What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-12-07 compared with 2021-11-24 · 152 added, 143 removed, 413 unchanged (42% of the section changed)

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(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the account or disclosures to which it relates.

Valuation of Management Contract Assets – Impairment Consideration

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the account or disclosures to which it relates.

Valuation of Management Contract Asset – Impairment Consideration

As described in Note 1(f) to the financial statements, the Company has historically capitalized the cost of purchasing management contracts as intangible assets.

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We have addressed this critical audit matter by performing appropriate audit procedures.

These procedures included (i) performing an independent evaluation of whether events or circumstances indicate that it is more likely than not that impairment exists;

These procedures included (i) assessing management’s evaluation of whether events or circumstances indicate that it is more likely than not that impairment exists;

(ii) evaluating the reasonableness of management’s fair value estimate assumptions;

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Costa Mesa, CA

November 24, 2021

December 7, 2022

Hennessy Advisors, Inc.

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Accrued liabilities and accounts payable

Accrued management contract payment

Operating lease liability

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Total current liabilities

Notes payable, net of issuance costs

Long-term operating lease liability

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Shares issued for dividend reinvestment pursuant to the 2018 Dividend Reinvestment and Stock Purchase Plan

Shares repurchased pursuant to a stock buyback program

Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan

Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan

Stock-based compensation

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Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan

Shares issued for auto-investments pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan

Shares issued for dividend reinvestment pursuant to the 2021 Dividend Reinvestment and Stock Purchase Plan

Stock-based compensation

Employee restricted stock forfeiture

Balance at September 30, 2022

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asset and operating lease liability

Amortization of note issuance costs

Deferred income taxes

Deferred offering costs

Employee restricted stock forfeiture

Stock-based compensation

Unrealized gains on marketable securities

Interest expense associated with debt issuance cost

Unrealized loss (gain) on marketable securities

Change in operating assets and liabilities:

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Cash flows from financing activities

Principal payments on bank loan

Shares repurchased pursuant to stock buyback program

Proceeds from issuance of notes, net of underwriting discount

Payment of issuance costs on notes

Repurchase of vested employee restricted stock for tax withholding

Proceeds from shares issued pursuant to the 2018 Dividend Reinvestment and

Stock Repurchase Plan

Proceeds from shares issued pursuant to the 2021 Dividend Reinvestment and

Stock Repurchase Plan

Proceeds from shares issued pursuant to the 2018 Dividend Reinvestment and Stock Repurchase Plan

Proceeds from shares issued pursuant to the 2021 Dividend Reinvestment and Stock Repurchase Plan

Dividend payments

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

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Cash paid for interest

Dividend investment issued in shares

Non-cash payment related to management contract (Note 17)

See Accompanying Notes to Financial Statements

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In 1990, the Company became a registered investment advisor, and on April 15, 2001, the Company changed its name to Hennessy Advisors, Inc.

The Company’s operating

activities consist primarily of providing investment advisory s e

rvices to 16 open-end

The Company’s operating activities consist primarily of providing investment advisory services to 16 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 BP Energy Transition Fund, the Hennessy BP Midstream Fund, the Hennessy Gas Utility Fund, the Hennessy Japan Fund, the Hennessy Japan Small Cap Fund, the Hennessy Large Cap Financial Fund, the Hennessy Small Cap Financial Fund, and the Hennessy Technology Fund.

The Company also provides shareholder services t o

shareholders of 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 Fund, the Hennessy Large Cap Financial Fund, the Hennessy Small Cap Financial Fund, and the Hennessy Technology Fund.

The Company also provides shareholder services to investors in the Hennessy Funds.

The Company’s operating revenues consist of contractual investment advisory and shareholder service fees paid to it by the Hennessy Funds.

