use asset of $1.1 million on the balance sheet.
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Right-of-use
assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease
right-of-use
assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The Company’s lease terms may include options to extend the lease when it is reasonably certain that it will exercise any such options. For its leases, the Company concluded that it is not reasonably certain that any renewal options would be classifiedexercised, and, therefore, the amounts are not recognized as non-current.part of operating lease
right-of-use
assets or operating lease liabilities. Leases with initial terms of 12 months or less, and certain office equipment leases that are deemed insignificant, are not recorded on the balance sheet and are expensed as incurred and included within rent expense under general and administrative expense. Lease expense related to operating leases is recognized on a straight-line basis over the expected lease terms.
The Company’s most significant leases are real estate leases of office facilities. The Company adopted this standardleases office space under
non-cancelable
operating leases. Its principal executive office is located in Novato, California, and it has additional offices in Austin, Texas, Boston, Massachusetts, and Chapel Hill, North Carolina. Only the office lease in Novato, California has been capitalized because the other operating leases have terms of 12 months or less, including leases that are
month-to-month
in nature. The classification of the Company’s operating lease
right-of-use
assets and operating lease liabilities and other supplemental information related to the Company’s operating leases are as follows:
   
December 31, 2021
 
   
(In thousands,
except years and
percentages)
 
Operating lease
right-of-use
assets
  $920 
Current operating lease liability
  $361 
Long-term operating lease liability
  $554 
Weighted average remaining lease term
   2.6 
Weighted average discount rate
   0.90%
 
For the three months ended December 31, 2021, total rent expense for all offices, which is recorded under general and administrative expense in the current period statements of income, totaled $0.1 million.
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The undiscounted cash flows for
future
maturities of the Company’s operating lease
liabilities
and adjusted the September 30, 2017reconciliation to the balance of operating lease liabilities reflected on the Company’s balance sheet for consistency.

In March 2016, the FASB issued ASU2016-09 “Compensation - Stock Compensation (Topic 718): Improvementare as follows:

   
December 31, 2021
 
   
(In thousands)
 
Remainder of fiscal year 2022
  $273 
Fiscal year 2023
   374 
Fiscal year 2024
   286 
   
 
 
 
Total undiscounted cash flows
   933 
   
 
 
 
Present value discount
   (18) 
   
 
 
 
Total operating lease liabilities
  $915 
   
 
 
 
(6)
Accrued Liabilities and Accounts Payable
Details relating to Employee Share-Based Payment Accounting.” The new standard contains several amendments that will simplify the recognition for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, classification of awards as either equity oraccrued liabilities and classification withinaccounts payable reflected on the statementCompany’s balance sheet are as follows:
   
December 31, 2021
   
September 30, 2021
 
         
   
(In thousands)
 
Accrued bonus liabilities
  $801   $2,738 
Accrued
sub-advisor
fees
   623    628 
Other accrued expenses
   1,040    785 
   
 
 
   
 
 
 
Total accrued liabilities and accounts payable
  $2,464   $4,151 
   
 
 
   
 
 
 

(7)
Debt Outstanding
On October 20, 2021, the Company completed a public offering of cash flows for certain components of share-based awards. Early adoption is permitted for any interim or annual period. The changes4.875% notes due 2026 in the new standard eliminateaggregate principal amount of $40,250,000 (the “2026 Notes”), which included the full exercise of the underwriters’ overallotment option. The 2026 Notes bear interest at 4.875% per annum, payable on the last day of each calendar quarter and at maturity, beginning December 31, 2021. The 2026 Notes mature on December 31, 2026.

The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of the Company’s future unsecured unsubordinated indebtedness, senior to any of the Company’s future indebtedness that expressly provides that it is subordinate to the 2026 Notes, effectively subordinate to all of the Company’s existing and future secured indebtedness, and structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s future subsidiaries.
(8)
Income Taxes
The Company’s effective income tax rates for the three months ended December 31, 2021 and 2020, were 16.1% and 26.4%, respectively. For the three months ended December 31, 2021, the effective income tax rate was lower than the federal statutory rate due to the recognition of a tax benefit related to a California tax refund of $0.2 million.
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The Company is
subject
to income tax in the U.S. federal jurisdiction and multiple state jurisdictions. As of December 31, 2021, the Company has identified 22 major state tax jurisdictions in which is subject to income tax. For state tax jurisdictions with unfiled tax returns, the statutes of limitations remains open indefinitely.
(9)
Commitments and Contingencies
The Company has no commitments and no other significant contingencies with original terms in excess tax benefits or tax deficiencies fromof one year other than operating leases, which are discussed in Note 5.

(10)
Equity
Amended and Restated 2013 Omnibus Incentive Plan
The Company has adopted, and the statement of stockholders’ equity.Company’s shareholders have approved, the Amended and Restated 2013 Omnibus Incentive Plan (the “Omnibus Plan”). Under the new guidance, all excess tax benefits and tax deficiencies resulting from stock-based compensation awards vesting and exercises are recognized prospectively within income tax expense, and excess tax benefits are recognized regardlessOmnibus Plan, participants may be granted RSUs, each of whether they reduce current taxes payable. This will increasewhich represents an unfunded, unsecured right to receive a share of the volatility of our effective tax rate.

- 16 -

We elected to early adopt ASU2016-09, using a modified retrospective approach. As a result of early adoption of ASU2016-09, an income tax benefit of approximately $0.2 million was recognized as a discrete eventCompany’s common stock on the date specified in the quarterly period ended December 31, 2016.

(11)    Asset Purchaserecipient’s award. The Company issues new shares of Two Rainier U.S. Funds

On December 1, 2017,its common stock when it is required to deliver shares to an RSU recipient. The RSUs granted under the Omnibus Plan vest over four years at a rate of 25% per year. The Company completedrecognizes

stock-based
compensation expense on a
straight-line
basis over the purchasefour-year vesting term of the assetseach award.
A summary of RSU activity is as follows:
   
Three Months Ended December 31, 2021
 
   
Shares
   
Weighted Average Grant
Date Fair Value per Share
 
Non-vested
balance at beginning of period
   323,810   $8.87 
Granted
   0      0   
Vested
(1)
   (41,353)    (9.37) 
Forfeited
   (1,906)    (8.95) 
   
 
 
   
 
 
 
Non-vested
balance at end of period
   280,551   $8.79 
   
 
 
   
 
 
 
(1)
Represents partially vested RSUs for which the Company already has recognized the associated compensation expense but has not yet issued to employees the related shares of common stock.
Additional information related to the managementRSUs is as follows:
   
