ENDI (ENDI) Risk Analysis

5 Followers

Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

ENDI disclosed 25 risk factors in its most recent earnings report. ENDI reported the most risks in the “Finance & Corporate” category.

Risk Overview Q2, 2023

Risk Distribution

60% Finance & Corporate

12% Tech & Innovation

12% Legal & Regulatory

8% Macro & Political

4% Production

4% Ability to Sell

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average

Sector Average

Risks removed

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ENDI Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q2, 2023

Main Risk Category

Finance & Corporate

With 15 Risks

Finance & Corporate

With 15 Risks

Number of Disclosed Risks

No changes from last report

S&P 500 Average: 31

No changes from last report

S&P 500 Average: 31

Recent Changes

0Risks added

0Risks removed

0Risks changed

Since Jun 2023

0Risks added

0Risks removed

0Risks changed

Since Jun 2023

Number of Risk Changed

No changes from last report

S&P 500 Average: 3

No changes from last report

S&P 500 Average: 3

See the risk highlights of ENDI in the last period.

Risk Word Cloud

Currently, no data available

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 25

Finance & Corporate

Total Risks: 15/25 (60%)Above Sector Average

Share Price & Shareholder Rights6 | 24.0%

Share Price & Shareholder Rights - Risk 1

The price of our Class A Common Stock may fluctuate substantially which may affect the value of an investment in our Class A Common Stock.

You should consider an investment in our Class A Common Stock to be risky, and you should invest in our Class A Common Stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our Class A Common Stock to fluctuate, in addition to the other risks mentioned in this "Risk Factors" section and elsewhere in this Annual Report on Form 10-K as well as the risk factors disclosed in our other reports filed with the SEC from time to time, are: - sale of our Class A Common Stock by our stockholders, executives, and directors; - volatility and limitations in trading volumes of our shares of Class A Common Stock; - the timing and success of introductions of new products and services by us or our competitors or any other change in the competitive dynamics of our industry; - our ability to attract new customers; - changes in our capital structure or dividend policy, future issuances of securities and sales of large blocks of Class A Common Stock by our stockholders; - our cash position; - our operating performance and the profitability of our operations; - factors such as variations in our interim financial results; - announcements and events surrounding financing efforts, including debt and equity securities; - reputational issues; - announcements of acquisitions, partnerships, collaborations, joint ventures, new products and services, capital commitments, or other events by us or our competitors; - changes in general economic, political and market conditions in any of the regions in which we conduct our business; - changes in industry conditions or perceptions; - analyst research reports, recommendations and changes in recommendations, price targets, and withdrawals of coverage; - departures and additions of key personnel; - disputes and litigations related to intellectual property and contractual obligations; - changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and - other events or factors, many of which may be out of our control, including, but not limited to, pandemics such as COVID-19, war, or other acts of God. The securities market has, from time to time, experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. In a volatile market, we may experience wide fluctuations in the market price of our Class A Common Stock. If the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our Class A Common Stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

Share Price & Shareholder Rights - Risk 2

Our management owns a significant percentage of our common stock and will be able to exert significant control over matters subject to stockholder approval.