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maintaining a compliance program (including a code of ethics), conducting ongoing reviews of the compliance programs of the fund’s service providers (including any sub-advisor),

including their codes of ethics, as appropriate, conducting onsite visits to the fund’s service providers (including any sub-advisor)

including their codes of ethics, as appropriate, conducting on-site

visits to the fund’s service providers (including any sub-advisor)

as feasible, monitoring incidents of abusive trading practices, reviewing fund expense accruals, payments, and fixed expense ratios, evaluating insurance providers for fidelity bond, 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;

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adherence to the fund’s investment objectives, policies, and restrictions;

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

overseeing service providers that provide accounting, administration, distribution, transfer agency, custodial, sales

, marketing, public relations, audit, information technology, and legal services to the fund;

maintaining in-house

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

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

financial intermediary platforms;

paying the incentive compensation of the fund’s compliance officer and employing other staff such as legal, marketing, national accounts, 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 (the “Funds’ Board of Trustees”);

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The fees are computed and billed monthly, at which time they are recognized in accordance with Accounting Standards Codification 606 — Revenue from Contracts with Customers.

The Company waived a portion of its fees with respect to the Hennessy Cornerstone Large Growth Fund and the Hennessy BP 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 BP Midstream Fund and the Hennessy Technology Fund to comply with contractual expense ratio limitations.

The Company waived a portion of its fees with respect to the Hennessy Energy Transition Fund through the expiration of the fund’s expense limitation agreement on October 25, 2020.

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 contractual expense ratio limitations.

The fee waivers are calculated daily by the Hennessy Funds’ accountants at U.S.

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The Financial Accounting Standards Board (“FASB”) guidance on “Disclosures about Fair Value of Financial Instruments” requires disclosures regarding the fair value of all financial instruments for financial statement purposes.

The estimates presented in these financial statements are based on information available to manage m

ent as of the end of fiscal years 2021 and 2020.

The estimates presented in these financial statements are based on information available to management as of the end of fiscal years 2022 and 2021.

Accordingly, the fair values presented in the Company’s financial statements as of the end of fiscal years 2022 and 2021 may not be indicative of amounts that could be realized on disposition of the financial instruments.

The fair value of receivables, accounts payable, and notes payable has been estimated at carrying value due to the short maturity of these instruments.

lue of marketable securities and money market accounts is based on closing net asset values as reported by securities exchanges registered with the SEC.

The fair value of marketable securities and money market accounts is based on closing net asset values as reported by securities exchanges registered with the SEC.

Investments in highly-liquid

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The Company holds investments in publicly traded mutual funds, which are accounted for as trading securities.

Accordingly, unrealized gains of less than $ 1,000 per year were recognized in operations for fiscal years 2021 and 2020.

Accordingly, unrealized gains and losses of less than

$ 1,000 per year were recognized in operations for fiscal years 2022 and 2021.

Dividend income is recorded on the ex-dividend

Purchases and sales of marketable securities are recorded on a trade-date

basis, and realized gains and losses recognized on sale are determined on a specific identification/average cost ba s

basis, and realized gains and losses recognized on sale are determined on a specific identification/average cost basis.

Property and Equipment

Property and equipment are stated at cost less accumulated

depreciation.

Property and equipment are stated at cost less accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between one and ten years.

Management Contracts Purchase d

Management Contracts Purchased

Throughout its history, the Company has completed 10 purchases of the assets related to the management of 30 different mutual funds, some of which were reorganized into already existing Hennessy Funds.

In accordance with FASB guidance, the Company periodically reviews the carrying value of its management contract asset t o

determine if any impairment has occurred.

In accordance with FASB guidance, the Company periodically reviews the carrying value of its management contracts asset to determine if any impairment has occurred.

The fair value of the management contracts asset was estimated by applying the income approach and is based on management estimates and assumptions, including third-party valuations that utilize appropriate valuation techniques.

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The Company considers the management contracts asset to be an intangible asset with an indefinite useful life and no impairment as of the end of fiscal year 2022.