December 31, 2021
 
   
(In thousands, except years)
 
Total expected compensation expense related to RSUs
  $17,169 
Recognized compensation expense related to RSUs
   (14,703) 
   
 
 
 
Unrecognized compensation expense related to RSUs
  $2,466 
   
 
 
 
Weighted average remaining years to expense for RSUs
   2.8 
   
 
 
 
12
Table of the Rainier Large Cap Equity Fund and the Rainier Mid Cap Equity Fund and reorganized the assets of such funds into the Hennessy Cornerstone Large Growth Fund and the Hennessy Cornerstone Mid Cap 30 Fund, respectively. The purchase was consummated in accordance with the terms and conditions of that certain Transaction Agreement, dated as of May 10, 2017, as amended, between the Company, Manning & Napier Group, LLC, and Rainier Investment Management, LLC. The purchase price of $1.0 million was funded with available cash and was based on the total net assets under management of the Rainier Large Cap Equity Fund and the Rainier Mid Cap Equity Fund as measured at the close of business on November 30, 2017. The amount of the purchased assets as of the closing date were approximately $122 million.

(12)    Subsequent Events

The Company entered into a single,non-cancelable operatingsub-lease at 4800 Bee Caves Road, Suite 100, Austin, Texas 78746, where it occupies approximately 600 square feet and has the right to use all common areas. The term of thesub-lease commenced on January 4, 2018, and expires on December 31, 2018, but will automatically renew for successivesix-month periods unless either party gives at least 60 days’ notice of termination to the other party prior to the renewal date. The rent expense is $1,500 per month for the initial term of thesub-lease.

On January 12, 2018, the Company completed the purchase of the assets related to the management of the Rainier Small/Mid Cap Equity Fund and reorganized the assets of such fund into the Hennessy Cornerstone Mid Cap 30 Fund. The purchase was consummated in accordance with the terms and conditions of that certain Transaction Agreement, dated as of May 10, 2017, as amended, between the Company, Manning & Napier Group, LLC, and Rainier Investment Management, LLC. The purchase price of $2.1 million was funded with available cash and was based on the total net assets under management of the Rainier Small/Mid Cap Equity Fund as measured at the close of business on January 11, 2018. The amount of the purchased assets as of the closing date were approximately $253 million.

In January 2018, the Company adopted an updated Contents

Dividend Reinvestment and Stock Purchase Plan.Plan
In January
 2021, the Company adopted a Dividend Reinvestment and Stock Purchase Plan (the “DRSPP”), replacing the previous Dividend Reinvestment and Stock Purchase Plan that had been in place since 2018. The DRSPP provides shareholders and new investors with a convenient and economical means of purchasing shares of the Company’s common stock and reinvesting cash dividends paid on the Company’s common stock. Under the DRSPP and its predecessor plans, the Company issued 1,922 and 2,817 shares of common stock during the three months ended December 31, 2021 and 2020, respectively. The maximum number of shares that may be issued under the updated planDRSPP is 1,550,000 shares, all1,470,000, of which remain1,458,535 shares remained available for issuance.

issuance as of December 31, 2021.

Stock Buyback Program
In August 2010, the Company adopted a stock buyback program. The program provides that the Company may repurchase up to 1,500,000 shares of its common stock and has no expiration date. Share repurchases may be made in the open market, in privately negotiated transactions, or otherwise. A total of 596,368 shares remains available for repurchase under the stock buyback program. The Company did not repurchase any shares of its common stock pursuant to the stock buyback program during the three months ended December 31, 2021.​​​​​​​
(11)
Earnings per Share and Dividends per Share
Basic earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding, while diluted earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents, which consist of restricted stock units (“RSUs”).
For the three months ended December 31, 2021 and 2020, the Company excluded
663 and
 227,410 common stock equivalents, respectively, from the diluted earnings per share calculations because they were not dilutive. In each case, the excluded common stock equivalents consisted of
non-vested
RSUs.
The Company paid a quarterly cash dividend of $0.1375 per share on November 23, 2021, to shareholders of record as of November 11, 2021.
(12)
Recently Issued and Adopted Accounting Standards
The Company has reviewed accounting pronouncements issued between the filing date of its most recent Form
10-K,
which was November 24, 2021, and the filing date of this Form
10-Q
and has determined that no accounting pronouncements issued would have a material impact on the Company’s financial position, results of operations, or disclosures.
(13)
Subsequent Events
The Company and BP Capital Fund Services, LLC mutually terminated the
sub-advisory
agreement for the Hennessy Energy Transition Fund and the Hennessy Midstream Fund as of January 31, 2022. These funds are now managed internally by the Company.
13
Table of Contents
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking
Statements

This report contains “forward-looking statements” within the meaning of the securities laws, for which we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. In some cases,
forward-looking
statements can be identified by terminology such as “expect,” “anticipate,” “intend,” “may,” “plan,” “will,” “should,” “could,” “would,” “assume,” “believe,” “estimate,” “predict,” “potential,” “project,” “continue,” “seek”“seek,” and similar expressions, as well as statements in the future tense. We have based these forward-looking statements on our current expectations and projections about future events, based on information currently available to us.
Forward-looking
statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at which, or means by which, such performance or results will be achieved.

- 17 -

Forward-looking statements are subject to risks, uncertainties, and assumptions, including those described in the section entitledtitled “Risk Factors” and elsewhere in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2017, filed with the Securities and Exchange Commission.2021. Unforeseen developments could cause actual performance or results to differ substantially from those expressed in or suggested by the forward-looking statements. Management does not assume responsibility for the accuracy or completeness of these forward-looking statements. There is no regulation requiring an update of any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations.

Our business activities are affected by many factors, including, without limitation, redemptions by mutual fund shareholders, taxes, general economic and financialbusiness conditions, including those related to the
COVID-19
pandemic, movement of interest rates, competitive conditions, industry regulation, and fluctuations in the stock market, many of which are beyond the control of our management. Further, the business and regulatory environments in which we operate remain complex, uncertain, and subject to change. We expect that regulatory requirements and developments will cause us to incur additional administrative and compliance costs. In addition, while domestic economic conditions currently are relatively favorable, further increases in short-term interest rates, policy changes from the administration in Washington, D.C., and developments in international financial markets could influence economic and financial conditions significantly. Notwithstanding the variability in our economic and regulatory environments, we remain focused on the investment performance of the Hennessy Funds and on providing
high-quality
customer service to investors.