As of March 22, 2023, our executive officers, directors and their affiliates beneficially owned 3,509,923 shares of our Class A Common Stock, representing approximately 74.0% of our outstanding shares of Class A Common Stock (including the shares of Class A Common Stock issuable upon exercise of the Class W-1 and Class W-2 Warrant), and 1,800,000 shares of our Class B Common Stock, representing 100.0% of our outstanding shares of Class B Common Stock. Of such shares, Cohanzick beneficially owns 2,400,000 shares of our Class A Common Stock and 1,800,000 shares of our Class B Common Stock, representing approximately 59.2% of our outstanding shares of Class A Common Stock (including the shares of Class A Common Stock issuable upon exercise of the Class W-1 and Class W-2 Warrant) and 100.0% of our outstanding shares of Class B Common Stock. David Sherman, our Chief Executive Officer and director, is the Managing Member of Cohanzick and owns approximately 71% of Cohanzick. In addition, Steven Kiel, a director, beneficially owns 754,015 shares of our Class A Common Stock (including the shares of Class A Common Stock issuable upon exercise of the Class W-1 and Class W-2 Warrant), representing approximately 13.8% of our outstanding shares of Class A Common Stock. Until the earlier of such date that (i) Mr. Kiel is no longer our director or (ii) neither Cohanzick nor any holder of our Class B Common Stock shall have the right to designate a director pursuant to the Voting Agreement. Mr. Kiel and the entities controlled by him have agreed to vote and cause their affiliate to vote in such manner as may be necessary to vote for the Class B Common Stock director designee. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, merger, consolidation, takeover or other business combination of our Company. This concentration of ownership could also discourage a potential acquiror from making a tender offer or otherwise attempting to obtain control of our Company, which could in turn have an adverse effect on the market price of securities. These stockholders, acting together, would be able to significantly influence all matters requiring stockholder approval. For example, these stockholders would be able to significantly influence elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction and the interests of these stockholders may be different from your interests.

Share Price & Shareholder Rights - Risk 3

Future sales, or the perception of future sales, of shares of Class A Common Stock could cause the market price for our shares of Class A Common Stock to decline.

The sale of substantial amounts of shares of our Class A Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Class A Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. As of March 22, 2023, 5,468,133 shares of Class A Common Stock are issued and outstanding. All 2,647,383 shares of Class A Common Stock issued in exchange for historical Enterprise Diversified, Inc. outstanding common shares in the Business Combination are freely tradable without registration under the Securities Act and without restriction by persons other than our "affiliates" (as defined under Rule 144 of the Securities Act, referred to herein as "Rule 144"), including our directors, executive officers and other affiliates. In addition, certain shares of our Class A Common Stock held by certain of our stockholders that are our affiliates are eligible for resale, subject to volume, manner of sale and other limitations under Rule 144. Furthermore, we have agreed to file a resale registration statement under the Securities Act on or before May 1, 2023 registering certain shares of our Class A Common Stock (including shares of our Class A Common Stock issuable upon exercisable of certain securities). Upon effectiveness of such registration statement, such shares of Class A Common Stock may be freely sold in the public market. Sales of a large number of shares of our Class A Common Stock or the perception that such sales could occur could cause the market price of the our Class A Common Stock to decline.

Share Price & Shareholder Rights - Risk 4

Our Class A Common Stock is and may continue to be subject to the "penny stock" rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

Rule 15g-9 under the Exchange Act establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person's account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience and objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our Class A Common Stock and cause a decline in the market value of our Class A Common Stock.

Share Price & Shareholder Rights - Risk 5

Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware or the federal district courts of the United States of America, as applicable, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware ("Court of Chancery") will, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of our Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine as that doctrine exists under the law of the State of Delaware. Our Certificate of Incorporation further provides that, to the fullest extent permitted by law, the federal district courts of the United States of America is the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the United States, including the Securities Act or the Exchange Act, in each case, the applicable rules and regulations promulgated thereunder. There is uncertainty as to whether a court would enforce such provision in connection with suits to enforce a duty or liability created by the Securities Act or the Exchange Act if brought derivatively on our behalf, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in shares of our Company will be deemed to have notice of, and consented to, the provisions of our Certificate of Incorporation. This exclusive forum provision may limit a stockholder's ability to bring a claim in a judicial forum that the stockholder finds favorable for disputes with us or our directors, officers, or other employees and may result in increased costs to our stockholders, which may discourage such lawsuits against us and such persons. Alternatively, if a court were to find these provisions of our Certificate of Incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.

Share Price & Shareholder Rights - Risk 6

Our Certificate of Incorporation, our Amended and Restated Bylaws, and Delaware law may have anti-takeover effects that could discourage, delay or prevent a change in control, which may cause our stock price to decline.