The Company completed its most recent asset purchase on October 26, 2018 , when it purchased the assets related to the management of the BP Capital TwinLine Energy Fund and the BP Capital TwinLine MLP Fund (the “BP Funds”), which were reorganized into the Hennessy BP Energy Transition Fund and the Hennessy BP Midstream Fund, respectively, two new series of Hennessy Funds Trust .

The Company, under the FASB guidance on “Accounting for Uncertainty in Income Tax,” uses a recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a company’s income tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

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Determining the income tax provision for these potential assessments and recording the related effects requires management judgement and estimates.

The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in the income tax provision and, therefore, could have a material impact on the Company’s income tax provision, net income, and cash flows.

The amounts ultimately paid on resolution of an

audit could be materially different from the amounts previously included in the income tax provision and, therefore, could have a material impact on the Company’s income tax provision, net income, and cash flows.

The accrual for uncertain tax positions is attributable primarily to uncertainties concerning the tax treatment of the Company’s domestic operations, including the allocation of income among different jurisdictions.

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federal income taxes for 2018 through 2022 remain open and subject to examination.

The Company has identified 22 major state tax jurisdictions in which it is subject to income tax, which include California, Colorado, Connecticut, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, and Wisconsin.

The Company has identified 22 major state tax jurisdictions in which it is subject to income tax, which include California, Colorado, Connecticut, District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Texas, and Wisconsin.

For tax years that remain open, the below chart shows the number of such state tax jurisdictions that remain subject to examination by the appropriate governmental agencies:

Number of State

Tax Jurisdictions

Number of State Tax

Jurisdictions

For state tax jurisdictions with unfiled tax returns, the statutes of limitations remains open indefinitely.

Earnings 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 e f

fect of common stock equivalents, which consist of restricted stock units (“RSUs”).

Amended and Restated 2013 Omnibus Incentive Plan

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The 50% limitation does not invalidate any awards made prior to a decrease in the number of outstanding shares, even if such awards have result or may result in shares constituting more than 50% of the outstanding shares being available for issuance under the Omnibus Plan.

Shares available under the Omnibus Plan that are not awarded in one particular year may be awarded in

subsequent years.

Shares available under the Omnibus Plan that are not awarded in one particular year may be awarded in subsequent years.

The compensation committee of the Company’s Board of Directors has the authority to determine the awards granted under the Omnibus Plan, including among other things, the individuals who receive the awards, the times when they receive them, vesting schedules, performance goals, whether an option is an incentive or nonqualified option, and the number of shares to be subject to each award.

However, no participant may receive options or stock appreciation rights under the Omnibus Plan for an aggregate of more than

75,000 shares in any calendar year.

The exercise price and term of each option or stock appreciation right is fixed by the compensation committee except that the exercise price for each stock option that is intended to qualify as an incentive stock option must be at least equal to the fair market value of the stock on the date of grant and the term of the option cannot exceed

However, no participant may receive options or stock appreciation rights under the Omnibus Plan for an aggregate of more than 75,000 shares in any calendar year.

In the case of an incentive stock option granted to a

10 % or more shareholder, the exercise price must be at least

110 % of the fair market value on the date of grant and cannot exceed

Incentive stock options may be granted only within

10 years from the date of adoption of the Omnibus Plan.

10 % or more shareholder, the exercise price must be at least 110 % of the fair market value on the date of grant and cannot exceed five years .

Incentive stock options may be granted only within 10 years from the date of shareholder approval of the Omnibus Plan (which was March 2014).

The aggregate fair market value (determined at the time the option is granted) of shares with respect to which incentive stock options may be granted to any one individual, which stock options are exercisable for the first time during any calendar year, may not exceed $ 100,000 .

An optionee may, with the consent of the compensation committee,

elect to pay for the shares to be received upon exercise of his or her options in cash, shares of common stock, or any combination thereof.

An optionee may, with the consent of the compensation committee, elect to pay for the shares to be received upon exercise of his or her options in cash, shares of common stock, or any combination thereof.

