Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
On Thursday, June 27, 2019, Enterprise Diversified, Inc. (the “Company”) sold 65% of its membership interest in Mt Melrose, LLC (“Mt Melrose”) to an unaffiliated third-party purchaser, Woodmont Lexington, LLC, a Delaware limited liability company (“Woodmont”). As has been previously reported, Mt Melrose owns and operates a portfolio of residential and other income-producing real estate in Lexington, Kentucky, and prior to this transaction had been a wholly-owned subsidiary of the Company.
As consideration for the transaction, Woodmont paid the Company $100,000 and agreed to assume full responsibility for the management and operation of Mt Melrose and its real estate portfolio. The Company has retained a 35% membership interest in Mt Melrose, with Woodmont now owning the other 65% membership interest. In connection with the transaction, the Company and Woodmont entered into a certain Amended and Restated Limited Liability Company Agreement of Mt Melrose, LLC dated June 27, 2019 (the “A&R LLC Agreement”). The A&R LLC Agreement sets forth the general terms and conditions governing the arrangements between the two members.
The following unaudited pro forma condensed combined balance sheet as of March 31, 2019, and the unaudited pro forma condensed combined statements of operations for the period ended March 31, 2019 and for the year ended December 31, 2018, are based on the historical audited financial statements of the seller after giving the pro forma effect to the sale. The sale will be accounted for using the equity method of accounting.
The unaudited pro forma condensed combined balance sheet as of March 31, 2019 assumes that the sale took place on that date. The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2018 give effect to the disposition as if it had occurred on January 1, 2018. The following unaudited pro forma condensed combined statement of operations for the period ended March 31, 2019 give effect to the disposition as if it had occurred on January 1, 2019.
These unaudited pro forma condensed combined financial statements (the “Pro Forma Financial Statements”) are provided for informational purposes only and are subject to a number of uncertainties and assumptions and do not purport to represent what the companies’ actual performance or financial position would have been had the sale occurred on the dates indicated and does not purport to indicate the financial position or results of operations as of any future date or for any future period. With respect to the Pro Forma Financial Statements, the unaudited condensed balance sheet and statement of operations as of and for the period ended March 31, 2019 were derived from (i) the Company’s unaudited condensed consolidated financial statements as of and for the three month period ended March 31, 2019, as included in its Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission on May 9, 2019. With respect to the Pro Forma Financial Statements, the unaudited condensed statement of operations for the year ended December 31, 2018 was derived from (i) the Company’s audited condensed consolidated financial statements as of and for the year ended December 31, 2018, as included in its Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 28, 2019.
The pro forma condensed combined financial statements reflect management’s best estimate of the fair value of the tangible assets and liabilities retained based on information currently available. As subsequent valuations are performed, increases or decreases in the fair value of assets and liabilities retained may result in adjustments, which may be material, to the balance sheet and/or statement of operations.
The unaudited pro forma condensed combined financial statements include adjustments which give effect to the events that are directly attributable to the sale, are expected to have a continuing impact and are factually supportable.
ENTERPRISE DIVERSIFIED, INC.
And Subsidiaries
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 31, 2019
Registrant Historical | Adjustments | Notes | Pro Forma | ||||||||||
Assets | |||||||||||||
Current Assets | |||||||||||||
Cash and cash equivalents | $ | 525,935 | 78,325 | (a) (b) | $ | 604,260 | |||||||
Accounts receivable, net | 158,185 | (57,021 | ) | (a) | 101,164 | ||||||||
Inventory | 159,477 | (119,470 | ) | (a) | 40,007 | ||||||||