Our business strategy centers on (i)(a) the identification, completion, and integration of future acquisitions and (ii)(b) organic growth, through both the retention of the mutual fund assets we currently manage and the generation of inflows into the mutual funds we manage. The success of our business strategy may be influenced by the factors discussed in the section entitledtitled “Risk Factors” and elsewhere in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2017.2021. All statements regarding our business strategy, as well as statements regarding market trends and risks and assumptions about changes in the marketplace, are forward-looking by their nature.

14
Table of Contents
Our Continuing Response to the
COVID-19
Pandemic
We continue to monitor the effects of the
COVID-19
pandemic on our business, particularly focusing on meeting the needs of our employees, our partners, and the Hennessy Funds and their shareholders. Since March 2020, we have remained engaged with key partners and service providers, strengthened our digital marketing and public relations programs, and maintained an effective governance and internal controls program in order to ensure our continued success.
Our employees in Novato, California have returned to the office. We continue to adhere to our Site-Specific Protection Plan for our Novato office, which we regularly update to reflect current local, state, and federal requirements.
We remain committed to providing the same high level of services to the 16 Hennessy Funds and their shareholders.
Overview

Our primary operatingbusiness activity is providing investment advisory services to 14a family of
open-end
mutual funds branded as the Hennessy Funds. With respect to fourWe manage 10 of the 16 Hennessy Funds internally. For the remaining six funds, asub-advisor acts as we have delegated the
day-to-day
portfolio manager for each fund, management responsibilities to
sub-advisors,
subject to our oversight. We oversee the selection and continued employment of each
sub-advisor,
review eachsub-advisor’s fund’s investment performance, and monitor each
sub-advisor’s
adherence to theeach applicable fund’s investment objectives, policies, and restrictions. In addition, we conduct ongoing reviews of the compliance programs of
sub-advisors
and makeon-site onsite visits tosub-advisors.
sub-advisors,
as feasible. Our secondary operatingbusiness activity is providing shareholder services to Investor Class shares of eachshareholders of the Hennessy Funds.

- 18 -

We derive our operating revenues from investment advisory fees and shareholder service fees paid to us by the Hennessy Funds. These fees are calculated as a percentage of the average daily net assets inof each of the Hennessy Funds.Fund. The percentage amount of the investment advisory fees varies from fund to fund, but theby fund. The percentage amount of the shareholder service fees is consistent across all funds.funds, but shareholder service fees are charged on Investor Class shares only. The dollar amount of the fees we receive fluctuates with changes in the average net asset value of each of the Hennessy Funds,Fund, which is affected by each fund’s investment performance, purchases and redemptions of shares, general market conditions, and the success of our marketing, sales, and public relations efforts.

U.S. equity markets posted strong gains in

On a total return basis, thethree-month period Dow Jones Industrial Average was up 7.87% for the three months ended December 31, 2017. U.S. equities rose primarily in anticipation2021. During the most recent quarter, equity prices rallied despite the emergence of the enactmentOmicron variant in November. While the market declined in November, it rallied strongly in December as investors became increasingly comfortable with the idea that the variant, while more transmissible, causes less severe illness. While the economy is expected to slow in 2022 versus its above trend rate in 2021, attention has turned to inflation and the Federal Reserve’s language around trying to rein it in. Despite initial thoughts that elevated rates of inflation were transitory, the Tax Cuts and Jobs Act of 2017, slated to lower corporate tax rates significantly. The bill was duly passed on December 22, 2017. Indications of an acceleration in domestic economic activity in the three-month period, highlighted by two consecutive quarters of real GDP growth above 3%, also encouraged investors. The Federal Reserve, feeling confident about the strengthconsensus is that higher than desired inflation will be a part of the economy and mindfulin the coming year, if not longer. With this in mind the Federal Reserve has now indicated, in the interest of trying to bring inflation down, that it may start to raise the Federal Funds rate as soon as March 2022. The market ended the year on a tighter labor market and continued robust job growth, raised short-termpositive note as investors returned to the idea that interest rates byremain at historically low levels, the unemployment rate has come down significantly, and the economy is expected to grow at a quarter pointhealthy pace in December.

2022.

15
Table of Contents
Long-term U.S. bond yields drifted up minimally overincreased during the three-month periodthree months ended December 31, 2017. Notwithstanding2021, as elevated rates of inflation have persisted and show no signs of abating in the recent strength of the economy,next several months. The Federal Reserve has acknowledged that it was incorrect in its assumption that high inflation would be a transitory phenomenon and has remained subdued and wage growth has been moderate over the last year, keeping bond yields from moving significantly higher.

indicated that it will likely raise interest rates in 2022

The Japanese equity market rose over 8%was down 4.87% in local currencyU.S. dollar terms over the three-month periodthree months ended December 31, 2017, boosted2021, as measured by evidence of continued strong economic growth and healthy corporate profits growth. Investors were also happy to see the yen hold steady overTokyo Stock Price Index. During the period. Solid increasesperiod, Japanese equities traded lower on concerns around Omicron’s emergence in the region, particularly in China, a key trading partner. Japanese stocks rallied in December as investors focused on news that a rebound in industrial production and a notable accelerationled by the automotive sector was underway.
In the 12 months ended December 31, 2021, 14 of the 16 Hennessy Funds generated positive returns, as the market recovered quickly from the sharp
pandemic-induced
decline in 2020. Over the inflation rate also helped improve investor sentiment overlonger term, 14 of the period.

We seek to provideHennessy Funds posted positive annualized returns in each of the

three-year,
five-year,
ten-year,
and since inception periods ended December 31, 2021, the exception being the Hennessy Energy Transition Fund and the Hennessy Midstream Fund, which focus exclusively on the more volatile Energy sector.
As always, we are committed to providing superior service to investors and employing a consistent and disciplined approach to investing based on a
buy-and-hold
philosophy that rejects the idea of market timing. Our goal is to provide products that investors can have confidence in, knowing their money is invested as promised and with their best interests in mind. Accordingly, we continually seek new and improved ways to support investors in the Hennessy Funds, overincluding by providing thought leadership and other resources to help them navigate market disruptions relating to the
COVID-19
pandemic. We operate a market cyclerobust and to generate inflows into the Hennessy Funds through our
leading-edge
marketing automation and sales efforts. We regularly targetcustomer relationship management (CRM) system, with a database of over 100,000 financial advisors through ourin addition to retail investors. We utilize this technology both to retain assets and to drive new purchases into the Hennessy Funds. We employ a comprehensive marketing and sales program consisting of content, digital, social media, and currently serve approximately 19,000 advisors who utilize the Hennessy Funds for their clients. More than one in five of those advisors owns two or more of the Hennessy Funds. We continually seek to expand our team of sales professionals to serve our advisor communitytraditional marketing initiatives and to assist us with providing services to our over 325,000 mutual fund accounts across the country.proactive meetings. In addition, we have an activeour consistent annual public relations effort withcampaign has resulted in the Hennessy brand name appearing on TV, radio, print, or online media on average once every two to three days.