Our Certificate of Incorporation, our Amended and Restated Bylaws, and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are authorized to issue up to 2,000,000 shares of preferred stock, none of which are outstanding as of March 22, 2023. This preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions. The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management. Provisions of our Certificate of Incorporation, our Amended and Restated Bylaws and Delaware law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, our Certificate of Incorporation, our Amended and Restated Bylaws and Delaware law, as applicable, among other things: - provide the board of directors with the ability to alter the Amended and Restated Bylaws without stockholder approval; - place limitations on the removal of directors; - establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings; and - provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum.

Accounting & Financial Operations4 | 16.0%

Accounting & Financial Operations - Risk 1

Failure to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our Class A Common Stock. If our internal controls are not effective, we may not be able to accurately report our financial results or prevent fraud.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports in a timely manner. In connection with the audit of our financial statements for the year ended December 31, 2022, our independent registered public accounting firm identified material weaknesses. A material weakness is a significant deficiency, or a combination of significant deficiencies, in internal controls over financial reporting such that it is reasonably possible that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses that have been identified by our independent registered public accounting firm relate to segregation of duties and the financial close and reporting process. While we intend to take steps to remediate the material weaknesses in our internal control over financial reporting by developing a phased approach that is intended to increase the effectiveness of the design and operation of our financial reporting controls and processes, we may not be successful in remediating such weaknesses in a timely manner, if at all, which may undermine our ability to provide accurate, timely and reliable reports on our financial and operating results. Furthermore, if we remediate our current material weaknesses but identify new material weaknesses in our internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A Common Stock may be negatively affected. As a result of such failures, we could also become subject to investigations by the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources from our business.

Accounting & Financial Operations - Risk 2

We have not historically paid cash dividends on our shares of our Class A Common Stock so any returns may be limited to the value of our shares.

To date, we have not paid any cash dividends on our capital stock. We intend to periodically review our policy for issuing dividends as a potential method for returning value to our stockholders. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors that our board of directors deems relevant. Therefore, any return to stockholders may be limited to the increase, if any, of our share price.

Accounting & Financial Operations - Risk 3

Financial reporting obligations of being a public company in the United States are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.

As a publicly traded company we incur significant legal, accounting and other expenses. The obligations of being a public company in the United States require significant expenditures and place significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including, but not limited to, those under Sarbanes-Oxley, the Dodd-Frank Wall Street Reform and Consumer Protection Act. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation, among other potential problems.

Accounting & Financial Operations - Risk 4

Changes in the value levels of the assets may cause CBA's AUM, revenue and earnings to decline. If CBA were to lose a significant amount of its AUM, revenue would decrease.

CBA's asset management business is primarily comprised of fees based on a percentage of the value of AUM and, in some cases, performance fees which are normally expressed as a percentage of returns to the client. Numerous factors, including price movements in the assets in the markets in which we manage assets, could cause: - the value of AUM, or the returns that we realize on AUM, to decrease; - the withdrawal of funds from any products offered by us in favor of products offered by competitors; or - a decrease in the amount of capital available to invest. The occurrence of any of these events may cause CBA's AUM, revenue and earnings, if any, to decline and may negatively impact the success of our asset management business, results of operations and financial condition. CBA is the adviser to four registered investment companies. The combined AUM for these advised funds was approximately $614 million and $514 million as of December 31, 2022 and 2021, respectively. CBA is also the sub-adviser to two Investment Company Act registered mutual funds with AUM totaling approximately $664 million and $855 million as of December 31, 2022 and 2021, respectively. The gross revenue from the advised funds totaled approximately $4.3 million and $1.6 million for the years ended December 31, 2022 and 2021, respectively, and gross revenue from the sub-advised funds totaled approximately $2.7 million for the years ended December 31, 2022 and 2021, respectively. If CBA were to lose a significant amount of its assets under management, CBA's revenue would also decrease which would negatively impact our results of operations and financial condition.