Under the Omnibus Plan, participants may be granted RSUs, each of which represents 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 t o

an RSU recipient.

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.

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All compensation costs related to RSUs vested during fiscal years 2022 and 2021 have been recognized in the financial statements.

The Company has available up to 3,734,792 shares of the Company’s common stock in respect of granted stock awards, in accordance with terms of the Omnibus Plan.

The Company has available up to 3,785,871

shares of the Company’s common stock in respect of granted stock awards, in accordance with terms of the Omnibus Plan.

A summary of RSU activity is as follows:

Fiscal Years Ended September 30,

September 30, 2019 and 2018

Weighted Average

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Dividend Reinvestment and Stock Purchase Plan

In January 2021, the Company adopted an updated Div i

dend Reinvestment and Stock Purchase Plan (the “DRSPP”), replacing the previous Dividend Rei n

vestment 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 plan, the Company issued 12,666 and 9,815 shares of common stock in fiscal years 2021 and 2020, respectively.

The maximum number of shares that may be issued under the DRSPP is 1,470,000 , of which 1,460,457 shares remained available for issuance as of September 30, 2021.

In January 2021, the Company adopted an updated 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 plan, the Company issued

12,666 shares of common stock in fiscal years 2022 and 2021, respectively.

The maximum number of shares that may be issued under the DRSPP is

1,470,000 , of which

1,452,845 shares remained available for issuance as of September 30,

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 temporarily suspended repurchases under the stock buyback program as of March 24, 2020, so the Company did not repurchase any shares of its common stock pursuant to the stock buyback program during fiscal year 2021.

In August 2010, the Company’s Board of Directors adopted a stock buyback program pursuant to which the Company was authorized to repurchase up to 1,500,000 shares of its common stock in the open market, in privately negotiated transactions, or otherwise.

The program does not have an expiration date.

In August 2022, the Board of Directors increased the number of shares that may be repurchased under the program to 2,000,000 shares.

As a result, a total of 1,096,368 shares remains available for repurchase under the stock buyback program.

The Company did no t repurchase any shares of its common stock pursuant to the stock buyback program during fiscal year 2022.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ from those estimates.

Actual results could differ from those

Fair Value Measurements

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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.

Based on the definitions, th e

following table represents the Company’s assets categorized in the Level 1 to Level 3 hierarchies:

Based on the definitions, the following table represents the Company’s assets categorized in the Level 1 to Level 3 hierarchies:

September 30, 2022

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There were no transfers between levels during fiscal years 2022 or 2021.

The fair values of receivables, payables, and accrued liabilities approximate their book values given the short-term nature of those instruments.

The fair value of the 2026 Notes (see Note 9 in this Item 8, “Financial Statements and Supplementary Data”) was approximately $

million as of September 30, 2022, based on the last trading price of the notes on that date (Level 1).

The cost, gross unrealized gains, gross unrealized losses, and fair market value of the Company’s trading investments were as follows:

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Property and equipment, net

During each of fiscal year 2021 and fiscal year 2020, depreciation expense was $ 0.2 million.

During each of fiscal year 2022 and fiscal year 2021, depreciation expense was $ 0.2

Management Contracts

The costs related to the Company’s purchase of the assets related to management contracts are capitalized as incurred and comprise the management contracts asset.

This asset was $ 80.6

million as of the end of fiscal year 2021, unchanged from the end of fiscal year 2020.

This asset was $ 80.9 million as of the end of fiscal year 2022, an

$ 0.3 million from the end of fiscal year 2021.

The increase was related to expenses incurred in connection with the definitive agreement signed with Stance Capital in August 2022.

The Company considers the management contracts asset to be an intangible asset per Accounting Standards Codification 350 — Intangibles – Goodwill and Other.

The purchase costs that comprise the management contracts asset include legal fees, shareholder vote fees, and percent of asset costs to purchase the assets related to the management contracts.