Each of

We provide service to nearly 160,000 mutual fund accounts nationwide, including accounts held by shareholders who employ financial advisors to assist them with investing as well as accounts held by retail shareholders who invest directly with us. We serve over 13,500 financial advisors who utilize the 14 Hennessy Funds achieved positive annualized returnson behalf of their clients, including nearly 170 who purchased one of our Funds for the three-year,five-year,10-year, and since inception periods ended December 31, 2017. Infirst time during theone-year period ended December 31, 2017, only one most recent quarter. Approximately 17% of the 14such advisors own two or more Hennessy Funds, hadand over 520 advisors hold a negative return, and it was down less than 0.5%. position of over $500,000, demonstrating strong brand loyalty.
16
Table of Contents
Total assets under management as of December 31, 2017,2021, was $6.9$4.1 billion, an increase of 5.0%$0.2 billion, or 6.3%, or $331 million, from $6.6 billion as ofcompared to December 31, 2016.2020. The increase in total assets from December 31, 2016, to December 31, 2017, was attributable to positive market impact and to the purchase of assets related to the management of the Rainier Large Cap Equity Fund and the Rainier Mid Cap Equity Fund.

- 19 -

appreciation.

The following table illustrates the
quarter-by-quarter
changes quarter by quarter in our assets under management since December 31, 2016:

   Total Assets Under Management 
   At Each Quarter End, December 31, 2016, through December 31, 2017 
   12/31/2016  3/31/2017  6/30/2017  9/30/2017  12/31/2017 
   (In thousands) 

Beginning assets under management

  $6,698,519  $6,592,589  $6,635,802  $6,526,756  $6,612,812 

Acquisition inflows

   —     —     —     —     121,831 

Organic inflows

   327,308   376,440   249,043   197,671   324,132 

Redemptions

   (647,952)   (554,606)   (496,768)   (393,988)   (480,832) 

Market appreciation

   214,714   221,379   138,679   282,373   346,050 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending assets under management

  $6,592,589  $6,635,802  $6,526,756  $6,612,812  $6,923,993 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2020:

   
Fiscal Quarter Ended
 
                 
   
December 31,

2021
  
September 30,

2021
  
June 30,

2021
  
March 31,

2021
  
December 31,

2020
 
                 
   
(In thousands)
 
Beginning assets under management
  $4,065,922  $4,117,560  $4,023,364  $3,832,551  $3,564,597 
Acquisition inflows
   —     —     —     —     —   
Organic inflows
   147,461   94,871   301,731   208,253   213,502 
Redemptions
   (240,160)   (222,467)   (351,897)   (369,846)   (401,160) 
Market appreciation (depreciation)
   99,626   75,958   144,362   352,406   455,612 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending assets under management
  $4,072,849  $4,065,922  $4,117,560  $4,023,364  $3,832,551 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
As stated above, the fees we receive for providing investment advisory and shareholder service are based on average assets under management. The following table shows average assets under management by share class for each quarter since December 31, 2020:
   
Fiscal Quarter Ended
 
                     
   
December 31,

2021
   
September 30,

2021
   
June 30,

2021
   
March 31,

2021
   
December 31,

2020
 
                     
   
(In thousands)
 
Investor Class
  $2,365,152   $2,385,204   $2,505,402   $2,378,675   $2,308,369 
Institutional Class
   1,734,121    1,717,046    1,646,013    1,539,714    1,477,001 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $4,099,273   $4,102,250   $4,151,415   $3,918,389   $3,785,370 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The principal asset on our balance sheet, management contracts, represents the capitalized costs incurred in connection with the purchase of the assets related to the management of mutual funds. As of December 31, 2017,2021, this asset had a net balance of $75.7$80.6 million, compared to $74.4unchanged since September 30, 2021.
On October 20, 2021, we completed a public offering of the 2026 Notes in the aggregate principal amount of $40.25 million, aswhich included the full exercise of the underwriters’ overallotment option. The 2026 Notes mature on December 31, 2016.2026, and may be redeemed in whole or in part at any time or from time to time at our option on or after December 31, 2023. The current period increase was mainly due2026 Notes bear interest at 4.875% per annum, payable on the last day of each calendar quarter and at maturity, beginning December 31, 2021. The 2026 Notes are direct unsecured obligations, rank equally in right of payment with any of our future unsecured unsubordinated indebtedness, senior to any of our future indebtedness that expressly provides that it is subordinate to the purchase2026 Notes, effectively subordinate to all of assets relatedour existing and future secured indebtedness, and structurally subordinated to the managementall existing and future indebtedness and other obligations of any future subsidiaries of ours.
The 2026 Notes are the Rainier Large Cap Equity Fund and the Rainier Mid Cap Equity Fund.

The principal liability on our balance sheet is the bank debt incurred in connection with the purchaseat $38.7 million, net of assets related to the managementissuance costs.

17
Table of mutual funds and the repurchase of 1,500,000 shares of the Company’s common stock pursuant to the completion of its self-tender offer in September 2015. As of December 31, 2017, this liability had a balance of $25.2 million, compared to $29.5 million as of December 31, 2016. The decrease was the result of making monthly loan payments on our bank debt.

2017 Corporate Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law, which changes various corporate income tax provisions within the existing Internal Revenue Code. The law is required to be accounted for in the period of enactment, which for us is our first fiscal quarter of 2018. We recorded aone-time,non-cash benefit to income taxes of approximately $4 million for the accountingre-measurement of our deferred tax liability based on the lower federal corporate income tax rate. We expect the Tax Cuts and Jobs Act to favorably impact our net income, earnings per share, and cash flows in the future by way of a lower corporate tax rate.

