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Note 24 - Related Party Transactions
 6 Months Ended
Jun. 30, 2024
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]

24. RELATED PARTY TRANSACTIONS

 

Certain terms in this footnote are defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.  The Company has identified the following related party transactions for the six months ended June 30, 2024 and 2023. The transactions are listed by the related party and, unless otherwise noted in the text of the description, the amounts are disclosed in the tables at the end of this section.

  

A. JKD Investor 

 

The JKD Investor is an entity owned by Jack J. DiMaio, the vice chairman of the board of directors and vice chairman of the Operating LLC’s board of managers, and his spouse.  On October 3, 2016, JKD Investor invested $6,000 in the Operating LLC.  Additional investments were made in January 2017 and January 2019 in the amounts of $1,000 and $1,268, respectively.  See note 15. The interest expense incurred on this investment is disclosed in the table below. 

 

On January 31, 2020, JKD Investor purchased $2,250 of the 2020 Senior Notes. On January 31, 2022, the Operating LLC and JKD Investor entered into the 2022 Note Purchase Agreement, pursuant to which, among other things, on such date, (i) JKD Investor paid to the Operating LLC an additional $2,250 and (ii) in consideration for such funds, the Operating LLC issued to JKD Investor the Amended and Restated Note in the aggregate principal amount of $4,500. On January 5, 2024, the Operating LLC and JKD Investor entered into an amendment to the Amended and Restated Note, pursuant to which the Amended and Restated Note was amended to (a) extend (i) the maturity date thereof from January 31, 2024 to January 31, 2026, (ii) the date following which the Amended and Restated Note may be redeemed by JKD Investor from January 31, 2023 to January 31, 2025, and (iii) the date following which the Amended and Restated Note may be prepaid by the Operating LLC from January 31, 2023 to January 31, 2025; and (b) increase the interest rate payable under the Amended and Restated Note from 10% per annum to 12% per annum effective as of January 31, 2024.See note 16. The Company incurred interest expense on this debt, which is disclosed in the table below.

 

B.  Duane Morris, LLP (“Duane Morris”)

 

Duane Morris is an international law firm and serves as legal counsel to the Company.  Duane Morris is considered a related party because a partner at Duane Morris is a member of the same household as a director of the Company.  The expense incurred by the Company for services provided by Duane Morris is included within professional fees and operating expense in the consolidated statements of operations and comprehensive income and is disclosed in the table below. 

 

C. Cohen Circle, LLC ("Cohen Circle")

 

The Company has a sublease agreement as sub-lessor for certain office space with Cohen Circle. The Company received payments under this sublease agreement, in which payments are recorded as a reduction in rent and utility expenses. This sublease agreement commenced on August 1, 2018 and has a term that automatically renews for one-year periods if not cancelled by either party upon 90 days’ notice prior to the end of the then-existing term. The income earned pursuant to this sublease agreement is included as a reduction in rent expense in the consolidated statements of income and is disclosed in the table below.

 

 

D. Investment Vehicle and Other 

 

Stoa USA Inc. / FlipOS

 
Stoa USA Inc. / FlipOS was a private company in which the Company owned common equity. It was considered a related party because Daniel G. Cohen was a member of the board of directors. During the year ended December 31, 2023, Stoa USA Inc. / FlipOS announced that it had ceased operations. As of September 2023, the Company had made cumulative investments of $847 in Stoa USA Inc. / FlipOS. The Company wrote-off this investment during the third quarter of 2023 and recorded a principal transactions loss of $6,847. The fair value of this investment was included in other investments, at fair value on the consolidated balance sheets. Any realized and unrealized gains or losses on these investments were included in principle transactions and other income on the consolidated statements of operations and comprehensive income. As of June 30, 2024, the Company had  no remaining investment in Stoa USA Inc. / FlipOS.  

 

CK Capital and AOI 

 

CK Capital and AOI are related parties as they are equity method investments of the Company.  In December 2019, the Company acquired a 45% interest in CK Capital.  The Company purchased this interest for $18 (of which $17 was paid to an entity controlled by Daniel G. Cohen).  In addition, in December 2019, the Company also acquired a 10% interest in AOI, a real estate holding company, for $1 from entities controlled by Daniel G. Cohen.  Income earned or loss incurred by the Company on the equity method investments in CK Capital and AOI is included in the tables below.  In accordance with the CK Capital shareholders agreement, the Company may receive fees for consulting services provided by the Company to CK Capital.  Any fees earned for such consulting services are included in principal transactions and other income in the table below.  See note 11.

 

SPAC Fund 

 

The SPAC Fund was considered a related party because it was an equity method investment of the Company prior to its consolidation effective April 1, 2023 (see note 4).  The Company had an investment in and a management contract with the SPAC Fund.  Income earned or loss incurred on the investment prior to consolidation is included as part of principal transactions and other income in the tables below.  Revenue earned on the management contract prior to consolidation is included as part of asset management in the table below. 

 

U.S. Insurance JV 

 

U.S. Insurance JV is considered a related party because it is an equity method investment of the Company. The Company has an investment in and a management contract with the U.S. Insurance JV.  Income earned or loss incurred on the investment is included as part of principal transactions and other income in the tables below.  Revenue earned on the management contract is included as part of asset management and is shown in the table below.  As of June 30, 2024, the Company owned 1.86% of the equity of the U.S. Insurance JV.