The purchase costs that comprise the management contracts asset include legal fees, shareholder vote fees, and percent of asset costs to purchase the assets related to the management

Investment Advisory Agreements

The Company has investment advisory agreements with Hennessy Funds Trust under which it provides investment advisory services to all classes of the 16 Hennessy Funds.

stment advisory agreements must be renewed annually (except in limited circumstances) by (a) the Funds’ Board of Trustees or the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (b) the vote of a majority of the trustees of Hennessy Funds Trust who are not interested persons of the Hennessy Funds.

Company has investment advisory agreements with Hennessy Funds Trust under which it provides investment advisory services to

all classes of the

The investment advisory agreements must be renewed annually (except in limited circumstances) by (a) the Funds’ Board of

Trustees or the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (b) the vote of a majority of the trustees of Hennessy Funds Trust who are not interested persons of the Hennessy Funds.

If an investment advisory agreement is not renewed, it terminates automatically.

There are two additional circumstances in which an investment advisory agreement would terminate.

There are two additional circumstances in which an investment advisory agreement terminates.

First, an investment advisory agreement automatically terminates if the Company assigns it 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).

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The Company has entered into sub-advisory

agreements for the Hennessy Focus Fund, the Hennessy Equity and Income Fund, the Hennessy BP Energy Transition Fund, the Hennessy BP Midstream Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund.

agreements for the Hennessy Focus Fund, the Hennessy Equity and Income 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 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.

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

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fund’s average daily net asset value.

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

Effective January 31, 2022, the Company and BP Capital Fund Services, LLC mutually agreed to terminate the sub-advisory

agreement for the Hennessy Energy Transition Fund and the Hennessy Midstream Fund.

Those funds are now managed internally by the Company.

The Company determines if an arrangement is an operating lease at inception.

Operating leases are included in operating lease

assets and current and

operating lease liabilities on the Company’s balance sheet.

During the quarter ended March 31, 2021, the Company renewed the lease for its office in Novato, California for an additional three years .

During the quarter ended March 31, 2021, the Company renewed the lease for its office in Novato, California for an additional three years , which created a

operating lease as of such date.

Upon renewal of the lease, the Company recorded a

asset of $ 1.1 million on its balance sheet.

The renewed lease expires on July 31, 2024 .

The lease renewal created a long-term operating lease as of March 31, 2021, and the Company recorded a right-of-use

asset of $ 1.1 million on the balance sheet.

There were no other

operating leases as of the end of fiscal year 2022.

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

Operating lease

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 th e

information available at the lease commencement date.

The Company’s lease terms ma y

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 exercised, so the amounts are not recognized as part of operating lease right-of-use

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 exercise, and, therefore, the amounts are not recognized as part of operating lease

assets or operating lease liabilities.

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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.

Its principal executive office is located in Novato, California, and it has additional offices in Austin, Texas, Dallas, 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

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Weighted average discount rate

For fiscal years 2021 and 2020, the Company’s lease payments related to its operating lease right-of-use

assets totaled $ 0.43 million and

million, respectively, and total

rent expense for all offices, which is recorded under general and administrative expense in the statements of income, totaled $ 0.51 million and

$ 0.57 million, respectively.

The undiscounted cash flows for future maturities of the Company’s operating lease liabilities and the reconciliation to the balance of operating lease liabilities reflected o n

the Company’s balance sheet are as follows:

years 2022 and 2021, the Company’s lease payments related to its

operating lease right-of-use

assets totaled $ 0.36 million and $ 0.43 million, respectively, and total rent expense for all offices, which is recorded under general and administrative expense in the statements of income, totaled $ 0.49 million and $ 0.51 million, respectively.

The undiscounted cash flows for future maturities of the Company’s operating lease liabilities and the reconciliation to the balance of operating lease liabilities reflected on the Company’s balance sheet are as follows:

September 30, 2022

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Fiscal year 2024

Total undiscounted cash flows

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Accrued Liabilities and Accounts Payable

The details relating to the accrued liabilities and accounts payable reflected on the Company’s balance sheet are as follows:

Details relating to the accrued liabilities and accounts payable reflected on the Company’s balance sheet are as follows:

(In thousands)

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Total accrued expenses

On March 26, 2020, the Company prepaid in full all principal, accrued interest, and costs and expenses outstanding under its term loan agreement with U.S.