Investments, at fair value | 681,381 | 681,381 | |||||||||||
Other current assets | 124,545 | (63,117 | ) | (a) | 61,428 | ||||||||
Total current assets | 1,649,523 | 1,488,240 | |||||||||||
Real estate - held for investment, net | 9,603,101 | (8,998,525 | ) | (a) | 604,576 | ||||||||
Real estate - held for resale | 2,087,974 | (2,047,927 | ) | (a) | 40,047 | ||||||||
Property and equipment, net | 1,250,445 | (35,941 | ) | (a) | 1,214,504 | ||||||||
Property and equipment - held for resale | 73,212 | (73,212 | ) | (a) | — | ||||||||
Goodwill, net | 1,237,036 | 1,237,036 | |||||||||||
Note receivable | 173,281 | 173,281 | |||||||||||
Long-term investments, at fair value or net asset value | 9,139,673 | 53,846 | (c) | 9,193,519 | |||||||||
Lease right-of-use assets | 162,142 | 162,142 | |||||||||||
Other assets | 74,488 | 74,488 | |||||||||||
Total long-term assets | 23,801,352 | 12,699,593 | |||||||||||
Total assets | $ | 25,450,875 | $ | 14,187,833 | |||||||||
Liabilities and Stockholders' Equity | |||||||||||||
Current Liabilities | |||||||||||||
Accounts payable | $ | 293,275 | (35,465 | ) | (a) | $ | 257,810 | ||||||
Accrued bonus | 133,763 | 133,763 | |||||||||||
Accrued expenses | 236,930 | (66,649 | ) | (a) | 170,281 | ||||||||
Accrued interest | 179,909 | (179,909 | ) | (a) | — | ||||||||
Deferred revenue | 215,811 | 215,811 | |||||||||||
Lease liability, current | — | — | |||||||||||
Notes payable, current | 1,690,934 | (891,901 | ) | (d) | 799,033 | ||||||||
Total current liabilities | 2,750,622 | 1,576,698 | |||||||||||
Lease liability, net of current portion | 164,052 | 164,052 | |||||||||||
Notes payable, net of current portion | 6,246,781 | (5,782,666 | ) | (d) | 464,115 | ||||||||
Total long-term liabilities | 6,410,833 | 628,167 | |||||||||||
Total liabilities | 9,161,455 | 2,204,865 | |||||||||||
Stockholders' Equity | |||||||||||||
Preferred stock | — | — | |||||||||||
Common stock | 328,160 | 294,565 | |||||||||||
Additional paid-in-capital | 27,718,308 | 23,686,069 | |||||||||||
Treasury stock | (511,901 | ) | (511,901 | ) | |||||||||
Accumulated other comprehensive income | 3,054 | 3,054 | |||||||||||
Accumulated deficit | (11,248,201 | ) | (4,306,452 | ) | (e) | (15,554,653 | ) | ||||||
Total stockholders' equity | 16,289,420 | 11,982,968 | |||||||||||
Total liabilities and stockholders' equity | $ | 25,450,875 | $ | 14,187,833 |
ENTERPRISE DIVERSIFIED, INC.
And Subsidiaries
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the three months ended March 31, 2019
Registrant Historical | Adjustments | Notes | Pro Forma | ||||||||||
Revenues - asset management | $ | 696,980 | $ | 696,980 | |||||||||
Revenues - real estate | 182,506 | (165,082 | ) | (f) | 17,424 | ||||||||
Revenues - internet operations | 274,902 | 274,902 | |||||||||||
Revenues - home services | 357,077 | 357,077 | |||||||||||
Revenues - other | 212,631 | 212,631 | |||||||||||
Total revenues | 1,724,096 | 1,559,014 | |||||||||||
Cost of revenues - real estate | 163,143 | (145,478 | ) | (f) | 17,665 | ||||||||
Cost of revenues - internet operations | 87,613 | 87,613 | |||||||||||
Cost of revenues - home services | 221,488 | 221,488 | |||||||||||
Total cost of revenues | 472,244 | 326,766 | |||||||||||
Gross profit - asset management | 696,980 | 696,980 | |||||||||||
Gross profit (loss) - real estate | 19,363 | (19,604 | ) | (f) | (241 | ) | |||||||
Gross profit - internet operations | 187,289 | 187,289 | |||||||||||
Gross profit - home services | 135,589 | 135,589 | |||||||||||
Gross profit - other | 212,631 | 212,631 | |||||||||||
Total gross profit | 1,251,852 | 1,232,248 | |||||||||||
Selling, general and administrative expenses | 760,495 | (103,334 | ) | (f) | 657,161 | ||||||||
Income from operations | 491,357 | 575,087 | |||||||||||
Interest expense | 160,213 | (148,808 | ) | (f) | 11,405 | ||||||||
Other income, net | 42,625 | (31,297 | ) | (f) | 11,328 | ||||||||
Total other income (loss) | (117,588 | ) | (77 | ) | |||||||||
Income before income taxes | 373,769 | 575,010 | |||||||||||
Income tax benefit (expense) | — | — | |||||||||||
Net income | 373,769 | 575,010 | |||||||||||
Less: net income attributable to the noncontrolling interest | — | — | |||||||||||
Net income attributable to Enterprise Diversified, Inc. | $ | 373,769 | $ | 575,010 | |||||||||
Earnings per share, basic | 0.15 | 0.23 | |||||||||||
Weighted average number of shares, basic | 2,544,776 | 2,544,776 |
ENTERPRISE DIVERSIFIED, INC.