 

CREO JV

 

CREO JV is considered a related party because it is an equity method investment of the Company. The Company has an investment in and a management contract with CREO JV.  Income earned or loss incurred on the investment is included as part of principal transactions and other income in the table below.  As of  June 30, 2024, the Company owned 7.5% of the equity of CREO JV.

 

Sponsor Entities of Other SPACs

 

In general, a SPAC is initially funded by a sponsor and that sponsor invests in and receives private placement and founders shares of the SPAC.  The sponsor  may be organized as a single legal entity or multiple entities under common control.  In either case, the entity (or entities) is referred to in this section as the sponsor of the applicable SPAC.  The Company has had the following transactions with various sponsors of SPACs that are related parties, which the Company does not consolidate.  

 

FTAC Athena Acquisition Corp. ("FTAC Athena") was a SPAC.  The sponsor of FTAC Athena ("FTAC Athena Sponsor") was a related party as it was an equity method investment of the Company.  On February 26, 2021, the Operating LLC entered into a letter agreement with FTAC Athena Sponsor whereby the Operating LLC would provide personnel to serve as the chief financial officer as well as other accounting and administrative services to FTAC Athena Sponsor for a period not longer than 24 months.  As consideration for these services, the Company received an allocation of 35,000 founders shares of FTAC Athena stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in principal transactions and other income, other SPAC entities in the table below. FTAC Athena liquated in 2023.

 

FTAC Zeus Acquisition Corp. ("FTAC Zeus") was a SPAC.  The sponsor of FTAC Zeus ("FTAC Zeus Sponsor") was a related party as it was an equity method investment of the Company.  On November 24, 2021, the Operating LLC entered into a letter agreement with FTAC Zeus Sponsor whereby the Operating LLC would provide personnel to serve as the chief financial officer as well as other accounting and administrative services to FTAC Zeus Sponsor for a period not longer than 24 months.  As consideration for these services, the Company received an allocation of 35,000 founders shares of FTAC Zeus stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in principal transactions and other income, other SPAC entities in the table below. FTAC Zeus liquidated in 2023.

 

FTAC Emerald Acquisition Corp. ("FTAC Emerald") is a SPAC.  The sponsor of FTAC Emerald ("FTAC Emerald Sponsor") is a related party as it is an equity method investment of the Company.  On December 20, 2021, the Operating LLC entered into a letter agreement with FTAC Emerald Sponsor whereby the Operating LLC would provide personnel to serve as the chief financial officer as well as other accounting and administrative services to FTAC Emerald Sponsor for a period not longer than 24 months.  As consideration for these services, the Company received an allocation of 35,000 founders shares of FTAC Emerald stock to the Operating LLC and recorded an equity method investment of $40 for the valuation of these services. The revenue earned on this arrangement is disclosed in principal transactions and other income, other SPAC entities in the table below.

 

As of June 30, 2024, all of the SPACs above other than FTAC Emerald have either liquidated or are in the process of completing a merger with an operating company.  Subsequent to the liquidation of the SPAC, there is no further income or loss recorded on the above transactions.  

 

Other 

 

The Company invests in sponsor entities of SPACs, either directly or through its interest in the SPAC Series Funds, that are not otherwise affiliated with the Company but are considered related parties because they are accounted for under the equity method.  As of  June 30, 2024, the Company owned 5.37% of these entities in the aggregate. Income earned or loss incurred on the equity method investments is disclosed in other SPAC entities in the table below.

 

The following tables display the routine transactions recognized in the consolidated statements of operations from the identified related parties that are described above.

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2024

  

2023

  

2024

  

2023

 
                 

Asset management

                

CREO JV

 $187  $-  $371  $- 

SPAC Fund

  -   -   -   173 

U.S. Insurance JV

  286   317   603   561 
  $473  $317  $974  $734 

Principal transactions and other income

                

Other SPAC Entities

 $-  $10  $5  $25 

SPAC Fund

  -   -   -   28 

U.S. Insurance JV

  (179)  185   (102)  288 

CREO JV

  (276)  158   (117)  507 
  $(455) $353  $(214) $848 

Income (loss) from equity method affiliates

                

Dutch Real Estate Entities

 $(11) $69  $(127) $211 

Other SPAC Entities

  (5,985)  (580)  23,176   (1,117)
  $(5,996) $(511) $23,049  $(906)
                 

Operating expense (income)

                

Duane Morris

 $148  $61  $306  $236 

Cohen Circle

  (26)  (25)  (52)  (51)
  $122  $36  $254  $185 

Interest expense (income)

                

JKD Investor

 $234  $196  $720  $514 
  $234  $196  $720  $514 

 

 The following related party transactions are not included in the tables above.

 

E.  Directors and Employees

 

The Company has entered into employment agreements with Daniel G. Cohen and Joseph W. Pooler, Jr., its chief financial officer.  The Company has entered into its standard indemnification agreement with each of its directors and executive officers.

 

The Company maintains a 401(k)-savings plan covering substantially all of its employees.  The Company matches 50% of employee contributions for all participants not to exceed 3% of their salary. Contributions made on behalf of the Company were $104 and $245, respectively, for the three and six months ended June 30, 2024. Contributions made on behalf of the Company were $110 and $226, respectively, for the three and six months ended June 30, 2023 .