Bank National Association.

The aggregate prepayment amount of $ 15.4 million was funded by cash on hand, and the Company did not incur any prepayment penalties.

Debt Outstanding

On October 20, 2021, the Company completed a public offering of 4.875 % notes due 2026 in the aggregate principal amount of $ 40,250,000 (the “2026 Notes”), which included the full exercise of the underwriters’ overallotment option.

The initial net proceeds received were approximately $ 38,607,000 after considering the impact of issuance costs and underwriter discounts.

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.

Commitments and Contingencies

The Company has no commitments and no significant contingencies with original terms in excess of one year other than operating leases, which are discussed in Note 7.

Other than the operating leases discussed in Note 7 in this Item 8, “Financial Statements and Supplementary Data,” the Company has no commitments and no significant contingencies with original terms in excess of one year.

Retirement Plan

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To be eligible for the discretionary profit-sharing contribution, an employee must be eligible to participate in the 401(k) retirement plan and must complete at least 501 hours of service during the calendar year or be employed as of the last day of the calendar year.

As of the end of each of fiscal

years 2021 and 2020, the Company’s gross liability for unrecognized tax benefits related to uncertain tax positions was $ 0.6 million.

If the tax benefits of such amounts were recognized, $ 0.50 million of such amounts would decrease the Company’s effective income tax rate.

The Company’s net liability for accrued interest and penalties was $ 0.30 million and $ 0.27 million as of September 30, 2021, and September 30, 2020, respectively.

As of the end of each of fiscal years 2022 and 2021, the Company’s gross liability for unrecognized tax benefits related to uncertain tax positions was $ 0.4 million and $ 0.6 million, respectively.

If the tax benefits of such amounts were recognized, $ 0.3 million and $ 0.5 million of such amounts, respectively, would decrease the Company’s effective income tax rate.

The Company’s net liability for accrued interest and penalties was $ 0.3 million as of each of

September 30, 2022, and September 30, 2021.

The Company has elected to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.

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The Company’s activity was as follows:

Fiscal Years Ended

September 30,

Fiscal Years Ended September 30,

(In thousands)

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Ending year balance

The total amount of unrecognized ta x

benefits can change due to final regulations, audit settlements, tax examinations activities, lapse of applicable statutes of limitations, and the recognition and measurement criteria under the guidance related to accounting for uncertainly in income taxes.

The total amount of unrecognized tax benefits can change due to final regulations, audit settlements, tax examinations activities, lapse of applicable statutes of limitations, and the recognition and measurement criteria under the guidance related to accounting for uncertainly in income taxes.

The Company is unable to estimate what this change could be within the next 12 months, but does not believe it would be material to its financial statements.

The Company’s income tax expense

was as follows:

Fiscal Years Ended

September 30,

The Company’s income tax expense was as follows:

Fiscal Years Ended September 30,

(In thousands)

2 unchanged sentences

The principal reasons for the differences from the federal statutory income tax rate and the Company’s effective tax rate were as follows:

Fiscal Years Ended

September 30,

Fiscal Years Ended September 30,

Federal statutory income tax rate

7 unchanged sentences

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows:

Fiscal Years Ended

September 30,

Fiscal Years Ended September 30,

(In thousands)

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Weighted average common stock outstanding, diluted

For fiscal years 2021 and 2020, the Company excluded 65,098 and 186,520 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 vested RSUs.

fiscal years 2022 and 2021, the Company excluded 282 and 65,098 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

Concentration of Credit Risk

The Company m a

its cash accounts with three com m

ercial banks that, at times, may exceed federally insured limits.