- 20 -

Contents

Results of Operations

Three Months Ended December 31, 2017, Compared to Three Months Ended December 31, 2016

The following table sets forth items in the statementstatements of income as dollar amounts and as percentages of total revenue for the three months ended December 31, 2017 and 2016:

   Three Months Ended December 31, 
   2017  2016 
   Amounts   Percent
of Total
Revenue		  Amounts   Percent
of Total
Revenue		 
   (In thousands, except percentages) 

Revenue:

       

Investment advisory fees

  $12,672    91.7%  $12,109    91.1% 

Shareholder service fees

   1,141    8.3   1,185    8.9 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total revenue

   13,813    100.0   13,294    100.0 
  

 

 

   

 

 

  

 

 

   

 

 

 

Operating expenses:

       

Compensation and benefits

   3,166    22.9   3,214    24.2 

General and administrative

   1,515    11.0   1,395    10.5 

Mutual fund distribution

   120    0.9   61    0.5 

Sub-advisor fees

   2,532    18.3   2,289    17.2 

Amortization and depreciation

   83    0.6   93    0.6 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total operating expenses

   7,416    53.7   7,052    53.0 
  

 

 

   

 

 

  

 

 

   

 

 

 

Net operating income

   6,397    46.3   6,242    47.0 

Interest expense

   263    1.8   266    2.0 

Other income

   (13)    —     —      —   
  

 

 

   

 

 

  

 

 

   

 

 

 

Income before income tax expense

   6,147    44.5   5,976    45.0 

Income tax (benefit) expense

   (2,040)    (14.8)   1,980    14.9 
  

 

 

   

 

 

  

 

 

   

 

 

 

Net income

  $8,187    59.3%  $3,996    30.1% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Revenuesrevenue:

   
Three Months Ended December 31,
 
                
   
2021
  
2020
 
                
   
Amount
   
Percent of

Total Revenue
  
Amount
   
Percent of
Total Revenue
 
                
   
(In thousands, except percentages)
 
Revenue
       
Investment advisory fees
  $7,938    93.0%  $7,208    92.5% 
Shareholder service fees
   596    7.0   581    7.5 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total revenue
   8,534    100.0   7,789    100.0 
  
 
 
   
 
 
  
 
 
   
 
 
 
Operating expenses
       
Compensation and benefits
   2,262    26.5   2,104    27.0 
General and administrative
   1,400    16.4   1,308    16.8 
Mutual fund distribution
   155    1.8   121    1.6 
Sub-advisory
fees
   1,877    22.0   1,785    22.9 
Depreciation
   53    0.6   62    0.8 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total operating expenses
   5,747    67.3   5,380    69.1 
  
 
 
   
 
 
  
 
 
   
 
 
 
Net operating income
   2,787    32.7   2,409    30.9 
Interest expense
   508    6.0   —      —   
Other income
   (2)    (0.0)   (1)    (0.0) 
  
 
 
   
 
 
  
 
 
   
 
 
 
Income before income tax expense
   2,281    26.7   2,410    30.9 
Income tax expense
   368    4.3   637    8.1 
  
 
 
   
 
 
  
 
 
   
 
 
 
Net income
  $1,913    22.4%  $1,773    22.8% 
  
 
 
   
 
 
  
 
 
   
 
 
 
Revenue – Investment Advisory Fees and Shareholder Service Fees

Total revenue is comprised ofcomprises investment advisory fees and shareholder service fees. Total revenue increased 3.9% from the prior comparable period to $13.8 million inComparing the three months ended December 31, 2017.

Investment advisory fees increased 4.6% from the prior comparable period2020, to $12.7 million in the three months ended December 31, 2017.2021, total revenue increased by 9.6%, from $7.8 million to $8.5 million, investment advisory fees increased by 10.1%, from $7.2 million to $7.9 million, and shareholder service fees increased by 2.6%, from $0.58 million to $0.60 million. The increase in investment advisory fees were mainlywas due to increased average daily net assets of the Hennessy Funds.

- 21 -

Funds, which was attributable to market appreciation.

We collect investment advisory fees from each of the Hennessy Funds at differing annual rates. These annual rates range between 0.40% and 1.25% of average daily net assets. Average daily net assets of the Hennessy Funds for the three months ended December 31, 2017, increased by $217 million,2021, was $4.1 billion, which represents an increase of $0.3 billion, or 3.3%8.3%, compared to $6.76 billion, versus the prior comparable period.

Shareholder service fees decreased 3.7% from the prior comparable period to $1.1 million in the three months ended December 31, 2017. The decrease in shareholder service fees was due to a change in the composition of average daily net assets. Assets held in Institutional Class shares of the Hennessy Funds are not subject to a shareholder service fee, whereas assets held in Investor Class shares of the Hennessy Funds are subject to a shareholder service fee. The average daily net assets held in Institutional Class shares increased, while the average daily net assets held in Investor Class shares decreased versus the prior comparable period.

The Company collects investment advisory fees from each of the Hennessy Funds at differing rates. These range between an annual rate of 0.40% and 0.90% of average daily net assets.2020. The Hennessy Fund with the largest average daily net assets for the three months ended December 31, 2017,2021, was the Hennessy Focus Fund, with $2.76$1.2 billion. The Company collectsWe collect an investment advisory fee from the Hennessy Focus Fund at an annual rate of 0.90% of average daily net assets. However, the Company payswe pay asub-advisor

sub-advisory
fee at an annual rate of 0.29% to the Fund’sfund’s
sub-advisor,
which reduces the net operating profit contribution of the Fundfund to the Company’sour financial results.operations. The Hennessy Fund with the second largest average daily assets for the three months ended December 31, 2017,2021, was the Hennessy Gas UtilityJapan Fund, with $1.38$0.82 billion. The Company collectsWe collect an investment advisory fee from the Hennessy Gas UtilityJapan Fund at an annual rate of 0.40%0.90% of average daily net assets.

However, we pay a

sub-advisory
fee at an annual rate between 0.35% and 0.42% (depending on asset level) to the fund’s
sub-advisor,
which reduces the net operating profit contribution of the fund to our financial operations.
18
Table of Contents
Total assets under management as of December 31, 2017,2021, was $6.9$4.1 billion, an increase of 4.7%$0.2 billion, or $311 million,6.3%, compared with $6.6 billion as of September 30, 2017.to December 31, 2020. The increase in total assets under management over the three months ended December 31, 2017, was dueattributable to positive market impact and the purchase of assets related to the management of the Rainier Large Cap Equity Fund and the Rainier Mid Cap Equity Fund. appreciation.
The Hennessy Funds with the three largest amounts of net inflows for the three months ended December 31, 2017, were as follows:

Hennessy Japan Fund: $69 million

Three Months Ended December 31, 2021
Fund Name
Amount
Hennessy Japan Small Cap Fund
$6 million
Hennessy Large Cap Financial Fund
$5 million
Hennessy Energy Transition Fund
$2 million
Hennessy Japan Small Cap Fund: $53 million

Large Cap Financial Fund: $1 million

The Hennessy Funds with the three largest amounts of net outflows for the three months ended December 31, 2017, were as follows:

Hennessy Mid Cap 30 Fund:-$108 million

Three Months Ended December 31, 2021
Fund Name
Amount
Hennessy Focus Fund
$(46) million
Hennessy Gas Utility Fund
$(26) million
Hennessy Cornerstone Mid Cap 30 Fund
$(13) million
Hennessy Gas Utility Fund:-$73 million

Hennessy Focus Fund:-$57 million

Redemptions as a percentage of assets under management decreased from an average of 3.3%3.5% per month during the three months ended December 31, 2016,2020, to 2.4%an average of 2.0% per month during the three months ended December 31, 2017.

