United States securities and exchange commission logo
March 3, 2022
Alea A. Kleinhammer
Chief Financial Officer
ENDI Corp.
1806 Summit Ave, Ste 300
Richmond, VA 23230
Re: ENDI Corp.
Registration
Statement on Form S-4
Filed February 3,
2022
File No. 333-262505
Dear Ms. Kleinhammer:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-4
General
1. We understand that
Enterprise Diversified has been in contact with the SEC s Division of
Investment Management.
Please provide a brief analysis as to whether the combined
company would be an
investment company under the Investment Company Act of 1940.
Among other things,
your analysis should indicate the value of the combined company s
investment securities
and total assets, exclusive of cash items and government securities
on an unconsolidated
basis. This analysis should include what exclusion(s) from the
Investment Company Act
of 1940 that you and your subsidiaries would rely on (if any).
In particular, please
provide us with a legal analysis supporting your determination,
including the specific
facts and circumstances supporting any exemption.
2. Please provide us your
analysis in support of your statement on page 21 that you believe
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that the Mergers and related transactions do not constitute a change
of control of CBA
under the Advisers Act and therefore are not an assignment of CBA s
investment advisory
contracts.
3. Please add a section that provides a discussion of the material
aspects of CBA's business.
For example, describe the funds that CBA advises, including a
description of the
company's policies regarding its Responsible Investing Strategy
disclosed on page 52 as
well as a description of the fees it earns pursuant to the funds and
any other material
aspects of CBA's investment strategies or business operations.
4. Please revise to include a section that describes the transactions
with related persons,
promoters and certain control persons pursuant to Item 404 of
Regulation S-K.
5. Please tell us why you are not required to present separate proposals
addressing each
material change from ENDI's current certificate of incorporation,
including the dual class
structure, provisions related to the amendment to the bylaws with the
affirmative vote of
at least eighty percent of the total voting power of all outstanding
shares, the provisions
related to nomination of directors by the Class B holders, the
provisions related to the
meetings of stockholders and the exclusive forum provisions, in light
of Rule 14a-4(a)(3)
of the Exchange Act. In addition, with respect to each of the
following, please tell us
what consideration you gave to including such document as an annex to
your Form S-
4: Form of Amended and Restated Certificate of Incorporation of New
Parent, Form of
Amended and Restated Bylaws of New Parent and each of Exhibits 10.1 to
10.6.
6. Please provide us your analysis regarding whether or not New Parent
qualifies as
an emerging growth company.
Cover Page
7. Please revise the cover page of your registration statement and the
Questions and Answer
section to disclose the cash value of the consideration that the ENDI
shareholders will
receive and the cash value of the consideration that the CBA Member
will receive in
connection with the Business Combination. In addition, please revise
the cover page and
the question and answer section to disclose the ownership of New
Parent by the officers
and directors of ENDI, the non-affiliated ENDI stockholders, and the
CBA Member after
the completion of the Business Combination. In this regard, we note
your disclosure on
page 3. Also, please disclose the ownership percentages of New Parent
by the officers
and directors of ENDI, the non-affiliated ENDI stockholders and the
CBA Member if the
CBA Member exercises the warrants, and the ownership percentages if
additional shares
of New Parent are purchased pursuant to the Additional Purchase
Subscription
Agreement.
Questions and Answers, page 2
8. Please add a question and answer that briefly describes the rights of
New Parent Class A
common stock and New Parent Class B common stock. Similarly, please
revise the
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Summary section to provide a summary of the material terms of the W-1
and W-2
Warrants. In addition, in the Description of New Parent's Securities
section, please
describe the "certain adjustments" that pertain to the exercise price
of the W-1 and W-2
Warrants.
What factors did the ENDI Board of Director consider in reaching its decision
to approve the
Merger Agreement . . . ., page 2
9. We note that, although ENDI has (i) total assets of $14,857,180 as of
December 31, 2020
as compared to CBA's total assets of $2,603,301 as of December 31,
2020, (ii) revenues of
$5,247,732 for the fiscal year ended December 31, 2020 as compared to
CBA's revenues
of $3,061,088 for the fiscal year ended December 31, 2020 and (iii)
net income of
$3,279,404 for the fiscal year ended December 31, 2020 as compared to
CBA's net
income of $1,088,142 for the fiscal year ended December 31, 2020,
David Sherman will
have control of the New Parent with approximately 61.9% ownership of
the total shares
outstanding, and will be the CEO and a director of New Parent. In
addition, pursuant to
the terms of the Stockholder Agreement and New Parent's certificate of
incorporation, he
will be able to designate 60% of the directors so long as he holds at
least 25% of New
Parent's Common Stock. Please revise this section to clearly explain
the reasons for
the terms of the merger so that investors understand the reasons for
the consideration paid
to the CBA Member as well as the reasons for the terms of the Voting
Agreement, the
Stockholders Agreement, the Additional Purchase Subscription Agreement
and the
Services Agreement. In addition, please add risk factors related to
the control that David
Sherman will have of New Parent and the potential conflicts of
interests related to his
ownership of CBA Member and the Services Agreement.