The amount on deposit at September 30, 2021, exceeded the insurance limits of the Federal Deposit Insurance Corporation by approximately $ 4.0 million.

maintains its cash accounts with three commercial banks that, at times, may exceed federally insured limits.

The amount on deposit at September

2022 , exceeded the insurance limits of the Federal Deposit Insurance Corporation by approximately $

In addition, total cash and cash equivalents include $

1 unchanged sentence

Government Money Market Fund that is not federally insured.

The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

The Company believes it is not exposed to any significant credit risk on cash and cash

Recently Issued and Adopted Accounting Standards

The Company has reviewed accounting pronouncements issued between December 1, 2020, the filing date of its most recent previously filed Annual Report on Form 10-K,

and November 24, 2021, the filing date of this Annual Report on Form 10-K,

and has determined that no accounting pronouncement issued would have a material impact on the Company’s financial position, results of operations, or disclosures.

The Company has reviewed accounting pronouncements issued between November 24, 2021, the filing date of its most recent previously filed Annual Report on Form 10-K,

and December 7, 2022, the filing date of this Annual Report on Form 10-K,

determined that no accounting pronouncement issued would have a material impact on the Company’s financial position, results of operations, or disclosures.

There have been no other significant changes to the Company’s critical accounting policies and estimates during fiscal year 2022.

Risk and Uncertainties – COVID-19

and Geopolitical Tensions

In March 2020, the World Health Organization declared a global health pandemic related to the outbreak of a novel coronavirus.

There is uncertainty around the duration and breadth of the COVID-19

pandemic, as well as the impact it will have on the Company’s operations.

As a result, the ultimate impact on the Company’s business, financial condition, or operating results cannot be reasonably estimated at this time.

The short and long-term implications of Russia’s invasion of Ukraine are difficult to predict.

The imposition of sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact the Company’s business, financial condition, and results of operations.

Because of the highly uncertain and dynamic nature of these events, the impact of Russia’s invasion of Ukraine on the Company’s business, financial condition, or operating results cannot be reasonably estimated at this time.

Pending Asset Purchase of the Stance Equity ESG Large Cap Core ETF

On August 29, 2022, the Company announced that it signed a definitive agreement with Stance Capital, LLC and Red Gate Advisers, LLC, among others, to purchase the assets related to the management of the Stance Equity ESG Large Cap Core ETF.

The Company filed a Current Report on Form 8-K

regarding this transaction on August 30, 2022.

Upon completion of the transaction, the assets related to the Stance Equity ESG Large Cap Core ETF will be reorganized to become a series of Hennessy Funds Trust named the Hennessy Stance ESG Large Cap ETF.

The transaction is subject to customary closing conditions, including SEC approval of an exemptive order allowing the Hennessy Stance ESG Large Cap ETF to operate under the Portfolio Reference Basket structure licensed by the Blue Tractor Group, as well as approval by the Board of Trustees of Hennessy Funds Trust, the Board of Directors of The RBB Fund, Inc.

(of which the Stance Equity ESG Large Cap Core ETF is a series), and the shareholders of the Stance Equity ESG Large Cap Core ETF.

Subsequent Events

As of November

24, 2021, the filing date of this Annual Report on Form 10-K, management evaluated the existence of events occurring subsequent to the end of fiscal year 2021, and determined the following to be subsequent events:

On October 20, 2021, the Company completed a public offering of 4.875 % notes

due 2026 in the aggregate principal amount of $ 40,250,000 , 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 eac h

calendar quarter and at maturity, beginning December 31, 2021 .

The 2026 Notes mature on December 31, 2026 .

As of December 7, 2022, the filing date of this Annual Report on Form 10-K,

management evaluated the existence of events occurring subsequent to the end of fiscal year 2022, and determined the following to be subsequent events:

On October 27, 2022 , the Company announced a quarterly cash dividend of $ 0.1375 per share paid on November 30, 2022 , to shareholders of record as of November 15, 2022 .

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data