Corporate Activity and Growth5 | 20.0%

Corporate Activity and Growth - Risk 1

We may experience difficulties, unexpected costs and delays in integrating the businesses of CBA and Enterprise Diversified and may not realize synergies, efficiencies or cost savings from the Business Combination.

CBA and Enterprise Diversified operated independently prior to the consummation of the Business Combination. Our success depends in large part on our ability to integrate the two companies' businesses, business models and cultures. In particular, asset management businesses such as Enterprise Diversified's and CBA's depend, to a large degree, on the efforts and performance of individual employees whose efforts and performance may be affected by any difficulties in the integration of the businesses. In the process of integrating CBA and Enterprise Diversified, CBA and Enterprise Diversified may experience difficulties, unanticipated costs and delays. The challenges involved in the integration may include: - the necessity of coordinating geographically disparate organizations and addressing possible differences in corporate and regional cultures and management philosophies; - managing our Company at geographically separate locations; - retaining personnel from different companies and integrating them into a new business culture while maintaining their focus on providing consistent, high-quality client service; - integrating information technology systems and resources; - integrating accounting systems and adjusting internal controls to cover operations; and - meeting the expectations of clients with respect to the integration. The integration of certain operations is taking time and may continue to require the dedication of significant management resources, which may temporarily distract management's attention from the ongoing businesses of our Company. It is possible that the integration process could result in the loss of key employees, diversion of each company's management's attention, the disruption or interruption of, or the loss of momentum in, each company's ongoing business or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with clients and employees or the ability to achieve benefits related to the Business Combination, or could reduce our earnings or otherwise adversely affect our business and financial results. In addition, the ongoing integration may strain our financial and managerial controls and reporting systems and procedures. This may result in the diversion of management and financial resources from our core business objectives. Even if CBA and Enterprise Diversified are able to integrate their businesses and operations successfully, there can be no assurance that this integration will result in any synergies, efficiencies or cost savings or that any of these benefits will be achieved within a specific time frame. Any of these factors could adversely affect our business and results of operations.

Corporate Activity and Growth - Risk 2

In certain circumstances, Cohanzick may pursue certain business opportunities with unrelated third parties that may compete with our business.

Pursuant to our Amended and Restated Certificate of Incorporation ("Certificate of Incorporation"), Cohanzick will not be prohibited from pursuing business opportunities with unrelated third parties that may compete with our business, for which Cohanzick may receive compensation. Although, CrossingBridge and Cohanzick have entered into a Services Agreement pursuant to which Cohanzick agrees that during the term of the Services Agreement and, if terminated by Cohanzick, for a period of six months after termination, Cohanzick shall not begin to serve as the investment adviser or sub-adviser to any open end registered U.S. mutual fund or U.S. ETF governed under the Investment Company Act that pursues an investment strategy that is substantially similar to any investment strategy provided by CrossingBridge or its affiliates to any of their clients, without the written consent of CrossingBridge, this restriction shall not apply to any existing clients of Cohanzick as of the date of execution of the Services Agreement or for any period after such restriction terminates.

Corporate Activity and Growth - Risk 3

The success of the launch of new funds depends on their growth, and the lack of growth may impact CBA's results of operations.

During 2021, CBA launched three new funds, the CrossingBridge Ultra-Short Duration Fund, the CrossingBridge Responsible Credit Fund and the CrossingBridge Pre-Merger SPAC ETF, each of which has limited operating history. As a result, prospective investors have a limited track record on which to base their investment decisions. There is also a risk that one or more of these new funds will not grow or maintain an economically viable size, in which case they could ultimately liquidate without stockholder approval, which could negatively impact our results of operations and financial condition.

Corporate Activity and Growth - Risk 4

The announcement of the proposed RiverPark Strategic Income Fund acquisition could disrupt our relationships with our customers, business partners and others, as well as our operating results and business generally.

