Note 3 - Related Party Transactions

12 Months Ended

Dec. 31, 2022

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 Advisors, LLC, 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 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 years ended December 31, 2022 and 2021 are noted below.

	Years Ended December 31,
Cohanzick Management Expense Allocation	2022		2021
Employee compensation and benefit expenses allocated	$	284,850	$	909,915
Owner compensation and benefit expenses allocated		612,387		1,156,622
Other allocated expenses		269,830		412,434
Total allocated expenses	$	1,167,067	$	2,478,971

As of the years ended December 31, 2022 and 2021, the due to affiliate balance between CBA and Cohanzick reported on the Company’s accompanying consolidated balance sheets was $0 and $3,377,291, respectively. The 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 will extend for another 12 months with 0% interest. Repayments made by CBA to Cohanzick for the allocated expenses during the years ended December 31, 2022 and 2021 totaled $3,646,038 and $0, respectively.

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 s 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 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 year ended December 31, 2022, CBA earned $246,743 of revenue from the services agreement with Cohanzick. No comparable revenue was earned during the year ended December 31, 2021 as the service agreement was not in force until the Closing Date. As of December 31, 2022, a receivable of $160,330 related to the services agreement revenue with Cohanzick is included in the due from affiliate amount on the accompanying consolidated balance sheets. Subsequent to the year ended December 31, 2022, this receivable was repaid in full and the corresponding due from affiliate amount has been settled.

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 year ended December 31, 2022, CBA paid $25,533 of rental expenses, including utilities, per the license agreement with Cohanzick. No comparable expenses were paid during the year ended December 31, 2021 as the license agreement with Cohanzick was not in force until the Closing Date.

Willow Oak Asset Management, LLC

Services Agreement with Arquitos

The Company, through Willow Oak, was party to a service-based contract with Arquitos Investment Manager, LP, Arquitos Capital Management, LLC, Arquitos Epicus, LP, and Arquitos Capital Offshore Master, Ltd. (collectively “Arquitos”), which are managed by Steven Kiel, the Company’s director, and earned revenue for services provided to Arquitos including: strategic planning, investor relations, marketing, operations, compliance program monitoring and legal coordination, accounting and bookkeeping, annual audit and tax coordination, and liaison to third-party service providers. In exchange for these services, Steven Kiel, through Arquitos, was contracted to perform ongoing consulting services for the benefit of Willow Oak in the following areas: strategic development, marketing, networking, and fundraising. In addition to the foregoing exchange of services, Willow Oak also earned an annual performance revenue fee share through its contract with Arquitos. As of December 31, 2022, this service contract and revenue fee share have expired. During the year ended December 31, 2022, the Company earned $24,451 of revenue through this fund management services arrangement. No comparable activity exists for the year ended December 31, 2021.

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. 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 consolidated balance sheets as of December 31, 2022. Subsequent to the year ended December 31, 2022, this over payment was repaid in full and the corresponding due from affiliate amount has been settled.