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2021.

Operating and Other Expenses

Total operating expenses increased 5.2% to $7.4 million in

Comparing the three months ended December 31, 2017,2020, to the three months ended December 31, 2021, total operating expenses increased by 6.8%, from $7.1$5.4 million in the prior comparable period.to $5.7 million. The increase isin operating expenses was due primarily to increases insub-advisor fee all expense and general and administrative expense, but was partially offset by a decrease in compensation and benefits expense.categories other than depreciation, which decreased slightly. As a percentage of total revenue, total operating expenses increased 0.7decreased 1.8 percentage points to 53.7% in67.3%. Although the dollar value increased, operating expenses decreased as a percentage of total revenue because some of our operating expenses are fixed costs that do not increase with increasing revenue.
Compensation and Benefits Expense
: Comparing the three months ended December 31, 2017, as compared2020, to 53.0% in the prior comparable period.

Compensation and Benefits Expense: Compensation and benefits expense decreased 1.5% to $3.17 million in the three months ended December 31, 2017,2021, compensation and benefits expense increased by 7.5%, from $3.21$2.1 million in the prior comparable period. The decrease is primarily due to a decrease in the Company’sincentive-based compensation expense.$2.3 million. As a percentage of total revenue, compensation and benefits expense decreased 1.30.5 percentage points to 22.9% for26.5%. The dollar value increase in compensation and benefits expense was due to an increase in

incentive-based
compensation in the current period.
General and Administrative Expense
: Comparing the three months ended December 31, 2017, compared2020, to 24.2% in the prior comparable period.

General and Administrative Expense: General and administrative expense increased 8.6% to $1.5 million in the three months ended December 31, 2017,2021, general and administrative expense increased by 7.0%, from $1.3 million to $1.4 million in the prior comparable period. The increase resulted from increased sales and distribution-related costs in the current period versus the prior comparable period.million. As a percentage of total revenue, general and administrative expense increased 0.5 percentage points to 11.0% in the three months ended December 31, 2017, compared to 10.5% in the prior comparable period.

Mutual Fund Distribution Expense: Mutual fund distribution expense increased 96.7% to $0.1 million in the three months ended December 31, 2017, from $0.06 million in the prior comparable period. As a percentage of total revenue, mutual fund distribution expense increaseddecreased 0.4 percentage points to 0.9% for16.4%. The dollar value increase in general and administrative expense was due to the three months ended December 31, 2017, comparedreturn to 0.5% in the prior comparable period ended December 31, 2016.

in-person
events related to media, public relations, and other company functions.
19
Table of Contents
Mutual Fund Distribution Expense
: Mutual fund distribution expense consists of fees paid to various financial institutions that offer the Hennessy Funds as potential investments to their clients. When the Hennessy Funds are purchased through one of these financial institutions, the institution typically charges an
asset-based
fee, which is recorded in “mutualas mutual fund distribution expense” inexpense on our statement of operations to the extent paid by us. When the Hennessy Funds are purchased directly, we do not incur any such expense. These fees generally increase or decrease in line with the net assets of the Hennessy Funds held through these financial institutions, which are affected by inflows, outflows, and fund performance.

The increase in In addition, some financial institutions charge a minimum fee if the average daily net assets of a Hennessy Fund held by such an institution are less than a threshold amount. In such cases, we pay the minimum fee.

Comparing the three months ended December 31, 2020, to the three months ended December 31, 2021, mutual fund distribution expense inincreased by 28.1%, from $0.12 million to $0.16 million. As a percentage of total revenue, mutual fund distribution expense increased 0.2 percentage points to 1.8%.
Mutual fund distribution expenses are impacted by many factors, including the currentthree-month period is due to both entering into contract amendments that altered following:
average daily net assets held by financial institutions;
the services provided (and associated fees), and changes in the compositionsplit of average daily net assets held by financial institutions. These changes have led to an allocationinstitutions in Institutional Class shares of a larger portionthe Hennessy Funds versus Investor Class shares of mutual fund distribution expense to the Company.

Sub-Advisor FeeHennessy Funds; and

fee minimums at various financial institutions.
Sub-Advisory
Fees Expense
:Sub-advisor fee expense increased 10.6% to $2.5 million in Comparing the three months ended December 31, 2017,2020, to the three months ended December 31, 2021,
sub-advisory
fees expense increased by 5.2%, from $2.3$1.8 million into $1.9 million. Although the prior comparable period. The increase isdollar value increased,
sub-advisory
fees expense as a resultpercentage of an increasetotal revenue decreased 0.9 percentage points to 22.0% because the growth in average daily net assets under managementheld by the Hennessy Funds that we internally manage was larger than the growth in average daily net assets of the
sub-advised
Hennessy Funds.Funds, thus increasing our revenue relative to
sub-advisory
fees expense paid to
sub-advisors.
Depreciation Expense
: Comparing the three months ended December 31, 2020, to the three months ended December 31, 2021, depreciation expense decreased by 14.5%, from $0.06 million to $0.05 million. As a percentage of total revenue,sub-advisor fee depreciation expense increased 1.1decreased 0.2 percentage points to 18.3% for0.6%. The decrease in depreciation expense was due to previously purchased assets being fully depreciated, partially offset by new fixed asset purchases.
Interest Expense
Comparing the three months ended December 31, 2017, compared2020, to 17.2% in the prior comparable period.

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Amortization and Depreciation Expense: Amortization and depreciation expense decreased 10.8% to $0.08 million in the three months ended December 31, 2017,2021, interest expense increased by 100.0% from $0.09$0 to $0.5 million. The increase in interest expense was due to our issuance of $40.25 million in the prior comparable period. The decrease is a result2026 Notes on October 20, 2021, for which we made our first interest payment on December 31, 2021.

20
Table of a reduced fixed asset base forContents
Income Tax Expense
Comparing the three months ended December 31, 2017, compared2020, to the prior comparable period. As a percentage of total revenue, amortization and depreciation expense remained the same at 0.6% for the three months ended December 31, 2017, compared2021, income tax expense decreased by 42.2%, from $0.6 million to $0.4 million. The decrease in income tax expense was due primarily to the prior comparable period.