10. Please revise to disclose quantitative information for the costs
associated with the
Business Combination and the other transactions contemplated by the
Merger Agreement.
If the Business Combination is completed, will there be a public market for the
New Parent Class
A shares issued . . . ., page 3
11. Please identify here the specific OTC Market that will quote New
Parent's Class A
Common Stock after the completion of the merger.
Do I have appraisal rights if I object to the proposed Business Combination,
page 4
12. Please disclose here whether ENDI shareholders that wish to exercise
appraisal rights
must vote against the proposals. In addition, please revise your
summary section on page
10 and throughout to describe how ENDI shareholders properly exercise
the
appraisal rights pursuant to NRS 92A.400 to 92A.480, and please define
the term
"Effective Time" as used to describe the appraisal rights.
How is voting conducted, page 6
13. Please expand this question and answer to disclose the percentage of
votes necessary to
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approve the adjournment proposal as well as the effect of a failure to
vote, a broker non-
vote, or an abstention for the adjournment proposal.
Summary, page 7
14. Please revise to provide an organizational chart detailing all
relevant entities prior to the
business combination and an organizational chart of the combined
entities. Please include
appropriate information to allow a reader to fully understand the
legal and economic
ownership of each entity before and after the merger and other
instruments (e.g. warrants)
owned by each entity.
15. Please disclose here the termination provisions, including the amount
of termination fees,
in the Merger Agreement.
16. Please disclose a summary of the Additional Purchase Subscription
Agreement,
Redemption provisions of the Stockholder Agreement, the Services
Agreement and any
employment agreements that you will enter into in connection with the
Business
Combination. In addition, please identify the "certain other parties"
that are subject to the
Registration Rights Agreement as well as the number of securities that
are subject to the
Registration Rights Agreement.
Interests of ENDI Directors and Officers in the Business Combination, page 12
17. Please tell us whether you will enter into a severance agreement with
Alea Kleinhammer,
Jessica Greer, Eliza Sanchez, and Steven Ison prior to effectiveness.
If so, please disclose
the material terms of these agreements and file the agreements as
exhibits to the
registration statement.
Required Regulatory Approvals, page 12
18. Please revise to disclose the expected date, if known, of receiving a
response from the
OTC and FINRA related to the required regulatory approvals listed on
page 12.
Summary Selected Historical Consolidated Financial Information, page 14
19. We note you refer to unaudited pro forma combined book value per share
but do not
include this metric in the tables beginning on page 14. Please revise
accordingly.
Operational Risks Associated with the Business Combination
The announcement of the proposed Mergers could disrupt . . . ., page 19
20. The disclosure in this risk factor does not appear to address the
potential disruption of
ENDI's and CBA's relationship with its customers, suppliers, business
partners and
others. Please revise to address these risks. In addition, please add
risk factors that
specifically address the risks related to the business operations of
ENDI and CBA,
including risks related to asset management operations, real estate
operations, internet
operations and CBA's investment strategies.
Alea A. Kleinhammer
ENDI Corp.
March 3, 2022
Page 5
Risk Factors, page 19
21. Please include a risk factor addressing the risk that you may be
deemed an investment
company as defined in Section 3 of the Investment Company Act of
1940.
Risks to Stock in Connection with the Business Combination, page 21
22. Please revise to include quantitative disclosure regarding the costs
associated with the
Business Combination.
The Business Combination
Background of the Business Combination, page 25
23. Please clarify what you mean by a "sub-$25 million publicly-reporting
company" and,
whether, after the Business Combination, you will no longer be a
sub-$25 million publicly
reporting company. In addition, please disclose why the board
determined that
a withdrawal of ENDI's direct investment in Alluvial Fund, LP would be
pursued.
24. Please disclose the number of companies that the representatives of
the board of directors
and ENDI's management held introductory and follow-up meetings with
between March
4, 2021 and March 22, 2021. In addition, please disclose why the board
of directors chose
not pursue the other leading option under consideration. In this
regard, we note your
disclosure on page 25 that at a meeting of the board of directors, the
board received on
update on the two leading options under consideration.
25. Please substantially revise the Background of the Merger section to
disclose the valuation
of CBA and ENDI and the negotiations surrounding the consideration and
ancillary
agreements, including the Voting Agreement, the Stockholder Agreement,
David
Sherman's employment agreement, the Services Agreement and the
Additional Purchase
Subscription Agreement.