Whether or not the RiverPark Fund acquisition and related transactions are ultimately consummated, as a result of uncertainty related to the proposed transactions, risks related to the impact of the announcement of the acquisition on our business may include the following: - we may pay significant costs, fees and expenses for professional services and transaction costs in connection with the proposed acquisition whether or not it is consummated; and - investors in the RiverPark Fund may seek to terminate their relationship with the RiverPark Fund either before or after the transaction. In addition, David Sherman, our Chief Executive Officer and director, is the President of CBA and the founder of Cohanzick, both of which are parties to the RiverPark Agreement, and as such, he may have interests that are in addition to the interests of our stockholders. If any of the aforementioned risks were to materialize, they could lead to significant costs which may have a material adverse effect on our results of operations.

Corporate Activity and Growth - Risk 5

If completed, the RiverPark Fund acquisition may not be successful or achieve its anticipated benefits.

If the RiverPark Fund acquisition is completed, we may not be able to successfully realize anticipated growth opportunities and synergies. In addition, upon the completion of the acquisition, CBA will assume certain liabilities of and take on other obligations of RiverPark as set forth in the RiverPark Agreement. We may not successfully or cost-effectively integrate the RiverPark Fund's business and operations with our business and operations. Even if we are able to integrate the combined businesses and operations successfully, this integration may not result in the realization of the full benefits of the synergies and other opportunities that we currently expect from the acquisition within the anticipated time frame, or at all. The RiverPark Fund may not increase its AUM over time as quickly as currently expected and the RiverPark Expense Limitation Agreement may cause CBA to bear greater costs than currently expected.

Tech & Innovation

Total Risks: 3/25 (12%)Above Sector Average

Trade Secrets1 | 4.0%

Trade Secrets - Risk 1

We may become subject to intellectual property disputes, which may be costly and may subject us to significant liability and increased costs of doing business.

We may become subject to actual and threatened legal proceedings, claims and counterclaims, including allegations relating to infringement of the intellectual property and proprietary rights of third parties. Our success depends, in part, on our ability to operate without infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties. However, we may not be aware or we may disagree that our products or services are infringing, misappropriating or otherwise violating third-party intellectual property rights and such third parties may bring claims alleging such infringement, misappropriation or violation. Lawsuits are often time-consuming and expensive to resolve and they may divert management's time and attention. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse impact on our business, financial condition or results of operations.

Cyber Security1 | 4.0%

Cyber Security - Risk 1

Cybersecurity incidents and other issues related to our information systems, technology and data may materially and adversely affect us.

Cybersecurity incidents and cyberattacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. The information and technology systems used by us and our service providers, and other third parties, are vulnerable to damage or interruption from, among other things: hacking, ransomware, malware and other computer viruses; denial of service attacks; network failures; computer and telecommunication failures; phishing attacks; infiltration by unauthorized persons; security breaches; usage errors by their respective professionals; power outages; terrorism; and catastrophic events such as fires, tornadoes, floods, hurricanes and earthquakes.

Technology1 | 4.0%

Technology - Risk 1

We may be exposed to business risks as a result of our internet operations.

Our Internet operations are subject to risks, including rapid technological change and the implementation of new systems and platforms; problems associated with the operation, security and availability of third-party infrastructure and our internet access, hosting, and storage systems; computer malware; electronic break-ins and similar disruptions. The failure of our systems to perform as expected could result in disruptions and costs to our operations and could adversely affect our business, financial condition, results of operations, and/or cash flows.

Legal & Regulatory

Total Risks: 3/25 (12%)Below Sector Average

Regulation3 | 12.0%

Regulation - Risk 1

We may be deemed an investment company in the future, which could impose on us burdensome compliance requirements and restrict our activities.