And Subsidiaries
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 2018
Registrant Historical | Adjustments | Notes | Pro Forma | ||||||||||
Revenues - asset management | $ | (77,5249 | ) | $ | (77,5249 | ) | |||||||
Revenues - real estate | 778,657 | (778,657 | ) | (f) | — | ||||||||
Revenues - internet operations | 1,168,843 | 1,168,843 | |||||||||||
Revenues - home services | 3,077,631 | 3,077,631 | |||||||||||
Revenues - other | 160,492 | 160,492 | |||||||||||
Total revenues | 4,410,374 | 3,631,717 | |||||||||||
Cost of revenues - real estate | 450,859 | (450,859 | ) | (f) | — | ||||||||
Cost of revenues - internet operations | 325,234 | 325,234 | |||||||||||
Cost of revenues - home services | 2,003,876 | 2,003,876 | |||||||||||
Cost of revenues - other | 202,533 | 202,533 | |||||||||||
Total cost of revenues | 2,982,502 | 2,531,643 | |||||||||||
Gross profit (loss) - asset management | (775,249 | ) | (775,249 | ) | |||||||||
Gross profit - real estate | 327,798 | (327,798 | ) | (f) | — | ||||||||
Gross profit - internet operations | 843,609 | 843,609 | |||||||||||
Gross profit - home services | 1,073,755 | 1,073,755 | |||||||||||
Gross profit (loss) - other | (42,041 | ) | (42,041 | ) | |||||||||
Total gross profit | 1,427,872 | 1,100,074 | |||||||||||
Selling, general and administrative expenses | 3,559,119 | (920,309 | ) | (f) | 2,638,810 | ||||||||
Income (loss) from operations | (2,131,247 | ) | (1,538,736 | ) | |||||||||
Impairment expense | 1,719,701 | (964,743 | ) | (f) | 754,958 | ||||||||
Interest expense | 552,206 | (523,672 | ) | (f) | 28,534 | ||||||||
Other income, net | 182,032 | (72,158 | ) | (f) | 109,874 | ||||||||
Total other income (loss) | (2,089,875 | ) | (673,618 | ) | |||||||||
Income (loss) before income taxes | (4,221,122 | ) | (2,212,354 | ) | |||||||||
Income tax benefit (expense) | — | — | |||||||||||
Net income (loss) | (4,221,122 | ) | (2,212,354 | ) | |||||||||
Less: net income (loss) attributable to the noncontrolling interest | (380,437 | ) | 380,437 | (g) | — | ||||||||
Net income (loss) attributable to Enterprise Diversified, Inc. stockholders | $ | (3,840,685 | ) | $ | (2,212,354 | ) | |||||||
Earnings (loss) per share, basic | (1.56 | ) | (0.90 | ) | |||||||||
Weighted average number of shares, basic | 2,461,428 | 2,461,428 |
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(a) | This adjustment reflects the disposition of assets and liabilities previously held by Mt Melrose, LLC that, upon the sale, will be deconsolidated from Enterprise Diversified Inc.’s financials. |
(b) | Included in this adjustment is an additional $100,000 representing the consideration paid by Woodmont Lexington, LLC. |
(c) | This adjustment accounts for the initial fair value of Enterprise Diversified, Inc.’s remaining 35% interest in Mt Melrose, LLC given the purchase consideration. |
(d) | This adjustment reflects the disposition and deconsolidation of liabilities previously held by Mt Melrose, LLC, less specifically named liabilities retained by Enterprise Diversified, Inc. as part of the purchase agreement. |
(e) | This adjustment reflects the estimated loss arising from the transaction on June 27, 2019. This estimated loss has not been reflected in the pro forma condensed combined statements of operations as it is considered to be nonrecurring in nature. |
(f) | This adjustment reflects the elimination of revenues, cost of goods sold, selling, general, and administrative expenses, and other income and expenses from the sale of the Mt Melrose, LLC entity. |
(g) | This adjustment reflects the elimination of any income (loss) attributable to the non-controlling interest, as there would be no non-controlling parties had the sale occurred as of January 1, 2018. |