Interest Expense: Interest expense decreased 1.1%recognition of a portion of the uncertain tax position related to $0.263 million ina California tax refund. During the period ended December 31, 2021, management determined that the position is certain as the apportionment method has been audited, the tax refund has been received, and there have been no further inquiries received from the state tax jurisdiction.

Net Income
Comparing the three months ended December 31, 2017, from $0.266 million in the prior comparable period. The decrease is due primarily2020, to a decrease in the Company’s principal loan balance compared to the prior comparable period, although that was partly offset by an increase in the interest rate charged to the loan. As a percentage of total revenue, interest expense decreased 0.2 percentage points to 1.8% for the three months ended December 31, 2017, compared2021, net income increased by 7.9%, from $1.8 million to 2.0%$1.9 million. The increase in the prior comparable period ended December 31, 2016.

Income Tax Expense: The provision fornet income tax expense decreased 203.0% to a benefit of $2.0 million in the three months ended December 31, 2017, from an expense of $2.0 million in the prior comparable period. This decrease iswas due to the Tax Cuts and Jobs Act of 2017 that was signed into law on December 22, 2017. The Company was required to record aone-time,non-cash benefit to income taxes of approximately $4 million for the accountingre-measurement of the Company’s deferred tax liability based on the lower federal corporate income tax rate. As a percentage of total revenue, income tax expense decreased 29.7 percentage points to-14.8% for the three months ended December 31, 2017, compared to 14.9% in the prior comparable period.

Net Income

Net income increased by 104.9% to $8.2 million in the three months ended December 31, 2017, from $4.0 million in the prior comparable period, primarily as a result of the reductiondecrease in income tax expense discusseddescribed above. As a percentage of total revenue, net income increased 29.2 percentage points to 59.3% for the three months ended December 31, 2017, compared to 30.1% in the prior comparable period.

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States, which require the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These accounting policies, methods, and estimates are an integral part of the financial statements prepared by management and are based upon management’s current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods, and estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgment. For a discussion of the accounting policies that we believe are most critical to understanding our results of operations and financial position, see the section entitledtitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2017.

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2021.

Liquidity and Capital Resources

We continually review our capital requirements to ensure that we have funding available to support our business model. Management anticipates that cash and other liquid assets on hand as of December 31, 2017,2021, will be sufficient to meet our short-term capital requirements.requirements for one year from the issuance date of this report, as well as our longer-term capital requirements for periods beyond one year from the issuance date of this report. To the extent that liquid resources and cash provided by operations are not adequate to meet long-term capital requirements, management plans to raise additional capital by either, or both of, seeking to increase our borrowing capacity or accessing the capital markets.markets, or by pursuing both of these options. There can be no assurance that we will be able to raise additional capital.

Total

21
Table of Contents
Our total assets under management as of December 31, 2017,2021, was $6.9$4.1 billion, which was an increase of $331 million,$0.2 billion, or 5.0%6.3%, fromcompared to December 31, 2016.2020. The primary sources of our revenue, liquidity, and cash flow are our investment advisory fees and shareholder service fees, which are based on and generated by our average assets under management. Property and equipment andOur average assets under management contracts purchased totaled $76.0 million as offor the three months ended December 31, 2017.2021, was $4.1 billion, an increase of $0.3 billion, or 8.3%, compared to the three months ended December 31, 2020. As of December 31, 2017,2021, we had cash and cash equivalents of $15.2$54.5 million.

The following table summarizes key financial data relating to our liquidity and use of cash for the three months ended December 31, 2017 and 2016:

   For the Three Months
Ended December 31,		 
   2017   2016 
   (Unaudited, in thousands) 

Cash flow data:

    

Operating cash flows

  $2,363   $2,382 

Investing cash outflows

   (1,115)    (83) 

Financing cash outflows

   (1,750)    (1,729) 
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

  $(502)   $570 
  

 

 

   

 

 

 

cash:

   
For the Three Months

Ended December 31,
 
         
   
2021
   
2020
 
         
   
(In thousands)
 
Net cash provided by operating activities
  $1,159   $1,051 
Net cash used in investing activities
   (57)    (66) 
Net cash provided by (used in) financing activities
   37,564    (986) 
  
 
 
   
 
 
 
Net increase (decrease) in cash and cash equivalents
  $38,666   $(1) 
  
 
 
   
 
 
 
The increase in cash provided by operating activities of $0.02$0.1 million is mainlywas due to timing of the payout of prepaid expenses in the current period versus the prior comparable period.

increased net income.

The increasedecrease in cash used in investing activities of $1.0$0.01 million is mainly relatedwas due to thedecreased purchases of property and equipment in the assets related to the management of the Rainier Large Cap Equity Fund and the Rainier Mid Cap Equity Fund.

current period.

The increase in cash used infrom financing activities of $0.02$38.6 million iswas due to an increase in the dividend payments inissuance of the current period versus the prior comparable period.

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The Company has an outstanding bank loan with U.S. Bank, as administrative agent and as a lender, and California Bank & Trust, as syndication agent and as a lender, which replaced and refinanced the bank loan previously entered into by the Company and U.S. Bank2026 Notes on October 26, 2012, and amended on November 1, 2013. Immediately prior to September 17, 2015, the Company’s bank loan with U.S. Bank had an outstanding principal balance20, 2021.

22
Table of $23.0 million. On September 17, 2015, in anticipation of the repurchase of up to 1,500,000 shares of the Company’s common stock at $16.67 per share pursuant to itsself-tender offer, the Company entered into a new term loan agreement to fund in part itsself-tender offer, thereby increasing its total loan balance to $35.0 million (consisting of a $20.0 million promissory note to U.S. Bank and a $15.0 million promissory note to California Bank & Trust). Then, on September 19, 2016, the Company entered into an amendment to its term loan agreement with U.S. Bank and California Bank & Trust to allow it to consummate the purchase of assets related to the management of the Westport Fund and the Westport Select Cap Fund. In addition, the amendment revised one of the financial covenants in the term loan agreement. On November 16, 2017, the Company entered into an amendment to its term loan agreement with U.S. Bank and California Bank & Trust to revise the excess cash flow prepayment requirements. On November 30, 2017, the Company entered into an amendment to its term loan agreement with U.S. Bank and California Bank & Trust to allow it to consummate the purchases of the assets related to the management of the Rainier Large Cap Equity Fund, the Rainier Mid Cap Equity Fund, and the Rainier Small/Mid Cap Equity Fund.