Under the Investment Company Act, and absent an applicable exemption, a company will generally be deemed an investment company under section 3(a)(1)(C) of the Investment Company Act if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on an unconsolidated basis. While we do not believe that we are deemed to be an investment company as a result of the consummation of the Business Combination, if we are deemed to be an investment company it could result in us becoming subject to the registration and other requirements of the Investment Company Act, unless we qualify for an applicable exemption, which would impose significant compliance and other costs and expenses. The rules and interpretations of the SEC and the courts relating to the definition of?"investment company," "investment securities," and potential applicable exemptions are complex. We intend to continue our business to ensure that it does not fall within the Investment Company Act's definition of?"investment company" under applicable SEC and court interpretations. However, we can provide no assurance that the SEC or a court would not take the position that we would be required to register under the Investment Company Act and comply with the Investment Company Act's registration and reporting requirements, capital structure requirements, affiliate transaction restrictions, conflict of interest rules, requirements for disinterested directors and other substantive provisions. If we were to become an "investment company" and be subject to the restrictions of the Investment Company Act, those restrictions would likely require changes in the way we conduct our business and add significant administrative burdens to our operations. To ensure that we do not fall within the Investment Company Act, we may need to take various actions which we may otherwise not pursue.

Regulation - Risk 2

The financial services industry is subject to government regulation in the United States, and our failure to comply with these regulations or regulatory action against us could adversely affect our results of operations, financial condition or business.

The financial services industry is among the most extensively regulated industries in the United States. We are subject to numerous state and federal laws and regulations of general application. It is very difficult to predict the future impact of the legislative and regulatory requirements affecting our business and our clients' businesses. CBA is registered as an "investment adviser" with the SEC under the Investment Advisers Act and is regulated thereunder. The Investment Advisers Act and the Investment Company Act, together with related regulations and interpretations of the SEC, impose numerous obligations and restrictions on investment advisers and registered investment companies (including mutual funds and ETFs), including requirements relating to the safekeeping of client funds and securities, limitations on advertising, disclosure and reporting obligations, prohibitions on fraudulent activities, restrictions on certain transactions between an adviser and its clients, and between a registered investment company and its advisers and affiliates, and other detailed operating requirements, as well as general fiduciary obligations. All of the foregoing laws and regulations, as well as any other laws and regulations we are or may become subject to, are complex and we are required to expend significant resources to monitor and maintain our compliance with such laws and regulations. Any failure on our part to comply with these and other applicable laws and regulations could result in regulatory fines, suspensions of personnel or other sanctions, including revocation of CBA's registration as an investment adviser which would, among other things, have a material adverse effect on our results of operations, financial condition or business. The Investment Advisers Act effectively requires client consent for any assignment of an investment advisory contract. Under the Investment Advisers Act and rules and guidance promulgated thereunder, an assignment includes a change of control of a registered investment adviser. With respect to clients that are registered investment companies, generally client consent requires consent of the board of directors or equivalent governing body of each registered investment company and the consent of the stockholders of the fund. We believe that the Mergers and related transactions did not constitute a change of control of CBA under the Investment Advisers Act and therefore are not an assignment of CBA's investment advisory contracts. Therefore, we have not sought the consent of CBA's clients. If the Mergers and related transactions are deemed to be an assignment under the Investment Advisers Act, we would likely need to seek the consent of CBA's clients, which may require a lengthy and costly stockholder voting process. CBA may also lose AUM, be subject to regulatory fines or be subject to other material adverse effects on our results of operations, financial condition or business.

Regulation - Risk 3

The asset management business is highly regulated.

Asset management is a highly regulated business subject to numerous legal and regulatory requirements. These regulations are intended to protect customers whose assets are under management and, as such, may limit our ability to develop, expand or carry out our asset management business in the intended manner. In particular, we are required to act in the best interest of our clients. In addition, regulators have substantial discretion in determining what is in the best interest of a client and have increased their scrutiny of potential conflicts as well as the disclosure of such conflicts to an asset manager's clients. Appropriately dealing with conflicts of interest is complex and if we fail, or appear to fail, to deal appropriately with any of these conflicts of interest, we may face reputational damage, litigation, regulatory proceedings, or penalties, fines or sanctions, any of which may have a material and negative impact on our asset management business. In addition, to the extent that we are required to obtain client or investor consent in connection with any potential conflict, any failure or delay in obtaining such consent may have a material and negative impact on our ability to take advantage of certain business opportunities. Further, Cohanzick actively manages mutual funds, private funds and separate accounts pursuant to various investment management and other similar agreements. CBA is not a party to these agreements. Counterparties to such agreements could claim that CBA should also be deemed a party and if successful, CBA could have contingent liabilities resulting from the actions or omissions of Cohanzick.

