XML 19 R9.htm IDEA: XBRL DOCUMENT v3.23.1
Note 3 - Related Party Transactions
3 Months Ended
Mar. 31, 2023
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]

NOTE 3. RELATED PARTY TRANSACTIONS

 

CrossingBridge Advisors, LLC

 

Historical Shared Expenses Prior to Consummation of the Merger

 

The Company, through CrossingBridge, and its majority shareholder, Cohanzick, the historical sole member of CBA that is majority owned by the Company’s CEO and director, David Sherman, shared certain staff, office facilities, and administrative services. The parties involved had agreed to allocate these expenses based on the AUM of each party for activity occurring prior to the consummation of the Merger. These allocated expenses are reported under the CrossingBridge operations segment in the accompanying unaudited condensed consolidated statements of operations in the categories for which the utilization of services relates. A summary of the expenses allocated from Cohanzick to CBA for the three-month period ended March 31, 2022 is noted below. There is no comparable activity for the quarterly period ended March 31, 2023, because Post-Merger there were no CBA expenses allocated in this manner.

 

  

Three-Month Period Ended March 31,

 

Cohanzick Management Expense Allocation

 

2023

  

2022

 
         

Employee compensation and benefit expenses allocated

 $-  $426,996 

Owner compensation and benefit expenses allocated

  -   329,647 

Other allocated expenses

  -   127,195 

Total allocated expenses

 $-  $883,838 

 

There was no due to affiliate balance between CBA and Cohanzick reported on the Company’s condensed consolidated balance sheets as of the periods ended March 31, 2023 and December 31, 2022. Any due to affiliate balance is due 13 months after the calendar year-end upon 60 days’ written notice. If no notice is given, the date payment is due would extend for another 12 months with 0% interest. Repayments made during the three-month period ended March 31, 2022 by CBA to Cohanzick, for allocated expenses recorded during the year ended December 31, 2021, totaled $1,756,334.

 

Services Agreement with Cohanzick

 

In connection with the closing of the Merger, CrossingBridge entered into a Services Agreement (the “Services Agreement”) with Cohanzick pursuant to which CrossingBridge will make available to Cohanzick certain of its employees to provide investment advisory, portfolio management and other services to Cohanzick and, through Cohanzick, to Cohanzick’s clients. Any such individuals will be subject to the oversight and control of Cohanzick, and any services so provided to Cohanzick or a client of Cohanzick will be provided by such CBA employees in the capacity of a supervised person of Cohanzick. Cohanzick additionally may use the systems of CBA or its affiliates for its daily operations; provided that appropriate policies, procedures, and other safeguards are established to assure that (a) the books and records of each of CBA and Cohanzick are created and maintained in a manner so as to be clearly separate and distinct from those of the other person and the clients of such person, and (b) confidential client and/or other material non-public information relating to the investment advisory activities of CBA or Cohanzick, as applicable, or other proprietary information regarding either such person or its clients, is safeguarded and maintained for the benefit of such person. As consideration for its services, Cohanzick will pay CBA a quarterly fee equal to 0.05% per annum of the monthly weighted average AUM during such quarter with respect to all clients for which Cohanzick has full investment discretion. Cohanzick and CrossingBridge will also split the payment of certain costs of other systems which use is shared between Cohanzick and CrossingBridge. The initial term of the agreement is one year from the Closing Date. The Services Agreement shall continue until terminated pursuant to its terms. Specifically, after the one year anniversary of the execution of such agreement, either party may terminate the Services Agreement upon at least 120 days’ prior written notice to the other party. Notwithstanding the foregoing, either party may terminate the Services Agreement at any time upon written notice following a material breach of the Services Agreement by other party that remains uncured for at least 30 days after the other party receives notice of, or otherwise reasonably should have been aware of, the material breach.

 

During the three-month period ended March 31, 2023, CBA earned $153,864 of revenue from the Services Agreement with Cohanzick. No comparable revenue was earned during the three-month period ended March 31, 2022 as the Services Agreement was not in force until the Closing Date. As of March 31, 2023, a receivable of $153,864 related to the Services Agreement revenue is included in accounts receivable on the accompanying condensed consolidated balance sheets. All Services Agreement receivable amounts recorded of the year ended December 31, 2022, totaling $160,330, were collected during the three-month period ended March 31, 2023.

 

License Agreement between CBA and Cohanzick

 

Pursuant to the Merger Agreement, the Company, through CBA and Cohanzick entered into a license agreement. The license agreement provides CBA with the right to use and occupy certain office space originally leased by Cohanzick from a third-party landlord pursuant to a lease agreement dated November 23, 2018. The initial term of the license agreement runs through the first anniversary of the commencement date of the license agreement and will automatically renew for subsequent one year terms unless otherwise earlier terminated pursuant to the terms thereof. Pursuant to the license agreement, CBA shall pay Cohanzick a fee equal to Licensee’s Share (as defined herein) of the following charges: a monthly base rental and increases in certain taxes and operating expenses. “Licensee’s Share” means for a calendar month that occurs in whole or in part during the term, the fraction, expressed as a percentage, the numerator of which is the number of CBA employees that occupied the licensed premises as of the first business day of such calendar month, and the denominator of which is the number of Cohanzick and CBA employees that occupied the premises as of the first business day of such calendar month, as reasonably determined by Cohanzick.

 

During the three-month period ended March 31, 2023, CBA paid $21,814 of rental expenses, including utilities, per the license agreement with Cohanzick. No comparable expenses were paid during the three-month period ended March 31, 2022 as the license agreement with Cohanzick was not in force until the Closing Date.

 

Enterprise Diversified, Inc.

 

Due from Affiliate

 

Pursuant to the Merger Agreement, Enterprise Diversified agreed to reimburse Cohanzick for certain fees and expenses, comprising primarily of legal and accounting fees incurred as part of the share registration process. These fees were initially recorded and reimbursed for a total of $594,152 during the year ended December 31, 2022. Upon further analysis by both parties, it was determined that only $470,329 of these fees were subject to reimbursement in accordance with the Merger Agreement. The initial over payment of these fees, totaling $123,823, has been included within the due from affiliate amount on the accompanying condensed consolidated balance sheets as of December 31, 2022. During the three-month period ended March 31, 2023, this over payment was repaid in full and the corresponding due from affiliate amount has been settled.