The current term loan agreement requires 48 monthly payments of $364,583 plus interest based on, at our option:

(1) LIBOR plus a margin that ranges from 2.75% to 3.25%, depending on the Company’s ratio of consolidated debt to consolidated earnings before interest, taxes, depreciation, and amortization (excluding, among other things, certainnon-cash gains and losses) (“EBITDA”); or

(2) the sum of (a) the highest of the prime rate set by U.S. Bank from time to time, the Federal Funds Rate plus 0.50%, orone-month LIBOR plus 1.00%, and (b) a margin that ranges from 0.25% to 0.75%, depending on the Company’s ratio of consolidated debt to consolidated EBITDA.

Beginning March 1, 2016, the Company elected to use aone-month LIBOR rate contract, which has been renewed each subsequent month. As of December 31, 2017, the effective rate is 4.111%, which is comprised of the LIBOR rate of 1.361% as of December 1, 2017, plus a margin of 2.75% based on the Company’s ratio of consolidated debt to consolidated EBITDA as of September 30, 2017. The Company intends to renew the LIBOR rate contract on a monthly basis provided that theLIBOR-based interest rate remains favorable to the primerate-based interest rate.

All borrowings under the term loan agreement are secured by substantially all of the Company’s assets. The final installment of thethen-outstanding principal plus accrued interest is due September 17, 2019. As of December 31, 2017, the Company had $25.2 million currently outstanding under its term loan ($24.9 million net of debt issuance costs).

The term loan agreement includes certain reporting requirements and loan covenants requiring the maintenance of certain financial ratios. The Company was in compliance for the periods ended December 31, 2017 and 2016.    

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Contents
Item3. 4.
Quantitative and Qualitative Disclosures About Market Risk

An analysis of our market risk was provided in Item 7A of the Company’s Annual Report on Form10-K for the year ended September 30, 2017. There were no material changes to the Company’s market risk during the three months ended December 31, 2017.

Item4.
Controls and Procedures

An

Evaluation of Disclosure Controls and Procedures
Management performed an evaluation was performed by management of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rules
13a-15(e)
and
15d-15(e) of
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2017.the end of the period covered by this report. Based on thatsuch evaluation, management, including the Company’s principal executive officer and principal financial officers,officer, concluded that the Company’s disclosure controls and procedures are effective.

effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting
There hashave been no changechanges in the Company’s internal control over financial reporting identifiedas defined in connection with the evaluation required by paragraph (d) of
Rules13a-15 and15d-15 13a-15(f)
of the Exchange Act that occurred during the Company’s most recent fiscal quarter ended December 31, 2021, and that hashave materially affected, or isare reasonably likely to materially affect, the Company’sour internal control over financial reporting.

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23

Table of Contents
PART II: OTHER INFORMATION

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

We purchasedrepurchased shares from employees to pay forunderlying vested restricted stock units (“RSUs”) vested duringfrom an employee to satisfy tax withholding obligations arising in connection with the three-month periodvesting of RSUs. The stock repurchase is presented in the following table for the three months ended December 31, 2017:

Period

  Total number of
shares purchased		   Average price
paid per share		   Total number of
shares purchased
as part of publicly
announced plans
or programs (3)		   Maximum number of
shares that may
yet be purchased
under the plans or
programs (3)		 
   (a)   (b)   (c)   (d) 

October1-31, 2017(1)

   7,329   $15.95    0    1,363,211 

November1-30, 2017

   0   $0.00    0    1,363,211 

December1-31, 2017

   0   $0.00    0    1,363,211 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total (2)

   7,329   $15.95    0    1,363,211 
  

 

 

   

 

 

   

 

 

   

 

 

 

2021:
Period
  
Total Number of
Shares Purchased
   
Average Price
Paid per Share
   
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
   
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs
(1)
 
October
1-31,
2021
   —      —      —      596,368 
November
1-30,
2021
   —      —      —      596,368 
December
1-31,
2021
(2)
   3,458   $10.60    —      596,368 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
  
 
3,458
 
  
$
10.60
 
  
 
—  
 
  
 
596,368
 
  
 
 
   
 
 
   
 
 
   
 
 
 
(1)The
We are authorized to purchase a maximum of 1,500,000 shares repurchasedunder our stock buyback program. We announced the stock buyback program in October 2017 were repurchased according toAugust 2010, and the applicable employee’s instructions to pay for the vesting of RSUs granted on October 1, 2013, and October 15, 2014, and wereprogram has no expiration date. We did not purchasedrepurchase any shares pursuant to the stock buyback program described below.during the three months ended December 31, 2021.
(2)
The total shares repurchased were purchased at a weighted average price of $15.95 per share.
(3)The share repurchases related to the RSUsin December 2021 were not completed pursuant to a plan or program and are therefore not subject to a maximum per a plan or program. The Company has adopted a stock buyback program, which it announced August 5, 2010. Pursuant to the program, the Company is authorized to purchase a maximum of 1,500,000 shares. The program has no expiration date.

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24
Table of Contents
Item 6.
Exhibits

Set forth below is a listinglist of all exhibits to this Quarterly Report on
Form 10-Q.

31.1  Rule 13a-14a Certification of the ChiefPrincipal Executive Officer.
31.2  Rule 13a-14a Certification of the ChiefPrincipal Financial Officer.
32.1  Written Statement of the ChiefPrincipal Executive Officer, Pursuant to 18 U.S.C. §1350.§ 1350.
32.2  Written Statement of the ChiefPrincipal Financial Officer, Pursuant to 18 U.S.C. §1350.§ 1350.
101  Financial statements from the Quarterly Report on Form
10-Q
of Hennessy Advisors, Inc. for the quarter ended December 31, 2017,2021, filed on January 25, 2018,February 10, 2022, formatted in XBRL: (i) the Condensed Balance Sheets; (ii) the Condensed Statements of Income; (iii) the Condensed Statements of Changes in Stockholders’ Equity; (iv) the Condensed Statements of Cash Flows; and (v) the Notes to Unaudited Condensed Financial Statements.
104The cover page for the Company’s Quarterly Report on Form
10-Q
has been formatted in Inline XBRL and contained in Exhibit 101.

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25

Table of ContentsSignatures

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

authorized:
  HENNESSY ADVISORS, INC.
Date: January 25, 2018February 10, 2022  By: 

/s/ Teresa M. Nilsen

   

Teresa M. Nilsen Executive Vice

President Chief Financial Officer

and Secretary

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26