Macro & Political

Total Risks: 2/25 (8%)Below Sector Average

Economy & Political Environment1 | 4.0%

Economy & Political Environment - Risk 1

Unstable market and economic conditions and adverse developments with respect to financial institutions and associated liquidity risk may have serious adverse consequences on our business, financial condition and stock price.

The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, inflationary pressure and interest rate changes, increases in unemployment rates and uncertainty about economic stability. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism or other geopolitical events. Sanctions imposed by the United States and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. More recently, the closures of Silicon Valley Bank and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation ("FDIC") created bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve, and the FDIC jointly confirmed that depositors at SVB and Signature Bank would continue to have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty. There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our business plans. In addition, there is a risk that one or more of our current clients, financial institutions or other third parties with whom we do business may be adversely affected by the foregoing risks, which may have an adverse effect on our business.

Natural and Human Disruptions1 | 4.0%

Natural and Human Disruptions - Risk 1

We may be materially adversely affected by health epidemics such as COVID-19.

The outbreak of COVID-19 evolved into a global pandemic as COVID-19 spread to many regions of the world. The extent to which COVID-19 impacts our business and operating results may continue to depend on future developments that are uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, including variants, and the actions to contain COVID-19 or treat its impact, among others. For example, as a result of COVID-19, much of the world instituted stay-at-home orders, restrictions on travel, bans on public gatherings, the closing of non-essential businesses or limiting their hours of operation and other restrictions on businesses and their operations, which adversely impacted global commercial activity and contributed to significant volatility and a downturn in global financial markets. The spread of COVID-19, which caused a broad impact globally may have a material economic effect on our business. While the potential economic impact brought by the pandemic may be difficult to assess or predict, it has already caused, and may result in further, disruption of global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from COVID-19 could materially and adversely affect our business and the value of our common stock. The ultimate impact of the COVID-19 pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business or the global economy as a whole. However, these effects could have a material impact on our operations.

Production

Total Risks: 1/25 (4%)Below Sector Average

Employment / Personnel1 | 4.0%

Employment / Personnel - Risk 1

The success of the asset management business depends in part on its key personnel and loss of key personnel could adversely affect business.

The success of CBA and Enterprise Diversified's asset management business depends on its ability to attract and retain qualified portfolio managers and other key personnel. Competition in recruiting and retaining these personnel may make it difficult for CBA or Enterprise Diversified to continue its growth and success. The loss of their services or the inability in the future to attract and retain portfolio managers and other key personnel could hinder the implementation of their strategy. In addition, the loss of the services of David Sherman, CBA's founder and Chief Executive Officer, and our Chief Executive Officer and director, may materially adversely affect our business.

Ability to Sell

Total Risks: 1/25 (4%)Below Sector Average

Competition1 | 4.0%

Competition - Risk 1

Increased competition may cause CBA's AUM, revenue and earnings to decline.

The asset management industry is highly competitive and has relatively low barriers to entry. CBA competes based on a number of factors including: investment performance, the level of fees charged, the quality and diversity of services and products provided, name recognition and reputation, and the ability to develop new investment strategies and products to meet the changing needs of investors. In addition, the introduction of new technologies, as well as regulatory changes, may significantly alter the competitive landscape for investment managers. This could lead to fee compression or require us to spend more to modify or adapt our product offerings to attract and retain customers and remain competitive with products and services offered by new competitors in the industry. Increased competition on the basis of any of these factors, including competition leading to fee reductions, may cause CBA's AUM, revenue and earnings to decline and materially and negatively impact the success of our asset management business and affect our overall business, results of operations and financial condition.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.