Opinion of the Financial Advisor, page 30
26. On page 30, you state that the a summary of the Empire Fairness Opinion
is set forth on
page 30. However, we were unable to locate this disclosure. Please
revise to disclose the
FirstName LastNameAlea A. Kleinhammer
same information as would be required by Item 1015(b) of Regulation M-A,
file the
Comapany NameENDI
opinion Corp.include the opinion as an annex and file Empire's
consent as an
as an exhibit,
March exhibit.
3, 2022 Page 5
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Conditions to Closing, page 36
27. Please disclose which of these conditions, if any, may be waived by
the parties subject to
the Merger Agreement.
Additional Agreements
Post-Closing Purchase of Parent Shares, page 38
28. Please revise to identify the "certain employees" of ENDI who may
purchase 55,000
shares of New Parent Class A Common Stock pursuant to the Additional
Purchase
Subscription Agreement. In addition, please revise your disclosure on
page 38 and
throughout to clarify that the the price of the Additional Shares
purchased pursuant to the
Additional Purchase Subscription Agreement is equal to the lesser of
$8.00 or the 60 day
volume weighted average price of the Company s common shares as of
the Merger
closing date, excluding the highest and lowest trading days.
Unaudited Pro Forma Condensed Combined Financial Data, page 41
29. Please note that Article 11 of Regulation S-X was amended by SEC
Release No. 33-10786
which revised the pro forma terminology and the basis for pro forma
adjustments. Please
revise your pro forma discussion and pro forma adjustments to conform
to the updated
guidance.
Note 4. Pro Forma Adjustments, page 47
30. Please revise the notes to the Unaudited Pro Forma Condensed Combined
Financial
Statements to quantify the impact of each item/adjustment impacting
additional paid-in
capital and retained earnings.
Pro Forma Adjustment (a), page 47
31. We note you present a $1,230,000 pro forma adjustment to recognize a
liability related to
the redeemable Class B common stock and warrants. Please revise to
separately identify
the amounts related to the common stock and the warrants, and disclose
the assumptions
made to measure each amount.
32. Please revise to clarify how the W-2 warrants are presented in the pro
forma adjustments
column.
Pro Forma Adjustment (c), page 47
33. Please revise to eliminate the $219 thousand adjustment related to
transaction expenses
incurred during the nine months ended September 30, 2021 or tell us
why you believe this
meets the definition of a transaction accounting adjustment in Rule
11-02(a)(6)(i) of
Regulation S-X.
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Pro Forma Adjustment (h), page 47
34. Please tell us why there is no impact to pro forma income for the
compensation expense
related to the W-2 warrants, the options and the share purchase
requirement.
Pro Forma Adjustment (i), page 47
35. Please revise to clarify why you believe income taxes should not be
recognized on income
from CrossingBridge Advisors, LLC considering you recognized income
taxes on income
from Enterprise Diversified, Inc. for the nine months ended September
30, 2021.
Assets Under Management, page 49
36. Please revise to include a roll forward, for all periods presented, of
assets under
management (AUM) showing the beginning balance, gross inflows, gross
outflows,
market appreciation/deprecation, new funds established,
acquisitions/dispositions of
existing funds, etc., to arrive at an ending balance. Please
disaggregate the roll forwards
by the fund categories, strategy, type, products, etc., if meaningful
to understand your
business or financial results. Please also identify significant trends
or concentrations in
your AUM and discuss the causal factors for the trends. Refer to Item
303(a)(3) of
Regulation S-K.
37. Please revise to disclose information to provide investors with a
meaningful understanding
of the performance of each material investment strategy and the impact
on AUM, revenue
and any other relevant metric. Please discuss any relevant benchmarks
and the
performance against these benchmarks.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of
CrossingBridge Advisors, LLC, page 49
38. Please revise to expand your disclosure on why return of capital is
more important than
return on capital.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of
CrossingBridge Advisors, LLC, page 52
39. Please revise to provide relevant analysis of material changes in
financial condition from
the end of the preceding fiscal year to the date of the most recent
interim balance sheet
provided. Refer to Item 303(C)(1) of Regulation S-K for guidance.
Management of New Parent Following the Business Combination, page 55
40. Please revise your disclosure regarding David Sherman, Steven Kiel,
Thomas McDonnel
and Abigail Posner to briefly discuss the specific experience,
qualification, attributes or
skills that led to the conclusion that each should serve as a
director, in light of New
Parent's business and structure. In addition, with respect to each
person who will serve as
a director or an executive officer of New Parent, please revise to
disclose the
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compensation information pursuant to Items 402 and 407(e)(4) of
Regulation S-K. Also,
please include the disclosure required by Item 407(a) of Regulation
S-K.
Beneficial Ownership
New Parent, page 57
41. Please expand the table on page 57 to include the beneficial ownership
of New Parent
Class B Common Stock and the voting power of the Class A and Class B
common stock.
Comparison of Stockholders' Rights
Forum Selection, page 69
42. We note that your exclusive forum provision identifies the federal
courts of the U.S. as the
exclusive forum for actions arising under the Securities Act. Please
state that there is
uncertainty as to whether a court would enforce such a provision and
also state that
investors cannot waive compliance with the federal securities laws. In
that regard, we
note that Section 22 of the Securities Act creates concurrent
jurisdiction for federal and
state courts over all suits brought to enforce any duty or liability
created by the Securities
Act. Also, please add a risk factor that addresses the risks
associated with the exclusive
forum provision, and revise your Description of New Parent's
Securities section to discuss
the exclusive forum provision.
Incorporation of Certain Information by Reference, page 74
43. Please tell us why you believe that incorporation by reference is
appropriate for ENDI or
include the incorporated disclosure directly in the registration
statement. Refer to General
Instruction B of Form S-4.
Incorporation of Certain Information by Reference
Enterprise Diversified, Inc. Annual Report on Form 10-K for the year ended
December 31, 2020,
filed on March 29, 2021
Asset Management Operations - Page 9, page 74
44. Please provide us your proposed disclosure and revise future filings
to separately present
management fee revenue and performance fee revenue for each period
presented.
45. To the extent that management and performance fee revenues are
material, please provide
us your proposed disclosure and revise future filings to include a
roll forward, for all
periods presented, of assets under management (AUM) showing the
beginning balance,
gross inflows, gross outflows, market appreciation/deprecation, new
funds established,
acquisitions/dispositions of existing funds, etc., to arrive at an
ending balance. Please
disaggregate the roll forwards by the fund categories, strategy, type,
products, etc., if
meaningful to understand your business or financial results. Please
also identify
significant trends or concentrations in your AUM and discuss the
causal factors for the
trends. Refer to Item 303(a)(3) of Regulation S-K.
Alea A. Kleinhammer
ENDI Corp.
March 3, 2022
Page 9
Incorporation of Certain Information by Reference
Enterprise Diversified, Inc. Annual Report on Form 10-K for the year ended
December 31, 2020,
filed on March 29, 2021
Material Weaknesses in Internal Controls - Page 14, page 74
46. Please tell us and revise future filings to:
provide additional detail regarding the nature of the
deficiency in internal control
over financial reporting for each material weakness,
provide additional detail regarding how the deficiency impacted
financial reporting,
and
more clearly describe your current plans to remediate the
material weaknesses
including the steps remaining to be taken and the estimated
timing.
Incorporation of Certain Information by Reference
Enterprise Diversified, Inc. Annual Report on Form 10-K for the year ended
December 31, 2020,
filed on March 29, 2021
Note 13. Income Taxes - Page 42, page 74
47. Please provide us your proposed disclosure and revise future filings
to provide the
information required by ASC 740-10-50-12 for each period presented.
48. Please tell us why you did not recognize any current benefit
(provision) for federal or state
income taxes for the year ended December 31, 2020. Additionally,
please revise MD&A
in future filings to discuss the amount and trend of income tax
benefit (provision)
recognized and the underlying reasons for the variability to allow for
an assessment of
your results of operations.
Incorporation of Certain Information by Reference
Enterprise Diversified, Inc. Annual Report on Form 10-K for the year ended
December 31, 2020,
filed on March 29, 2021
Revenue Recognition - Asset Management Operations and Other Investment Revenue
- Page 31,
page 74
49. You disclose that performance fees are earned monthly. However, on page
29 you also
disclose that performance fee shares crystalize on an annual basis.
Lastly, we note that
you recognized negative revenue of $44,539 for management and
performance fees in the
quarter ended September 30, 2021. Please provide us your accounting
analysis which
supports recognizing performance fee revenue on a monthly basis.
Specifically tell us
FirstName LastNameAlea A. Kleinhammer
how you considered if performance fees were variable consideration and
how you
Comapany NameENDI
considered if theyCorp.
are constrained. Refer to ASC 606-10-32-11 and
Example 25 in ASC
March 606-10-55-221
3, 2022 Page 9 for guidance.
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CrossingBridge Advisors, LLC - Notes to Financial Statements, page 82
50. Please revise to disclose the nature of and other relevant facts and
circumstances related to
the guaranteed payments to member and tell us how you determined this
represented an
expense as compared to capital distribution.
Exhibit Index, page 103
51. Please have counsel revise its legality opinion regarding the warrants
to opine that the
warrant is a binding obligation of the registrant under the law of the
jurisdiction governing
the warrants.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Michael Volley at 202-551-3437 or Amit Pande,
Accounting Branch
Chief, at 202-551-3423 if you have questions regarding comments on the
financial statements
and related matters. Please contact Sonia Bednarowski at 202-551-3666 or John
Dana Brown at
202-551-3859 with any other questions.
Sincerely,
Division of
Corporation Finance
Office of
Finance
cc: Matthew Mamak